Gerresheimer AG

XETRA:GXI

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, welcome to the Gerresheimer AG's Q2 and First Half 2024 Results Conference Call. I am Charley, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, I will hand over to Mr. Guido Pickert, Vice President, Corporate Investor Relations. Please go ahead.

[Guido Pickert, executive]

Thank you, operator. Please note that the recording will be made available on our website some time after this call.

With that, I hand over to our CEO, Dietmar Siemssen, to run you through the highlights of the quarter, together with our CFO, Dr. Bernd Metzner. Dietmar?

[Dietmar Siemssen, executive]

Yes. Thank you so much, and welcome, everybody, and thank you for joining us this morning. As you heard Bernd Metzner, our CFO, and I will now run you through the highlights of our second quarter 2024. As always, we will then be happy to take your questions.

You have seen this chart several times during the last update calls. With our containment solutions, we bring the drug safely protected to the patient. Our drug delivery systems enable the drug to be safely administered. And with our connected devices and digital solutions for therapy support, we help to improve the health outcome for patients worldwide.

Why do we bring and keep bringing this slide up? Our Q2 results underline the strategic strength of this broad portfolio. It ranges from standard products and systems to highly sophisticated customized solutions. The ability to meet our customers' needs, to capitalize on global megatrends, to industrialize and to scale production globally is and will be a prerequisite for a strong competitive position and sustainable profitable growth. And that is why we are the strategic partner of choice for the pharma and biotech industry. And that is why we were able to secure these long-term contracts for which we are currently expanding our production capacities worldwide.

[ Taking ] strong advantage of our broad portfolio is often underestimated. Resilience, this is particularly important to keep in mind regarding our Q2 and 6-month results.

Yes, we are affected by destocking in the market, mainly in our vial business in our Primary Packaging Glass division, and this impacts our results. Will this slow down our growth in the mid and long term? No, it will not. We still believe destocking effects to be temporary, and we are getting signals from the market that the destocking begins to fade out.

And we were able to offset this effect with a strong performance in our Plastic & Devices Division in medical devices such as inhalers, pens and autoinjectors, but also in plastic drug containers, the later being the much underestimated business, which I will come back to you in a moment.

That's what I mean when I say that our broad portfolio makes us resilient. It enables us to offset market fluctuations in a particular business area, and you can see this on our results.

Our Q2 performance was in line with the previous year's results. We were able to compensate destocking effects in Primary Packaging Glass with a continued good performance in Plastics & Devices, including a notable margin expansion of 200 basis points. The decrease in adjusted earnings per share is solely due to the dilutive effect of last year's capital increase that took place in April of '23.

Yes, we plan to see better results, but the main reason for the lower revenues is the destocking. The important message here is that the underlying growth momentum is intact. With the destocking effects gradually decreasing and the ramp-up of new lines and projects kicking in, we expect a strong second half 2024. We are on track for sustainable, profitable growth, and we confirm our guidance.

Equally important, in the first half of 2024, we have continued to lay the foundation for strong value creation in the years ahead. A very important milestone in this regard on our growth path was the signing of contract to acquire Bormioli Pharma.

We have shared our key priorities for 2024 in the last call. We will accelerate our sustainable profit growth by consistently increasing the share of High Value systems and solutions and medical devices for injectables, in particular, for large molecule biologics in our product portfolio.

We will execute our ongoing growth projects and add global capacities for long-term contracts including contracts for drug delivery such as pens, autoinjectors and syringes for GLP-1 applications.

We will further expand our product portfolio with highly innovative systems and solutions, including our own IP solutions, connected devices and platform solutions for digital therapy support.

In our Q1 call, we gave you an update on our ongoing capacity expansion projects. Today, I want to shed some light on how we plan to expand our portfolio and especially how we want to increase the share of High Value Solutions in our Plastics business.

The basic principle of our Gerresheimer strategy is to combine a strong foundation business, solid growth, solid margins and strong cash generation with growth drivers that generate over-proportional top and bottom line growth. This combination is key to ensuring consistent and sustainable profitable growth.

The, you might say, old Gerresheimer before we actually initiated our formula G strategy process focused mainly on a commodity and pure volume business. By complementing our portfolio with new and innovative solutions and by focusing on customer centricity and operational excellence, we have significantly strengthened our existing business and opened the door for new high-growth markets and customers, of course.

We have done our work and have built that strong foundation. We now benefit from a resilient and strong base business. This business grows stable in the mid-single-digit range and delivers solid margins and reliable cash flow. It includes, for example, bulk vials, bottles or cartridges, plastic containers, and of course, also selected medical devices.

On top of that, we systematically identify drivers for over-proportional growth. Products and solutions, which allow us to grow faster than the market overall and to expand our margins because these solutions offer significantly added value for our customers, our High Value Solutions. Growth drivers are, for example, our ready-to-fill products, including our EZ-fill Smart platform; dedicated solutions for sensitive biologics, high-value syringes, metal or especially tungsten-free for biologics or silicon oil-free for ophthalmic applications; own IP solutions like our autoinjected Gx Inbeneo or our Gx SensAir on-body drug delivery pump device for large molecule biologics; and digital solutions like traceability or connected devices, which enable digital therapy support.

The new Gerresheimer now has a solid foundation of base business bolstered with High Value Solutions growth accelerators, and we are continuously expanding our High Value Solutions offering. The planned acquisition of Bormioli Pharma is a perfect fit for this strategy as it complements our portfolio, both in the base business as well as in the High Value Solutions business.

In our call right after the announcement of the planned acquisition, we talked about the complementary portfolio in both glass and plastic, in general, and especially how this acquisition will form molded glass powerhouse with a diversified portfolio for pharma, cosmetics as well as food and beverage.

Today, I would like to show you how this transaction will strengthen our pharma plastic business, marked here in yellow, and in particular, I'm going to talk about high-value plastic solutions. With these acquisitions, we are taking a lead forward towards positioning ourselves as a system and solution provider for High Value Solutions in both glass and plastics.

Bormioli's portfolio, regional footprint and customer base are highly complementary to Gerresheimer. And this is also clearly visible in our Plastic business.

We will significantly broaden our Plastic portfolio and especially our containment solutions with this transaction.

The combined portfolio will enable us to provide a broader range of solution pharma plastics and containment solutions, an even stronger one-stop shop for our pharma customers.

Bormioli's pharma plastic portfolio is also highly accretive to our High Value Solutions offerings as it includes, for example, additional attractive IP solutions.

High Value Solutions, growth drivers with significant added value for our customers are normally accessorated with containment solutions and drug delivery devices for injectables. But the Plastic portfolio also offers high added value for our customers through system integration, for example, bottle closure solutions resulting in higher margin for Gerresheimer.

Today, we already have a wide range of integrated plastic containment systems in our portfolio, a container plus closure including own IP solutions. These are High Value Solutions in plastics, a very attractive business.

Bormioli's portfolio will allow us to significantly broaden our offering, including also accessories. Bormioli's closure options will enable us to create new systems through system integration, new High Value Solutions, containment solutions consisting of a glass or plastic container and their respective closure.

What is the added value of the customer of buying complete systems instead of a container, and for example, a closure separately? Customers have just one source for the complete solution, one point of contact, one supply chain instead of two. They will also buy a fully qualified system with ensured functionality and tested container closure integrity instead of having to make sure internally that the selected closure option fits the container.

Customers can tap into our Primary Packaging Plastic product database to speed up their time to market with extensive technical documentation for their integrated systems, including documentation for fully customized solutions. That means considerably less effort, internal testing and documentation and a smooth regulatory registration and approval process.

That is why 1 and 1 equals more than 2, a fully integrated system consisting, for example, of a PET or glass bottle and the closure of choice when becomes a high value -- then becomes a High Value Solution. The same goes for all other drug containers with various closure options from desiccant closure to tamper-evident, child-resistant or senior-friendly closures to droppers, sprayers or nebulizers.

Expanding our portfolio with innovative products and High Value Solutions will help us to accelerate our growth of the top and bottom line. This will be visible midterm and drive our strong development in the future.

The Bormioli acquisition is surely another important cornerstone for our mid- and long-term growth strategy.

Thank you very much for the moment. And with this, I will hand over to our CFO, Bernd Metzner, for a deep dive into -- dive into our figures of the second quarter 2024.

[Bernd Metzner, executive]

Thank you, Dietmar, and welcome, everybody, also from my side. Let's dive into the analysis of the key financials for the second quarter 2024.

Revenues grew from EUR 500 million to EUR 502 million. This leads us to an organic revenue growth of 0.7%. The impact from FX was almost neutral.

Our Plastic & Devices Division continued its device-driven profitable growth in Q2 2024. Our Primary Packaging Glass Division developed in line with our expectations. Growth was muted due to the already known and anticipated temporary destocking effect.

Adjusted EBITDA remained at prior year's level of EUR 107 million. This led us to an organic adjusted EBITDA growth of 0.8%. Organically, adjusted EBITDA margin remained unchanged at 21.6%. The impact from FX was minus EUR 1 million.

Adjusted EPS went from EUR 1.30 to EUR 1.24. This led us to an organic adjusted EPS decline of 3.1%, which is due to the dilutive effect of the capital increase of April 2023. More to this later. The impact from FX was minus EUR 0.02.

Let's move on to the divisional development in Q2 2024. Plastic & Devices, revenues grew from EUR 265 million to EUR 283 million. This led us to an organic revenue growth of 6.7%. The organic growth was driven by strong contributions from the medical systems business. Especially the business with pens recorded a strong growth. The impact from FX was neutral.

Adjusted EBITDA grew from EUR 69 million to EUR 79 million. FX contribution was almost neutral. This led us to an organic adjusted EBITDA growth 12.4%. Organically, adjusted EBITDA margin increased from 26.3% by 140 basis points to 27.7% and was also driven by a better product mix.

Now Primary Packaging Glass. Revenues declined from EUR 234 million to EUR 218 million. This led us to an organic revenue decline by 6.6%. The impact from FX was minus EUR 1 million. The temporary destocking effect at our customers' level impacted our pharma glass business and was the reason for the revenue decline, unchanged from the development in the prior quarter.

Adjusted EBITDA declined from EUR 49 million to EUR 39 million. The impact from FX was minus EUR 1 million. This led us to an organic adjusted EBITDA decline of 17.4%. Organically, adjusted EBITDA margin decreased from 21.2% by 250 basis points to 18.7%.

Now Advanced Technologies. Revenues remained on prior year's level at EUR 2 million. Adjusted EBITDA is literally unchanged on prior year's level of minus EUR 3 million. Advanced Technologies continues to work intensively on new innovative solutions in the field of digital health and drug delivery solutions.

This slide shows the reconciliation of the reported to the adjusted financials for the second quarter of 2024. Revenues grew organically by 0.7% and adjusted EBITDA by 0.8%, as discussed in all details earlier.

Let me briefly comment on our EBITDA adjustments, which amounted to EUR 4.7 million in Q2 2024. The majority of this amount is related to restructuring of business division and the meaningful ramp-up of our new production sites in Mexico, North Macedonia and the United States.

Adjusted depreciation and amortization was almost on prior year's level. The adjustment of EUR 9.1 million consists of amortization of fair value adjustments.

Regarding income taxes, the adjusted tax rate in Q2 2024 was 24.5% compared to 23.8% in Q2 2023.

Adjusted net income after noncontrolling interest increased organically by 2.2% compared to Q2 2023.

As mentioned before already, the organic adjusted EPS declined by 3.1%. The reason for this is the dilutive effect of calculated 5.3% new shares in Q2 2024 in comparison to Q2 2023.

Coming now to the cash flow development in the second quarter of 2024. The free cash flow developed as expected. The adjusted EBITDA remained unchanged compared to prior year's Q2 at EUR 107 million.

Looking at net working capital, we see a cash outflow of EUR 50 million in Q2, which is more pronounced than last year's Q2 with a cash outflow of EUR 21 million.

Taking a look at the first half of the year in total, however, our net working capital-related cash outflow is still EUR 39 million better than last year's figure.

For the second half of the year, like last year, we expect a positive cash contribution from the release of working capital that should more than compensate for the negative development in the first half of 2024.

Regarding cash taxes, the outflow of EUR 10 million is significantly lower compared to last year due to different timing of tax payments.

Moving now on how we utilize these funds. Net CapEx in Q2 2024 was almost on prior year's level as we continued to execute our investment program into highly attractive growth opportunities. As you know, our currently elevated net CapEx cash-out is a consequence of very attractive and unique business opportunities. We are especially ramping up our capacities for medical devices, GLP-1 products and biologics.

Finally, let's turn to net financial debt as well as the adjusted EBITDA leverage. Net financial debt according to credit agreement in force stands now at slightly above EUR 1 billion. With this, our adjusted EBITDA leverage slightly increased from 2.4x to 2.5x.

With this, I hand back to Dietmar. Dietmar?

[Dietmar Siemssen, executive]

Yes. Thank you, Bernd. Let's come to the final chart. Our key priorities for 2024 represent the consequent execution of our formula G strategy, and as very often mentioned, our transformation into a system and solution provider. And this is what will strengthen our solid foundation, accelerate our growth, help us expand our margins, and ultimately, enable us to reach our ambitious goals.

We expect a significant upturn of our business in the second half of 2024 and especially in the fourth quarter as new production lines ramp up and we see the destocking effects fade out.

We once again confirm our guidance. This includes our 2024 and 2025 outlook as well as our midterm guidance. In 2024, we expect revenue growth of 5% to 10%, and we are still expecting some destocking effects in the market as -- or as we are still expecting some destocking effects in the market, we estimate revenue growth to be around the low end of our guidance range. Nevertheless, the adjusted EBITDA will once again be strong and reach between EUR 430 million and EUR 450 million, in line with our plans for further margin expansion. The adjusted earnings per share is expected to grow between 8% and 12%.

We also confirm, as mentioned, our guidance for 2025 and our midterm outlook guidance.

As you can see, we are on track and stay on track on our profitable growth path and would be delighted if you would accompany us going forward.

The next opportunity to check in on our financial performance in 2024 will be our Q3 results for our fiscal year 2024, which will be published on 10th of October. And we are planning a Capital Market Day in December. We will keep you informed of the exact date.

We hope you will join us again. Thank you, and I assume we are now happy to take your questions. Thank you.

[Operator]

[Operator Instructions] The first question comes from the line of Oliver Reinberg, Kepler Cheuvreux.

[Oliver Reinberg, analyst]

And three for me. The first one would be on destocking. If I listened correctly, I think in your prepared remarks you referred to the fact that you see destocking mainly in vials. So can you just explain like which kind of other product categories do you also see some kind of destocking effects? And also what kind of visibility do we have in the market here to differentiate between what is really destocking and what is potentially kind of a broader scope and offering in general in terms of supply?

And second question would be on Bormioli. I think in the -- when you presented the deal, you talked about more than EPS accretion in the first year. I mean, I guess it's a bit challenging to get there in the back-of-the-envelope calculation. But can you just provide a bit of color what have you assumed there in terms of depreciation, financing cost and tax rate and also sales synergies that gives you the kind of confidence really to deliver 10% EPS accretion here?

And then finally, on GLP-1. Is there any kind of phasing you expected that the growth contribution from GLP-1 is stronger in the second half than the first half because in order to deliver your guidance there's only a certain improvement in Q3, you probably need a double-digit growth. So just trying to get a kind of color how much visibility you have to get there.

[Dietmar Siemssen, executive]

Yes. Oliver, I think I'll take the first question. I think that Bormioli, Bernd, you can take. And I can also take the GLP-1 beginning.

Yes, the destock actually affects the vials, and for Gerresheimer primarily, the bulk vials and that's it.

The question is very relevant, is this only destocking or is there long-term effect? And the answer -- I think we answered it a couple of times. We don't see that the general trends to more and more injectables, more large molecules is broken, and as such, we see this as a temporary effect.

Coming to the GLP-1 question. There's no doubt the whole GLP-1 solutions we are supplying into the market are at present still in a ramp-up phase. And a logical consequence, there will be stronger and stronger sales coming up, not only quarter-by-quarter, but also year-by-year over the loop, not only by the next quarters, but actually also by the next years. And of course, we also see new platforms and projects starting over the loop of this year. They are just about to start and ramp. We will steadily ramp them up over the loop of the next months and that will actually contribute to stronger sales in the second half of the year.

[Bernd Metzner, executive]

Regarding -- Oliver, regarding -- thanks for the question. Regarding Bormioli, this really, as we indicated, is a little bit premature because we expect now that the closing takes place in Q4, obviously. But it's really too premature to discuss about the details now and how the phasing will be of the -- regarding the EPS accretion.

What is -- be assured, first, that we expect from day 1, actually from year 1, that we have a 10% EPS growth, so really a dilutive effect here. And that we have also a robust margin expansion of 50 to 100 bps, including synergies near term. That's crystal clear and remains intact. But the details for Q4 is difficult to predict now. I hope you understand.

[Oliver Reinberg, analyst]

But can you just share some kind of color when you talk about more than 10% EPS accretion for Bormioli? What you embedded for interest cost, D&A and what kind of sales synergies you expect in the first year?

[Bernd Metzner, executive]

I think we need to do the closing first. One is what we also said the last time when we acquired Bormioli, obviously, that we'll have funds available for the acquisition. We talked about the acquisition price. And the price was, as I said, related. We need to have that for this, and that comes along with 100 basically basis points on top of 3.7%, 3.8% Euribor. That's something what you need to calculate and then you can make the math, what does it mean for our interest costs for this acquisition.

[Oliver Reinberg, analyst]

Okay. And last follow-up is any kind of spillover into Gerresheimer co when you have a kind of higher leverage. Is there any kind of existing deadlines that will carry kind of higher interest because the leverage for the group has overall increased?

[Bernd Metzner, executive]

No, not really. Not material, Oliver. There's no material impact for the facility agreement and so on and so forth. So just to remind ourselves, we expect that we have an end of the year being 3.5 and 4.0 kind of leverage. And this goes down then throughout the year and will end in 2025 at a level of 3.0 or lower.

[Operator]

The next question comes from the line of Victoria Lambert, Berenberg.

[Victoria Lambert, analyst]

My first one is just your ramp-ups at the Peachtree facility and Morganton in the autumn. Are those expected to have more of a positive benefit in Q4? Or will we start to see some of the benefit in Q3?

And then my next question is just on the Advanced Technologies business. Is there any update there on your product submission with the FDA? Do you have any more clarity on when the product could be approved? And just if there are any other updates on the Advanced Technologies business, that would be helpful.

[Dietmar Siemssen, executive]

Yes, I'm happy to take this question. Actually, the ramp-ups we are talking about are not only the ramp-ups in Peachtree and Morganton. There are actually ramp-ups in Peachtree and Morganton, but you have to see there are also new lines starting in Horsovsky Tyn and Skopje and other facilities. So I think that's all -- well, we are not talking Peachtree 1 where we have the ramp-up already ongoing. And the next ramp-up will actually be Peachtree 2, the new facility. And here, the ramp-up actually will start in 1 year. It means in summer '25, yes.

So coming to the Advanced Technologies, actually, there's not much news, neither positive nor negative. I think we said that the FDA approval of the pump that is very relevant for us is coming within this year, and that is unchanged. The case, we're waiting for the approval here and preparing ourselves for the start of production. I hope this answers your questions.

[Operator]

The next question comes from the line of Oliver Metzger, ODDO.

[Oliver Metzger, analyst]

Yes. First question is on destocking. So can you give us an indication where the underlying development of PPG would have been if you exclude the glass vials where the destocking occurred?

Second, if you look for the first derivative of destocking, do you see right now it's unchanged or do you see already a slight turn for the better?

And the last one, very technical. Can you comment on the impact in the resin prices currently? And what do you see as [indiscernible] for the second half?

[Dietmar Siemssen, executive]

What crisis? That's the one. So pristine prices, yes, yes, yes. Easy question, no problem. Yes.

To the destocking, that's a very interesting question. Let me see, we gave a guidance to the market that we would grow between 5% and 10%. And we are now more guiding in the sales topic towards the lower end of this bandwidth. So if you want to know the impact, it's probably the difference in between lower and the high end. That's because we were clearly aiming for double-digit growth this year without the destocking.

The second question, actually I didn't get. Can you help me on the second question? And the third I could talk about resin price, but you can do this.

[Bernd Metzner, executive]

Actually, Oliver, thanks for the question regarding resin price. We don't see here a high, let's say, impact now. We don't see an impact in our -- for resin prices now in Q2 looking back in this year. So no topic.

[Dietmar Siemssen, executive]

The second question you have to repeat. I didn't get it.

[Oliver Metzger, analyst]

Yes. Just on destocking, if you look for a first derivative of the destocking. So is it basically now the headwind, what you will see, is it unchanged compared to Q1? Or do you see that the underlying headwinds basically becomes lower?

[Bernd Metzner, executive]

Oliver, just to -- now we get it acoustically. Basically, what we see is that it's really getting better quarter-by-quarter. And this is also related to our phasing of the overall business, obviously. So Q1 was worse. Then basically, if you look at our Q2 regarding organic growth, it's basically at the low point and now it should get improved in Q3 and then even get better in Q4. This is basically how we see the pattern for our organic growth overall. And I think the pattern for the destocking fits very well into this -- fits very well into this kind of concept.

[Operator]

The next question comes from the line of Paul Knight, KeyBanc.

[Paul Knight, analyst]

In the GLP-1 portion of the business, are you -- it would seem logical are you seeing GLP-1 product sales improve sequentially from Q1?

And the same thing with destocking. It seems like sequentially things started to improve from the first quarter in the impact of destocking. Would that be a fair assumption?

[Dietmar Siemssen, executive]

Yes, I'll start with GLP-1. As I mentioned before at the GLP-1, the whole GLP-1 market is actually in the race. All the capacities are built, and it's a similar picture in Gerresheimer. There are some lines now ramping up steadily. Others are starting. That's why very clearly, it's a very clear yes. We will increase quarter-by-quarter, but also year-by-year.

The next quarter will always be stronger. '25 will be much stronger than '24 as '24 is stronger than '23. And '26% to '27 will be the strongest year for GLP-1.

And the destocking, I do not know how much to add. I think Bernd just said it, we see the destocking steadily step-by-step getting better for us. It means that the sales are coming back in first quarter, second quarter. We clearly see some impacts in the third quarter, but it's still -- it's getting better. And then we clearly see things fading out more and more. So the fourth quarter will be even stronger than the third quarter.

And then I hope we are -- and then hopefully, the whole thing is solved because we are fed up with this meanwhile.

[Operator]

Next question comes from the line of Anna Bain, Barclays.

[Annapurna Bain, analyst]

Congrats on results today. Just a couple for me. I guess, firstly, thanks for your additional comments on the call on the Bormioli acquisition. I think the color and flavor of the rationale is very helpful.

Just regarding the benefits that you'll have coming from the complete system offerings, do you have a sense of the customer overlap between the 2 companies? I thought it would be great to kind of get any color there.

And then regarding sort of having relevant documentation, studies for container closure integrity, what's the timeline to really be able to market and push these complete offerings? Is it sort of day 1 or will it take time for you to really, I guess, bring the sort of various components together? And then that's sort of a long-term question.

And then sorry, a few more boring questions on this year in guidance for me. Just sort of on the growth project ramp. You've obviously commented that acceleration quarter-on-quarter, so Q4 will have more of a contribution from growth projects than Q3. But are you able to quantify that at all? I guess, sort of a lot of people are just trying to understand the shape of Q3 here.

And on destocking, any regional differences you've been seeing? I think the U.S., in particular, for vials has been weak. Is that improving? And I guess, any granularity you can give us regarding customer orders or order book would be great.

[Dietmar Siemssen, executive]

Thank you for your questions. They will keep us busy for the next 5 minutes. I have to take the Bormioli portion first. As we, I think, indicated at the last call after the announcement of the signing, the business really very complementary. This means the classic things like you are usually afraid of, how much double customers do you have, the regional overlap, it's actually extremely little.

There's very few customers. We are really moving into new customer bases and customer markets, more in the South Europe area, which is extremely complementary. And then you have to look into the details of the businesses.

To your questions of accretive, there's no doubt the business will be accretive from day 1. And then very fast, additionally, synergies will come into the -- in place. And we are not talking the classic synergies, cost, cost, cost only. It's clearly also sales synergies and system integration synergies. They have very interesting products that we would rate as high value products, especially in the sector of plastic. And a lot of the solutions they have or products they have are actually closures that fit extremely well into our system integration portfolio, both on plastic, but actually also in the glass side. So here, glass bottles need closures that, for example, come via plastic product and solutions out of the Bormioli.

So it's a very, very good complementary fit and that's why we are also very happy that we bring these new colleagues and products into the portfolio.

[Bernd Metzner, executive]

Just to take your second question regarding the detailing of the growth trajectory. And just to remind ourselves, we had in the first half of the year we grew around 2%, I think between 1.5 and 2.0 percentage points. And what we said we expect that Q3 will definitely improve compared to this number of the first half of this year and Q4 will be then even better than our Q3.

We don't want to go in further detailing because we also don't guide for specific quarters. What is important is, ultimately, combining the first half and the second half of the year together, we will have an organic growth at the lower end of our guidance range of 5% to 10% and our EBITDA is and remain between EUR 430 million and EUR 450 million for the full year 2024.

[Annapurna Bain, analyst]

Just a quick follow-up there. I guess, you're comfortable that within the bottom end of the guidance range, Q3 doesn't have to be a knockout quarter. It has to be an improvement, but it's really then Q4 that we'll see the growth acceleration, just to confirm sort of the [ bottom of the ] guidance being small.

[Bernd Metzner, executive]

Only the combination that's important. Q3 trajectory, what we just said, improvement. And then Q4, even higher improvement and then we should get there. And this is our plan and this is all data points leading to this. Yes.

[Operator]

The next question comes from the line of Olivier Calvet, UBS.

[Olivier Calvet, analyst]

Just a couple of questions left. So first off, on the ramp-up this year, I think at Q1 results you mentioned 6 sites, so Peachtree, Morganton, the Czech Republic, Queretaro, Skopje and China. I was just wondering if that's the order of the ramp-up you're seeing this year? And if you could just remind us what has started operations already? What starts in Q3 and what starts in Q4? That will be the first question on the ramp-up.

Then I just had a question on the food and beverage molded glass business. There's been a few question marks raised here in particular, given recent market comment by a larger French molded glass player. I understand you cover different customers, but I just have -- I was wondering if you had any color on pricing versus volume in that segment.

And I saw also that you're expanding capacity in Lohr, which I think is new. What is the expected timeline for that project? That would be my first 2 questions.

[Dietmar Siemssen, executive]

Yes, I will try to cover this. To the ramp-ups, the ramp-ups actually of this year are more or less the line ramp-ups. The big ones that you are referring to, Peachtree, Horsovsky Tyn, actually the ones that we are planning took place. But you have to see that if you start the line after the qualification, it's ramping up steadily and then week by week the volumes go up. That's why the real sales impact is only visible usually at the later, fall side of the year. And that's why it's -- the impact is strongest at the fourth quarter actually.

Then there's always new line start-ups that take place with new machines. And also here, we see a couple of them starting, for example, in Morganton at the end of the year. The new facility, China, though, is -- that's too early because it's still empty. That ramp-up take place end of '25 actually.

So then there was a question in food and beverage, I'm not fully sure whether I got it. The customers we have in food and beverage are very, very long, many, many years customers, very specific customers with very specific behavior. I would not automatically compare this one on one with a classic market of food and beverage.

And the Lohr furnace rebuild is planned. Of course, you see quite some [ companies ] moving into this right now, which is a lot of starting up coming. But actually the Lohr furnace, it is planned for the beginning of '25.

[Operator]

The next question comes from the line of Klaus Brune, Platow Verlag.

[Klaus Brune, analyst]

I got two of them. One is in your prepared remarks, you said we are getting signals from the market that the destocking is fading out. Maybe you can add some color to that, what kind of signals you're getting.

And in that connection, competitors are lowering their forecast. You do not -- you haven't done that. You only mentioned that revenue will be at the lower end. What's the reason you can be more optimistic than many of your competitors like SCHOTT and [indiscernible]? Is there less of a corona pickup that is now being taken out for you? Or what's the reason there?

[Dietmar Siemssen, executive]

The first answer is very easy because we see this in the orders. Just the order intake is getting better and the orders go up again, and I think it's similar to the pictures that some of our competitors see as well.

To the second question, it's always difficult to compare companies one on one. You have to look at the total portfolio. As we indicated in the beginning of my speech, actually, today, you have to consider the fact that we have a broad portfolio and wide areas of the portfolio actually are not affected by destocking effect at all.

Even if you see that the growth plans I had this year might have been stronger and we are affected by the destocking, we should not forget that certain areas or the other areas of the business actually are doing extremely well and performing strong according to plan. And this gives us the opportunity to compensate impacts in one or other area that is not developed according to expectations.

[Klaus Brune, analyst]

I want to add on, if I may have. Why don't you give us any indications about order intake? I think you mentioned that in the past that you don't want to give out the order intake numbers. But isn't there anything -- wouldn't that be something that would make it easier for us to see how the business is developing?

[Dietmar Siemssen, executive]

Yes. But actually, we don't -- it doesn't make too much sense because it's very highly complex. There's a lot of customers, a lot of facilities, a lot of things that come together in the end, whether it's the order or it's actually the calls that are relevant. We are disclosing some of the big new orders flying in. And I think that helps you much more than individual monthly calls out of the orders that we have.

[Bernd Metzner, executive]

Just to add. Ultimately, it boils down, I mean, we give organic sales growth guidance. And obviously, this isn't always baked with order intake discussions with customers and commitment from our customers. In this way, we are basically managing also our guidance. So this is basically the starting point is obviously our guidance supported by the orders.

[Operator]

The next question comes from the line of David Adlington, JPMorgan.

[David Adlington, analyst]

Most have already been asked. Maybe just on Bormioli, I just thought -- I think you said that you're still expecting closing in Q4. I just wondered if you have any updates on potential level of interest from third parties you are seeing in that subsequent strategic review or disposal? And any thoughts on when that process might complete?

[Dietmar Siemssen, executive]

Yes, I can give you an update here. Of course, these things are always depending on the approvals from the antitrust authorities. We have filed everything. Everything is in plan. And we have unchanged expectation that we can close with the fourth quarter, and that has not changed. And all the other topics is something we have to look into as soon as we have the closing.

[David Adlington, analyst]

Got it. Maybe just a follow-up there. Have you had any early indications of interest from third parties?

[Dietmar Siemssen, executive]

We spoke about a strategic review, and that is something that we will do as soon as we have the full transparency on the data and the situation. That is something [ that's identified ].

[Operator]

The next question comes from the line of Ed Hall, Stifel.

[Edward Hall, analyst]

First question from my side would be on Q3 growth in Plastics & Devices. I mean, should we expect a similar sort of mid-single-digit growth that we saw in Q2, given we're not seeing as much CapEx ramp in Q3? And does this sort of imply that the utilization rate of the existing facilities is currently close to maximum given a lot of the growth was attributed to product mix?

And then my second question, again, was on Bormioli. Just on the overlap of furnaces you have on the production of tubular versus molded glass. Are there any in the same facility or location? And what would this mean if there was a sale of this business?

[Dietmar Siemssen, executive]

You can take Q2 -- Q3 and I take the Bormioli one.

[Bernd Metzner, executive]

Maybe just to -- your question was regarding Q3 Plastic & Devices. I mean, if you look at the organic growth, 13.7% in Q1. Q2 was 6.7%. Q3 will be very consistent and in line with Q1, Q2, if one may say so. That's basically -- and by the way, we are telling you more than what we actually do because we don't give guidance for specific quarters and for specific divisions, but just that you have a certain feeling. So all good and very consistent.

[Dietmar Siemssen, executive]

These guys are doing strong. Bormioli, yes, I think one more time. It's really a complementary business and this is also the case for the furnaces. It's different businesses. It's really accretive. What we get in with Bormioli is type 1 Europe business, which we actually do not have at all. So there is no overlap. It's really complementary and accretive what we expect to see here.

[Edward Hall, analyst]

Perfect. And maybe just a follow-up there. You said it's in line with Q1, Q2. I think this is roughly a 600 basis points between the two. So I mean, is it closer to...

[Bernd Metzner, executive]

Maybe you take the midpoint. If you would calculate, you take the midpoint, all good. Yes. As mentioned that a very good -- the business is running very good in Plastics & Devices.

[Operator]

Next question comes from the line of Falko Friedrichs, Deutsche Bank.

[Falko Friedrichs, analyst]

My question is on destocking as well. Are you relatively confident that this could be all done and dusted by the end of this year so that we have sort of a more normal 2025? Or do you feel like this could continue into next fiscal year as well?

[Dietmar Siemssen, executive]

All the indications we see at the moment is that it's fading out. From my point of view, we were a bit surprised that it took actually into the second half of the year. The explanation for this is that I think that the classic first initial destocking phased out earlier, but they've got -- the awareness of our customer for full warehouse has got stronger. So the destocking was expanded to a couple of other areas and that led to the fact that the destocking takes a little bit longer.

We foresee that it's definitely ending over the loop of this year, and that's also what I would head up with this meanwhile, as I indicated before.

[Falko Friedrichs, analyst]

Okay. That's helpful. And then can you maybe give a little bit more flavor on your assumption that there is no structural underlying weakness in the vials market? What are you basing your statements on here? Is there anything else you can give us maybe?

[Dietmar Siemssen, executive]

You have to look at the base trends of the market, what happens. Why all of a sudden do we have such a strong demand for solutions, for drugs that actually are administered in a way that they are injected. And that is clearly all the products in the development are large molecules.

Biologics have difficult to get concentrated. So most of them, if not all of them, actually will be administered in -- as injected and that is driving clearly the trend.

We also see this in other products. I mean, if you deliver a broader portfolio of systems and solution, you clearly see the demand in other areas that are also depending on injectables. Stable or even strongly growing like pens, autoinjectors and so on. And that clearly gives you an indication. There is no reason to see that the trends toward more injectables and the vials and cartridges are the classic solutions for injectables is not further growing.

[Falko Friedrichs, analyst]

Okay. And then my last question is just to sort of be very clear on guidance. So you're pointing us to the low end on sales. But on adjusted EBITDA, the entire range is still possible this year, correct?

[Dietmar Siemssen, executive]

That is correct, which in principle confirms what you saw last year results. And it fits to our strategy, the bottom line grow stronger than the top line.

[Operator]

The next question comes from the line of Curtis Moiles, BNP Paribas.

[Curtis Moiles, analyst]

First, I wanted to see if I could get a little bit more color on the strong order backlog for the second half of the year. Can you point to any maybe strong product categories like maybe syringes or plastic [indiscernible] solutions or where you're seeing strength? And also, are you kind of seeing some orders come in for vials already that are making you confident that destocking is going to fade away in the second half?

And then secondly, I wanted to ask a little bit more about your CapEx. Are you still expecting to end in the upper end of the range there?

And maybe how are you expecting free cash flow to develop in the second half? Should we kind of expect a quarter-on-quarter improvement?

[Dietmar Siemssen, executive]

The first question is complicated because the way we define backlog of orders is significantly different than one or other of our peers. The peers use backlog of orders, I guess, as a pseudonym for we have high orders that are about to secure our sales in the next quarters and years. Here, we have a strong backlog, if you might say so, because we have a strong order book and we are building the capacities as we talk.

Backlog in our terms means the customers ordering and we are not able to deliver and [indiscernible] we do not have this. It's is nothing you would like to have.

The destocking, as I indicated, we clearly see in the orders that the destocking is fading out.

Free cash flow, Bernd, I will not take this one of your favorite questions away.

[Bernd Metzner, executive]

No, thanks. Regarding -- just to start with your CapEx, we see and we have guided for EUR 350 million CapEx cash-out, and this is something still impact plus/minus EUR 10 million.

And for free cash, we see basically a very good showing in the second half of this year. I indicated this for working capital, for example, and therefore, we expected it will be moderately negative for the free cash flow for the total year.

[Curtis Moiles, analyst]

And actually, sorry, if I could just have one quick follow-up on destocking. I think there's a little bit of confusion in the market around where maybe customer inventories are at and where they might normalize in the future. I know that's kind of hard for you to answer. But do you think there's going to be maybe a lower level of customer inventories going forward for vials? Or is it going to normalize to a sort of a pre-pandemic level?

[Dietmar Siemssen, executive]

I think that, that was their target of the destocking, to bring the safety stocks down. And the end of the destocking means that the safety stocks are on their expected target levels. They might correct them in a certain way upwards, but we don't see this yet. What we see is that their orders are getting up. This means that destocking effects on our sales actually fading out step by step.

[Operator]

The next question comes from the line of Alexander Galitsa, HAIB.

[Aliaksandr Halitsa, analyst]

Just a couple of quick questions. One is to get a sense as to how much cushion is built into the full year guidance, say, the destocking trend you're now seeing that it's improving will stall if the ramp-up of new lines enough to get you still to the -- within your guidance range on the top line. That's the first one.

[Dietmar Siemssen, executive]

We just confirmed the guidance. We clarified that we expect with the ongoing destocking that sales guidance will probably be more in the direction of the lower end than within the guidance, but we just confirmed the guidance.

[Aliaksandr Halitsa, analyst]

Fair enough. And then on conversion opportunity that you have outlined where you bring -- moving customers on to high value plastic with the Bormioli closures. Could you give us a sense of the opportunity how much revenue do you generate with those solutions that you see in the first sort of place that could be easily converted into the higher value offering?

[Dietmar Siemssen, executive]

The portfolio of High Value Solutions in plastic packaging is already pretty high. That's why I tried to explain within my speech we never disclose this in detail. But there's already quite some high content of systems with the respective value for the customer and the respective high margins for us.

And the Bormioli acquisition with their portfolio will further give us opportunity to expand this. It's too early, we need to see this after the closing to go in every detail how much this makes. But the opportunities are highly attractive and very well because it will open the door for us not only for closure solutions in plastic, but it will expand these opportunities towards bottle closure solutions in glass closure. And this is an opportunity that we did not have because so far, we do not have the capability in-house to do plastic closures for glass products.

[Operator]

The last question is a follow-up one from Oliver Reinberg, Kepler Cheuvreux.

[Oliver Reinberg, analyst]

Just quickly 2 things. One, on the soft top line dynamic. Obviously, the main reason is destocking, which is fully fair. I'm just wondering is there any kind of other product category that is worth calling out that is tracking a bit below expectations? Any kind of color on cosmetics demand would be question number one.

And secondly, I guess, in GLP-1 that's kind of dynamic field. Any kind of flavor you can add whether there is any kind of relevant discussions for any kind of new contracts?

[Dietmar Siemssen, executive]

The first one is easy. No, it's primarily the destocking. And to the detailed question on cosmetics, actually, Bernd, would you want? There was another question here, which I didn't get fully. What is it? Maybe you can help.

[Bernd Metzner, executive]

Any flavor on...

[Dietmar Siemssen, executive]

New prospects on GLP-1. There are no further contracts where the customer finally decided. And we hope that there will be final decisions made over the loop of the rest of this year. Especially we hope that they also go in our favor.

[Guido Pickert, executive]

Thank you very much to everyone. There are no further callers with questions in the queue at this time. We will, therefore, now conclude today's call. We are happy to organize follow-up calls, as you know, should you still have any questions and we're looking forward to seeing many of you soon. Thank you, and bye-bye.

[Dietmar Siemssen, executive]

Thank you so much.

[Bernd Metzner, executive]

Thank you.

[Operator]

Ladies and gentlemen, the conference is now concluded, and you may disconnect your lines. Thank you for joining, and have a pleasant day. Goodbye.