Gerresheimer AG
XETRA:GXI
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Gerresheimer AG
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The conference is now being recorded. Welcome to the conference call regarding the publication of Gerresheimer AG's Q3 Results 2022. [Operator Instructions] The floor will be open for questions following the presentation.
Now I hand over to Ms. Carolin Nadilo, Head of Investor Relations at Gerresheimer AG. Please go ahead.
Hi, everybody. Good morning from our side. Nice to have you with us in this call today as we release our Q3 numbers. With me today, as usual, here in Düsseldorf, are our CEO, Dietmar Siemssen; as well as our CFO, Dr. Bernd Metzner. We are presenting a set of slides accompanying the management's notes followed by the Q&A session. Please note, this call is being webcast live and will be filed in our website, too.
Before we start, I have to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read the disclaimer, but propose taken it as read into the records for the purpose of this call.
And now it's my pleasure to turn the call over to Dietmar. Please go ahead.
Yes. Thank you, Carolin, and welcome, everybody. Thank you for joining us today. Yes, Bernd, our CFO, and I will now run you through the highlights of our strong third quarter. As ever, we'll then be happy to take your questions.
Now we are on track with our third quarter 2022 results. We provided further evidence of the strong ongoing momentum in our business. We are navigating Gerresheimer solidly and strongly through a wide spectrum of challenges and, at the same time, keeping firmly focused on our growth opportunities.
In spite of the Russian war of aggression, rising inflation, energy discussions, supply chain issues and other challenges on the global market, we are sailing our ship with stability through the storm. Not only are we managing the ongoing challenges, but we are also decisively implementing our formula G strategy process and transforming Gerresheimer into a strong, sustainable, profitable growth machine.
We refer you, in today's call, the details of our progress in the third quarter of 2022. We have clearly started to harvest the fruits of the transformation process initiated by formula G. This transformation process is built on various pillars. Our growth is broad-based and sustainable, and all areas of our business are in growth mode.
2021 was already a successful year for us. And now after 3 quarters of strong, profitable growth, we are proud to be on track for another record year in 2022. The last quarter was another double-digit quarter. In more detail, we delivered organic revenue growth of 17.4%, building on our strong performance in the first 6 months.
The organic growth in adjusted EBITDA came in at 13.3% despite the significant impact of impact costs -- input costs, sorry, of the challenging geopolitical situation. This was supported by a continued strong customer demand and the ongoing success of our High Value Solutions, which grew more than 20%. We continue on our profitable growth path and are managing the challenges of the geopolitical and inflationary environment successfully. We are firmly on track to deliver on our guidance for the current year. Order intake remains strong, and we are committed to our midterm and also long-term targets.
Let me now turn to market dynamics and the external environment that these are a source of concern for many of you. We have proven that we are well positioned to keep a firm grip on the steering wheel even in these challenging times. Geopolitical tensions have risen significantly this year, and there are unfortunately no signs that they will abate anytime soon. Well prepared, we are facing these challenges, remain on course and invest in further growth opportunities.
As an international company with a global footprint of 36 plants in 15 countries, we're well diversified and positioned for such a dynamic market environment. Over the past decades, our business has proven its resilience, particularly in health care and pharma. In the last couple of years, through the pandemic and in the current environment, this asset becomes more and more visible than ever before.
I would like to highlight 5 points to show you that we are well positioned for these challenging times. We have a long-term and diversified energy supply agreements as well as price fixing contracts in place with both investment banks and also a leading European utility company. They protect us well against energy price volatility. We entered these energy agreements at levels significantly below today's pricing, and this offers us a unique competitive advantage.
We have proven in the past quarter that our strong market positions allows us to pass on cost increases to customers, even at short notice. The German government is taking decisive actions to stabilize the German energy market for businesses and consumers by setting up a protective shield, also by nationalizing utilities and the decision to implement a gas price brake.
Our products and services are an essential part of the health care delivery system in clinics, doctors' offices and vaccination centers, therefore, an important part of the critical infrastructure. Our medical systems and pharmaceutical packaging solutions ensure the availability of medicines and vaccines. As such, we are confident in being granted priority access to gas supplies in the unlikely event of restructures.
And last point, at the same time, we are continuously improving the energy mix at our facilities as part of our sustainability strategy. We will continue to actively monitor the evolving situation and will respond appropriately to guide Gerresheimer safely and effectively through these challenges.
We do not allow the current situation to distract us from our goals and our growth course. We are delivering. We are rolling out our formula G strategy process continuously. There are 4 main drivers of our success this financial year: the focus on High Value Solutions; capacity increases and regional expansions; as well as contract manufacturing; and the beauty goes to health trend.
I'd like now to illustrate these drivers with 2 strategic projects from the tubular glass business. Our recently announced investments in the United States is a splendid example for both our global capacity expansion and our focus on High Value Solutions. Moreover, this growth project speaks volumes about our standing in the market as a critical supplier for the global health care industry.
For an investment of up to $94 million, we will rapidly expand our manufacturing, supply and logistics capabilities for glass vials in the United States. U.S. Government is supporting this project with up to $66 million via its Biomedical Advanced Research and Development Authority called BARDA. The vials we will produce in our facility in Morganton, North Carolina, and can be used in vaccination campaigns against infectious diseases such as, for example, COVID-19 or others.
We are very honored to support the U.S. Government in strengthening its pharmaceutical supply chain for public health emergencies. The agreement confirms our role as a supplier of system-critical products such as pharmaceutical primary packaging solutions and drug delivery systems for the health care sector.
With this new state-of-the-art forming lines in Morganton, we are ready to serve the rising customer demand for glass vials, Elite Glass as well as Ready-To-Fill vials out of North Carolina in the future. This investment will serve our growth strategy beyond the initial purpose of producing glass vials for the U.S. market and will further strengthen our leading market position.
Second key contribution of our growth strategy is a new powerful Ready-To-Fill solution platform. We recently announced our collaboration with Stevanato Group to transform the global vial market. Market leaders with a combined market share of above 50%, we aim to develop a new high-end Ready-To-Fill solution platform. Our common goal is to establish a new industry standard for secondary packaging and processes.
Customers will benefit from a number of advantages, especially a reduction of their total cost of ownership, which leads to market and price advantages on all sites. The new Ready-To-Fill process can be easily integrated into existing fill and finish lines. Due to usage of green energy and reusable materials, it also improves the sustainability.
Moreover, it improves quality by minimizing the risk of expensive production downtimes and it helps to avoid vial breakage, lowering the so-called scrap rate. A significant improvement to quality is the game-changing reduction of particle contamination, and the solution offers an alternative to the classic EtO sterilization. In other words, customers can produce even better quality at lower cost and can focus on their core competency, their development of important drugs.
Today, less than 3% to 5% of the vials and cartridge market are already transformed to Ready-To-Fill. Our market analysis shows significantly rising demand and indicates that Ready-To-Fill vials will increasingly replace bulk vials in the future. We already saw such a transition with syringes. And today, more than [ 95% ] of our syringes or the worldwide syringes are Ready-To-Fill.
We will further accelerate this transformation from vials to RTFs by also licensing our offering to third parties. This will, therefore, be another accelerator for Gerresheimer's transformation into an innovation leader, solution provider and system integrator.
With these insights on our global capacity expansion strategy, I will hand over to Bernd for the financial details of our third quarter. Thank you for the moment.
Thank you, Dietmar, and welcome, everybody, also from my side. Let's dive into the analysis of the key financials for the third quarter 2022.
The third quarter 2022 has developed as expected despite the challenging economic and geopolitical environment. We showed another solid quarter with double-digit organic revenue growth and earnings growth. Reported revenues increased from EUR 382 million in Q3 2021 by 23.8% to EUR 473 million in Q3 2022.
We had an FX tailwind of around EUR 24 million mainly coming from a stronger U.S. dollar. The organic revenue increase amounted to 17.4%. As already in last quarter, this organic revenue growth rate includes tailwinds from pass-through effects as well as sustainable price increases. More on this in a minute.
Worth mentioning, Q3 again proves how our strong pricing power is the basis for the sustainable, profitable growth. The reported adjusted EBITDA increased from EUR 75 million by EUR 16 to EUR 91 million in Q3 2022. FX support was around EUR 6 million, resulting in an organic adjusted EBITDA growth rate of 13.3%.
This was another solid performance as we continue to absorb the headwinds of higher energy costs and other inflationary headwinds. Worth repeating, we are well hedged against the significant increase in energy prices, this is valid for both gas and electricity, and provides us with a good competitive cost position.
We have a long-term comprehensive hedge in place with leading investment banks as well as a price fix with a larger utility supplier. With this, we are not only well protected as long-term hedges are locked in early, but this also gives us a competitive advantage. In addition, recent well-considered German Government actions like the Uniper nationalization and the abolition of the gas levy are clearly supported.
Let's continue now with the figures. The adjusted EPS increased from EUR 0.97 by 18.6% to EUR 1.15. Stripping out the FX tailwinds, organic adjusted EPS growth amounted to 10.1%. Before we come to the divisional performance, I would like to zoom into the pricing effects that supported our revenue development.
In Q3 2022, our organic revenue growth rate for the group was 17.4%. The strong revenue growth can be divided into volume and price effects. For the price component, we can separate 2 effects: the tailwind from contractual pass-through effects mainly related to higher resin prices and the effects from renegotiated sustainable price increases that we implement as a result of higher input costs.
The tailwind from pass-through price increases amounted to around 1 percentage point in Q3. These effects are rather volatile and hard to predict. But adjusted for this effect, our revenue growth would have amounted to around 16%. Looking at the price/volume mix, in the underlying revenue, we see that around 9%, the growth comes basically from volume, the remainder from price effects.
Let's zoom into the organic adjusted EBITDA margin for Q3 2022 of 19% and look through the inflation top line effect at the same time. As you know, we basically pass on the inflation to the customer without additional margin. In other words, what does it mean for our Q3 margin? Our margin is technically inflation-induced distorted. If you would take out the inflationary induced price effects, our margin would look clearly better even than previous year.
Let's have a closer look into the divisions. Plastics & Devices reported revenues in Q3 2022 grew from EUR 208 million by 17.5% to EUR 244 million. We had an FX benefit of around EUR 10 million. The organic revenue increase was therefore 11.3%. This includes support from contractual pass-through of higher resin prices of around EUR 6 million.
In Q3, we had a strong contribution from our plastic business as well as in the area of contract manufacturing. Two items to be highlighted. First, our Primary Plastic Packaging business, including Centor, achieved strong underlying volume growth in the third quarter, which was again also supported by a pricing tailwind from passing through higher resin prices.
Second, our medical systems operations, including syringes, showed an outstanding performance in Q3 with a double-digit growth rate. The sustained high revenue momentum clearly reflects our strong execution on the back of a record order book level. The adjusted EBITDA increased from EUR 51 million in Q3 2021 by 16.1% to EUR 59 million in Q3 2022. We had an FX benefit of EUR 3 million, resulting in strong organic growth of 9.3%.
Now let's turn to Primary Packaging Glass. The Primary Packaging Glass Division showed another impressive quarter. Reported revenues increased significantly from EUR 174 million by 31.2% to EUR 229 million. FX support was EUR 12 million, translating into an organic revenue growth rate of 24.5%.
Both business units, Moulded and Tubular Glass, showed double-digit revenue growth rate. The strong growth in Tubular Glass business was once again fueled by the high demand in High Value Solutions, especially RTF Vials and Elite Glass.
On an as-reported basis, the adjusted EBITDA increased from EUR 35 million in Q3 2021 by 25.6% to EUR 44 million in Q3 2022. Excluding an FX tailwind of a mid-single-digit million euro amount, we achieved an organic growth rate of 18.9%. Our sustainable price increases are taking hold on the back of a very competitive cost position supported by our hedge.
Advanced Technologies. Advanced Technologies is running on plan. Reported revenues stand at EUR 4 million in Q3 2022. Adjusted EBITDA was minus EUR 4 million, essentially unchanged versus Q3 2021. Also in Q3, we had a high focus on R&D in this segment. For the full year 2022, we expect a slight increase in revenues and a negative adjusted EBITDA in the magnitude of approximately EUR 10 million.
As a reminder, at Advanced Technologies, we continue to strive to establish Gerresheimer as an innovative original equipment manufacturer for smart and connected devices in the health care industry. In August, we announced a strategic partnership for electronically controlled medtech systems with Zollner.
Together, we are pooling our market-leading pharmaceutical and medical technology expertise and will offer pharmaceutical, health care and biotech companies our conceptual design, development and manufacturing capacities for drug delivery and medical technology systems, including complete electronics. This is a further proof point that Advanced Technologies is becoming increasingly relevant and will clearly contribute to our growth and margin acceleration.
Let's turn to the cash flow. The second half of the year is regularly our harvest time as far as our free cash flow is concerned, also this year. As planned, our Q3 showed a solid free cash flow development. We achieved a cash inflow from operating activities of EUR 77 million, and this was despite an increase in working capital. This net working capital increase relates particularly to our strong revenue growth and to the buildup of safety stock.
Net CapEx increased by EUR 11 million to EUR 60 million as we had a furnace overhaul in Tettau during the third quarter 2022 and as we continue to invest in global injectable capacities and further ramp up contract manufacturing projects. Overall and as planned, we generated a free cash flow of EUR 17 million in Q3 2022.
Looking at Q4 2022, we plan with a very strong free cash flow performance, which, despite meaningful investments into profitable growth, should be at least at the level of last year of around EUR 60 million, if not even better. Apart from this, as you know, due to phasing effects and cutoffs between the quarters, it is very difficult to predict the free cash flow in an isolated quarter to the last penny.
With this, I hand back to Dietmar. Dietmar?
Yes, thank you, Bernd. And it's on me to do -- to summarize the whole thing. Yes, the first 9 months of the current fiscal year were strong. And we are now entering the final quarter of the financial year with an excellent momentum. We've been navigating the challenges of the current environment successfully and are structurally well positioned.
The order intake is on a record level, and we are now harvesting the benefits of the investments already made and are continuing to invest in our future growth. We are therefore confident in delivering on our guidance for the current year. We are also optimistic about our prospects over the medium and long term.
Looking at our progress after 9 successful months, we expect a strong final quarter leading to another record year with revenue growth of at least 10% and adjusted EBITDA and adjusted EPS growth growing at high single-digit rates. In other words, we confirm our 2022 guidance as well as our midterm objectives.
Since our last Capital Markets Day at the end of 2020, we have successfully reached key milestones to transform Gerresheimer into a sustainable and profitable growing company. As you have seen through, there are a lot of activities in our business that will drive the subsequent chapters of our transformation and contribute to delivering our growth ambitions.
So as I mentioned in our last earnings call, we'll be hosting another Capital Markets Day this year to give you a strategy update and also elaborate on the growth opportunities we see and the investment programs we put behind. The save-the-date invitations for December 6 will follow shortly. We hope you can join us then.
I'm now happy to take your questions. Thank you so far.
[Operator Instructions] The first question comes from Oliver Reinberg from Kepler.
Three questions from my side, if I may. And the first one would be on visibility of top line growth going forward. So it's obviously encouraging to see that the volume growth is now accelerating to high single-digit rates, and I saw on what is also a statement that you expect a high single-digit growth for next year. So can you just talk about how good is your visibility for next year? And this kind of guidance for high-single growth for 2023, does this include inflation? Or do you expect that also on volume terms?
Second question related to that, can you just provide some kind of color specifically on cosmetics in the wake of the more economic uncertainty? What kind of demand patterns do you see? And probably also comment on stocking levels. And secondly, on vials, obviously, we see that the demand for COVID vials is fading while the industry is ramping up for more capacity. So any kind of color in terms of the supply/demand situation for vials would be helpful.
And then the third and last question, please, on energy. So we obviously have the proposals of the German Commission on Monday. And assuming this would be implemented, can you just talk about, would you be part of this kind of group of corporates that would get 70% of gas supply at preferred terms? And if so, is that actually any kind of benefit or not? Given the hedging in place, I guess, it depends a bit on the kind of cash mix between the Uniper and investment banks. Any color here would be appreciated.
Yes, thank you for the questions, Oliver. I'll take the first 3 and then Bernd can take the gas topic. Yes, the visibility of the top line growth is actually pretty strong. We had, I think as we indicated several times, very strong order impacts over the group over the last 2 years, especially also in the areas of contract manufacturing and the areas of the high-value products. That's why visibility is strong, and we are pretty confident that the strong growth remains.
The guidance that we send out is, of course, not including extra price increases, price adjustments as it was in this year. And so the high value -- the high single digit that we actually guided midterm is absolutely intact, and I don't see reasons why we wouldn't definitely confirm this.
Yes, cosmetics -- actually, cosmetic is doing very well. It's returned strongly. It's not only the recovering of the market itself, but it's also the benefits of our sustainability strategy that pays off and we have good orders here also in cosmetics, which is actually doing very well.
And the third question was concerning the vials. The COVID -- actually, as we indicated several times, it's a bit difficult for us to oversee whether it's COVID -- or whether the vials is used for COVID vaccines or for any other applications. So order intakes remain strong.
What also happens is actually that, as we always was hoping for, that more and more of the now free capacities for COVID vials can be replaced by high-value products. And one of the things you see in the very strong contribution of high-value products is, of course, exactly this trend that we have more and more Elite, RTF vials and so on, on these lines that are now contributing to our profitable growth story.
I hope this answers these questions. I hand over to Bernd for the gas support or potential gas support.
Thank you. Thank you, Oliver, for your question regarding the gas price brake. In terms of the technical implementation of the gas price brake, many questions, as you know, are still open. Current working assumption is that it covers only 70% of the gas consumption at EUR 0.07 per kilowatt hour. And considering these 2 ballpark figures only, we will continue to profit from our fixings, that's for sure. We also don't see that it affects our bank hedging, and that's our perspective from it. And further information by the gas commission and the federal government is expected in the next weeks. And for sure, we will monitor this closely. But whatever it is, it's not bad for us and it can only improve our situation.
The next question comes from David Adlington from JPMorgan.
Apologies, I don't have a very good line or anything. But just maybe you could just remind us of, firstly, what percentage of your sales comes from cosmetics and beverages? I think you said that demand remains robust. I was wondering what your thoughts were in terms of particularly the outlook for both of those areas. And then secondly, just on...
Sorry, David, sorry for interrupting. We can't -- it's pretty hard to hear you. Can you please repeat and speak up a little bit?
Yes. So I'm on a vague line, sorry. Just on cosmetics and beverages, could you remind us what percentage of your sales that those represent? And I think you said that the demand outlook was still strong. Just wondering perhaps if you have any sort of thoughts in terms of how those might develop into a recessionary environment next year?
And then secondly, on cash flow, down to minus [ EUR 46 million ] year-to-date. Looking like a strongish Q4, but still only probably in the mid-teens positive for the full year. Do you think we will see an inflection point in cash flow as we go into next year or maybe it's a bit later? And related to that, the investment in the RTF vials, will that have a significant impact on that cash flow, particularly CapEx, obviously?
Just to start with cosmetic, it accounts to 15% to 20% of our revenues in ballpark. And as mentioned before by Dietmar, if I look at our order books and what have you, we have not seen any signs of reduction here. At least it's pretty strong, yes. And therefore, there is nothing to -- we have nothing in our order books; the opposite, we have full order books and we are sold out here. So no effects there.
Regarding the free cash flow, as you know, we have the strongest quarter comes now in Q4 as far as our free cash flow is concerned. And as I said before, we expect to be at least at the level of previous year. This was EUR 60 million and we expect to be even better there. But it's always difficult to really pinpoint. It's down by EUR 10 million, EUR 20 million or something like that, but we are very well underway, looking also at our cash intake in September now and our forecast for October. So we are very well underway.
Regarding the investment into the Ready-To-Fill vials, I just mentioned, obviously, this has an impact on our cash flow. But the biggest chunk of it is already invested in the last couple of quarters. But if you look at Morganton, Morganton, this is still coming in the next 12 months. And as you know, we get subsidies by the government by around EUR 60 million, EUR 70 million, something like this, and we are investing EUR 80 million, EUR 90 million there. So there might be a certain timing phasing effect when we make the CapEx cash-out and getting the funding. But this is not something what really keeps us up at night. I hope it answers your questions, David.
Yes, it does. And then just one follow-up. I mean given your performance year-to-date, just wondered why you weren't increasing the guidance for the full year?
Yes. In the end of the day, we are always careful. And as far as guidance statements are concerned, we always want to overachieve, and that's the way how we are guiding to be on the safe side.
The next question comes from Falko Friedrichs from Deutsche Bank.
So my first question is, how do you plan to go about refinancing your debt in '23 and '24 in light of these rising interest rates?
Then secondly, can you quantify how much CapEx you have already spent on this project with BARDA in the U.S.? We're sort of trying to get a feeling for where free cash flow could have been in the quarter. And when precisely do you expect to start being reimbursed for these upfront investments?
And then thirdly, can you provide some kind of outlook for depreciation/amortization charges going forward?
Just to start with the refinancing things, next year -- end of next year, we need to refinance our debenture note of around EUR 160 million. And very well advanced, we launched on last Friday our new debenture loan in light of this and by the magnitude of EUR 150 million, and we can provide you an update here in 4, 6 weeks from now.
Also important question is, obviously, what does it mean, the increase of the interest environment, let's say, how does it affect us? Practically, we have 1/3 of our today gross loans, only 1/3 is based on variables. Variables the rest, so 2/3 is really based on fixed interest rates. And if we increase now by, let's say, 100 bps the inflation or the interest overall, then it would hurt us by around EUR 4 million to EUR 5 million. That's basically the situation where we are heading in.
And in particular, if you look now at the new debenture loan, this would mean that in this particular case, we see that we have around 200 bps, 250 bps higher as based on this EUR 150 million higher interest rates, and this accounts then for EUR 4 million, something like this, additional interest cost as far as this debenture loan, for example, is concerned.
Tackling now your next question regarding Morganton, in the end, we have maybe around EUR 10 million. Maybe we have -- so far, we have not really material investments of BARDA in the cash flow in Q3. However, you will see the gross amount of government grants in the balance sheet, most likely in both assets and liabilities. Overall, let's say, we expected in Q4, maybe you have a double-digit euro amount, EUR 10 million, EUR 15 million, where we are investing. And we expect then there's a delay of 1, 2 months to get them the money from the agencies.
Regarding the depreciation, your last comment, it's a little bit too early now because we are just planning out for the next year. We are just planning with our -- or making now really a thorough assessment of our depreciation. I would assume that we will see an increase in our depreciation by around 10%, 15%, but let's see. We'll give a clear indication in December this year when we discuss in our Capital Markets Day.
The next question, there is a follow-up question from Oliver Reinberg from Kepler.
Probably 3 additional questions, if I may. Firstly, on moulded glass, I mean, obviously, the situation continues to evolve, but still have price increases. So I just wonder, can you just provide some kind of feedback what your clients keep telling you? And is there any kind of signs that there's an interest with sourcing moves from Europe to the U.S.? I guess the short term is an issue with kind of capacity. But is it the kind of discussion points you're having with clients? And also, do you have any kind of color how significant would be the burden from transportation costs if clients would just try to source from the U.S. compared to the product price? I'm not sure if you can share any color on that.
Secondly, on pricing, and given the inflationary environment, do you also plan for further price increases next year? Any color here would be helpful. And then last question, please. You have this 23% to 25% margin target midterm out there. Bernd, you just mentioned, obviously, talked about the inflation effects on the margin in Q3. I guess, midterm, when you set this kind of target, inflation since then has picked up quite significantly. And just as a rule of thumb, if we assume 15% impact from inflation over 3 years, that the low...
Oliver, we lost you.
If someone is still able to hear him, I can at least answer this question so far. So no problem with this, yes?
Okay. Will I repeat the questions? I could...
Oh, I can hear someone now. I'm the only one they talk to, that's great.
It's just the 2 of us...
Mr. Reinberg, can you hear me?
Yes, I can hear you well.
Well, perfect, I can start to answer the questions. There are some of our team is obviously out. I start with moulded, yes? You have to see the following situation. Also in moulded, the vast majority of the business is in a regulated market. You don't change back and forth in between competition in a regulated market. We are well protected. If you go ahead and then you look -- there are, of course, certain businesses that you could change, but there is hardly any worldwide capacity available.
And then shipping bulky products that are not so expensive with a lot of air in the middle is actually very expensive. So the likelihood that this is back-and-forth transportation in between U.S. and Europe is pretty low. So -- and we don't see this at the moment. It's very stable. And as we indicated before, not only the business of pharma is doing well, but also here, food and beverage and cosmetics is doing pretty well at the moment in moulded.
Then the next question was the -- I cannot -- our price increase next year. The price increase next year will only take place if we have clear cost increases. If there are some additional cost increases, we would try to push them forward to the customers, which we did this year as well. And I think we have a good position here. We have not hand them in detail at the moment. So the guidance is actually without any price increases.
And the guidance towards the 23% to 25%, there's no doubt about this. The push-through of the cost at the moment to prices, of course, has a deflation effect on the margin. Nevertheless, with the very strong success we see at the moment with high-value products on the one side, but also very strong order intake in pretty profitable business, especially, for example, in contract manufacturing, we still stick to this guidance because we see the business clearly developing in this direction.
I hope that is not only Reinberg that heard us, but also others. I have no confirmation anymore, but I hope this answers your question.
From my side, that's very helpful and very encouraging.
[Operator Instructions]
I would hear the questions if there would be more questions. If there are no further questions, I do have 1-hour presentation on the quality ISO/TS 16949, which is very boring.
At this time, there are no further questions.
So thank you. Thank you, and sorry for these technical hiccups. I'm very sorry. If there are any further questions following the call, please reach out to Investor Relations. Very happy to take your questions. Take care. All the best. Talk to you soon. Goodbye.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.
Thank you. Bye-bye.
Bye.