Elringklinger AG

XETRA:ZIL2

Earnings Call Transcript 2022-Q1

[Stefan Wolf, executive]

Good morning, everybody. We warmly welcome you to our conference call on the first quarter of 2022. As you all know, we have already published preliminary figures on April 14. So you already know the key data.

With today's publication of the full figures, we confirm what we have reported on April 14. I -- as always, I will start with some headlines on the first 3 months of 2022. And after that, my colleague, our CEO (sic) [ CFO ], Thomas Jessulat, then will present the financial figures of the first quarter. And after that, I will make some remarks on the ongoing year. And then after that, of course, as every time you have the opportunity to ask questions, and we are more than pleased to give you answers on your questions.

If we look at the past quarter, one topic, of course, dominates, that is the armed conflict between Russia and Ukraine, the war of Russia and Ukraine. The image continues to leave us stunned. I personally would never have believed in such a warlike confrontation in this form in Europe anymore. Our thoughts are, of course, with the victims and the families who are suffering so immensely.

ElringKlinger has neither production facilities nor manufacturers as customers in this region. Sales are essentially limited to our aftermarket segment. It is an important market for the aftermarket, but it's not the most important market of the aftermarket. This armed conflict with all its consequences affects, of course, the industry in general, but very much our industry regardless of sanctioned countries.

Pre-products were manufactured in Ukraine and when they can no longer be delivered restrict production at OEMs. You probably know that effect, especially wiring systems are here a topic. So we have a problem that just deliveries are not continuing from the Ukraine. At the same time, also due to the countermeasures to these aggressions, prices for raw materials, energy and logistics are further rising. And overall, the already high level of uncertainty has tremendously increased.

At the same time, the pandemic continues with a new wave in China since the end of March and the semiconductor shortage are by far -- is by far not over. So we add problems instead of eliminating problems in the supply chain in our industry. Our figures for the first quarter now fall into this environment. We generated revenues of EUR 434.6 million, which implies an increase of 2.5% compared to the previous year, which was caused by exchange rate effects.

On an organic level, sales remain more or less unchanged. Compared to the global light vehicle production, which declined by 4.5% within the same period, we have outperformed the market once again, which is always our goal. EBIT came in at EUR 14.1 million, which was below previous year's level of EUR 48.4 million, which included a divestment gain and some pandemic instruments such as short-time work, especially here in Germany. Due to the earnings level and an efficient working capital management in the course of the supply chain bottlenecks, we noticed an operating free cash flow of minus EUR 19.8 million.

As a result, net financial debt was now at EUR 387 million, below previous year's Q1 level of EUR 400 million. What is really pleasing is the development of the order situation with a value of EUR 1.53 billion and an unprecedented level of the order backlog has been reached. This is the highest order backlog I remember since the last 25 years I'm here in the company. So a pretty good situation.

Yes, those are the headlines for the first quarter 2022, and I will now hand over to our CFO, Thomas Jessulat. He is going to present the financial figures in detail.

[Thomas Jessulat, executive]

Yes. Thank you, Dr. Wolf. Ladies and gentlemen, also a warm welcome from my side. Over the next couple of minutes, I would like to comment the financial results of the first quarter, starting on Slide #4. Orders remain buoyant at ElringKlinger at the beginning of 2022. At EUR 578 million, the group exceeded its order intake reported for the same quarter last year by a further 0.3%. This was underpinned by some extent by, of course, exchange rate effects. As a result, the group's order backlog also expanded further.

After EUR 1.186 billion as of 31st of March 2021 and EUR 1.386 billion at the end of 2021, the order backlog as of 31st of March 2022 totaled now EUR 1.530 billion. This represents an increase of 29% and 10% respectively. Adjusted for currency effects, order backlog amounted to EUR 1.486 billion. Despite the general adversities which have already been outlined by Dr. Wolf, group saw revenue expand by EUR 10.5 million or 2.5% to EUR 434.6 million.

Excluding exchange rate effects, revenue decreased slightly by EUR 0.4 million or 0.1% and therefore, remain largely unchanged year-on-year. Based on this minimal organic change in revenue, ElringKlinger once again outperformed global automotive production, which contracted by 4.5% in the first 3 months, according to IHS data.

On Slide #5, we see the sales performance of the different segments and business units. In the period under review, the original equipment segment emulated its strong performance seen in the first quarter of the previous year. At EUR 335 million, the group generated slightly higher revenue in this segment than in the first quarter of 2021. Revenue was also up on the figure posted in the previous quarter, the fourth quarter of 2021. While the metal ceiling systems and drivetrain components business unit saw revenue expand slightly by EUR 0.7 million year-on-year to EUR 121 million, the lightweighting elastomer technology business unit increased its revenue noticeably by EUR 6.6 million. Lightweighting elastomer technology accounts for the largest share of group revenue with EUR 134 million or 30.7%.

In contrast, revenue generated by the Shielding Technology business unit was slightly lower compared to previous year's quarter at EUR 74 million. The E-Mobility business unit saw a slight decline in revenue to EUR 5.3 million in the quarter under review. When looking at the sales split by region, revenue from foreign sales increased in all regions within the first 3 months. The rest of Europe, which is the region generating the highest revenue within the group recorded a growth of 2.6%, which was roughly in line with the group average of 2.5%. Revenues in this region increased by EUR 3.3 million to EUR 135 million. And adjusted for currency effects, this increase was even more pronounced at 4.2%.

In Germany, by contrast, revenue contracted by 3.1% to EUR 91 million. And in the Asia-Pacific region, the effects of the most recent wave of the coronavirus pandemic in parts of China were not yet apparent in the first quarter of 2022. With revenue totaling EUR 86 million, this region was 5% up on the prior year figure. Assuming consistent exchange rates, the region came close to matching the level recorded in the previous year with a change of only minus 0.3%.

In the region comprising North America, revenue grew by 3.5% to EUR 104 million in the first quarter of 2022. Revenue benefited from currency effects in the period under review. And adjusted for these factors, revenue would have declined by 2.7%.

Let us now have a look at the earnings on Slide #7. Against the backdrop of consistent cost discipline, the direction taken by material-related prices as well as higher staff costs had an impact on group earnings in the first 3 months of 2022. The situation within the commodity markets deteriorated further year-on-year due to the armed conflict between Russia and Ukraine, higher energy costs and persistent supply chain bottlenecks.

In particular, the group was faced with additional cost for aluminum, steel and plastic. It has to be considered that the raw material impact listed here is a net position and also includes, for instance, compensation payments by customers. Staff costs also increased due in part to coronavirus infections. Moreover, they were influenced by currency effects and general increases and wage costs as well as one-off effects such as the revocation of a Board member or the employee bonus agreed by the company.

In this context, EBITDA fell by EUR 34.4 million to EUR 42.8 million. The group recorded an EBIT of EUR 14.1 million after EUR 48.4 million in the previous year's first quarter. This had included nonrecurring factors attributable to the pandemic, such as short-time work in Germany as well as the disposal of the Austrian subsidiary. Adjusted for these exceptional items, EBIT for the first quarter of 2021 amounted to EUR 34.4 million. The quarter just ended included the following exceptional items, provisions for contingent losses as well as one-off effects within the area of personnel amounted to EUR 8.7 million as a result of which adjusted EBIT stood at EUR 22.8 million for the first 3 months of 2022.

Net finance costs in the quarter under review was minus EUR 3.3 million, which contrasts with net finance income of EUR 1 million in the first quarter of 2021. While the net interest result of minus EUR 1.8 million was better than in the same quarter last year, the net result of foreign exchange gains and losses of EUR 0.4 million was significantly lower than 12 months ago. This was primarily due to unrealized foreign exchange losses. Taking net finance costs into account, earnings before taxes for the first quarter of 2022 amounted to EUR 10.9 million. After deducting tax expenses, which fell by EUR 3.9 million to EUR 7 million and taking into account non-controlling interest, the share of net income attributable to our shareholders amounted to EUR 4 million. Therefore, earnings per share amounted to EUR 0.06.

On Slide 26, we take a look at CapEx, net working capital and operating free cash flow. At EUR 12.8 million capital expenditure and property, plant and equipment was at a similar level as in the same quarter of the previous year. It included essential purchases made in connection with new ramp-ups at various plants around the globe and expenditure aimed at aligning the product portfolio with future technologies such as those of relevance to E-Mobility and of course, also lightweighting.

The investment ratio stood at 3% in the first quarter of 2022, up from 2.7% in the first quarter of the previous year. In response to the tense situation seen within the procurement markets as evidenced, for example, by higher prices for materials and supply side bottlenecks, inventory management was adjusted appropriately to this situation. Irrespective of this inventory levels also expanded in view of the group's solid order books in total up by EUR 66 million year-on-year to a carrying amount of EUR 389 million.

Net working capital, which encompasses inventories and trade receivables less trade payables totaled EUR 449 million at the end of the first quarter, its share expressed as a percentage of revenue for the 12-month period was therefore 27.5%, down from 28.5% a year earlier. Against the backdrop of the factors outlined above, the ElringKlinger Group recorded negative operating free cash flow of EUR 19.8 million in the first quarter of 2022. Net financial debt decreased by further EUR 12.8 million year-on-year to EUR 387 million it slightly increased over the reporting period as a result of the higher funding requirements for the group's operating business. The net debt-to-EBITDA ratio was 2.1% as of March 31, 2022, up from 1.9 a year earlier.

Let me now turn to Slide #11, showing the performance of our segments. As mentioned above, the original equipment segment was able to expand its revenue. In terms of earnings, this segment was affected by more substantial metal-related costs as well as provisions for contingent losses for selected products in response to higher prices for materials. And therefore, EBIT was down on the figure posted for the same period a year ago, which had included a disposal gain and some short-term work instruments.

Adjusted for the aforementioned gain on the disposal of the Austrian subsidiary earnings attributable to the E-Mobility business unit in the quarter under review were roughly on par with those posted in the previous year. Yes. Sorry, we got interrupted. I will continue with my explanations.

In the -- we are now still on Slide #11, yes, and I continue with the description of the aftermarket segment. In the aftermarket segment, revenue generated between January and March 2022 amounted to EUR 63 million, an increase of 13.9% compared to the same period last year. From a high revenue base, the segment managed to expand its earnings compared to both the preceding quarter and the same quarter of the previous year. EBIT now totaled EUR 13.8 million, which was attributable in part to consistent cost discipline and a favorable product and regional mix. Overall, the EBIT margin was 21.9% compared to 18.2% in the previous quarter and 21.5% in the same quarter last year.

The engineered plastics segment was able to increase its revenue year-on-year by 6.6% to EUR 35.3 million. On the whole, this was driven by broad sector mix in this segment. Business within the medical devices industry and the chemical sector, in particular, generated growth due to catch-up effects and volume demand with regard to project business. In addition to revenue growth, continued cost discipline had a positive impact on earnings. Overall, the segment generated an EBIT of EUR 5.6 million, which corresponds to an EBIT margin of 16%.

Having said this, I will turn back to Dr. Wolf.

[Stefan Wolf, executive]

Thank you very much, Mr. Jessulat for the presentation of the figures. Well, ladies and gentlemen, I have already outlined the current environment in my introductory remark. Amidst challenges underlying conditions, market continues to be exposed to high level of uncertainty. Key factors such as bottlenecks with the -- within the semiconductor industry issues surrounding supply chains and especially the shortage of raw material and placing considerable constraints on the recovery anticipated as measures aimed to containing the coronavirus pandemic are lifted.

According to IHS data, the post-COVID recovery of the auto industry will be more or less postponed all will take place at a lower extent. They expected to see a light vehicle production level that will be growing by 4.4% globally coming from a very, very low basis. Europe is expected to grow roughly on global average, while China is expected to remain on 2021 level. And light vehicle production in North America should increase significantly. But again, the degree of uncertainty is persistently high, ongoing high and there are still a lot of risks in our industry and in the economic world around the globe.

What does this mean in the short term? Well, we had to navigate through a very difficult, complex and uncertain environment. First of all, the armed conflict between Russia and Ukraine is associated with considerable suffering and far-reaching repercussions within European territory in addition to exposing the entire continent to the tri-metal effect of economic restrictions. Alongside higher raw material, energy and transport costs, this has also manifested itself in further impairments of supply chains as well as heightened volatility within the commodity markets.

Earnings could be undermined if the Russian-Ukraine conflict, cuts off important sources of revenue and exuberates the existing pressure on automotive industry value chains. In addition, the recent coronavirus lockdowns in China as well as the possible emergence of the new variants and the associated repercussions may have an impact on revenue and earnings. The remainder of the financial year will continue to be accompanied by a high degree of uncertainty.

As present, therefore, it is not possible to make a well-founded reliable forecast for the 2021 financial year. The Management Board of ElringKlinger AG will closely monitor further developments and provide a dependable outlook as soon as the general political and economical situation makes this possible. Again, it is not possible right now. Despite all the short-term challenges, it is also important to seize the medium and long term opportunities. ElringKlinger is very well positioned to do just that.

Our product portfolio is geared towards the rapidly growing demand for alternative drivetrain technologies, particularly in the strategic areas of the future, but also from within the traditional business units. Products are offered for the mobility of tomorrow. As a result, we expect strong sales growth in fuel cell technology, battery technology, electric drive units and lightweight structural engineering. At the same time, the traditional business areas are transforming. In this respect, the major market potential will be exploited with innovative solutions. With this setup, we aim to grow organically stronger than global automotive production and gradually increase our profitability.

Finally, ladies and gentlemen, I will quickly point out the upcoming events in the ElringKlinger Group in exactly 2 weeks on March 19. We will host this year's Annual General Meeting and all general shareholder assembly. It will be, again, in a virtual form due to the pandemic situation, which was uncertain at the end of January when we had to decide if we do it in presence or in a virtual format. And the next release of our quarterly figures for Q2 will be on August 4, and I already invite you to the conference call at that day to join us again to -- when we report about the second quarter.

Well, having said this, ladies and gentlemen, thank you very much for your attention. And Mr. Jessulat and myself are now happy to answer your questions. Thank you.

[Operator]

We have the first question from Akshat Kacker of JPMorgan.

[Akshat Kacker, analyst]

3 questions from me, please. The first one on the provisions for contingent losses within the OE segment. Can you just share some more details with regards to specifically what does this exactly relate to? That would be really helpful.

The second question is on auto OE margins. So adjusted for some specific items like staff costs and the provisions auto OE was roughly breakeven or low single digit in margins in the first quarter. Do you expect this to be the lowest point of the year? Or should we expect more pressure from cost inflation going into the second quarter?

And the final question is on E-Mobility. We previously spoke about the ramp-up of sizable series production orders in 2021 going into 2022, especially in the field of battery technology. But this quarter, you had the lowest turnover in the last 10 quarters. So can you share more details here as well, please?

[Stefan Wolf, executive]

Yes. Thank you for your questions. If I compare the provision for the losses, which you can see in the balance sheet, then if I compare to previous year's quarter, it's EUR 10 million in total increase, and there's mainly 2 components in there. The first component is, of course, the material cost impact on the product portfolio and the calculation in terms of this position.

And the second one is, let's say, a refinement of the method to assess this. And this has been also a point of the increase, in particular, towards the end of last year, which, of course, continues now in the ongoing accounting. So, the main impact is material, the other impact is not such a high one and it's related to the cost in our main commodities, of course, aluminum, steel and plastic, and that has an impact, again here on our product portfolio for the provision of the losses.

To your second question, OE margin, yes, we had some extra costs here in terms of staff bonus and also provisions here. Do I see this is the lowest point? I say no, because we are still in the, I would call it, in the early phase of the inflation period. And that means that we have to deal with the higher input prices from a sourcing perspective, that translates into our, let's say, accounting costing with a little bit of delay. And of course, customer compensation here is received but with a delay. And as long as we are in this run-up of this inflationary cost situation, I cannot say today that this is the lowest point. I don't think that, that would be the case.

And in regard to E-Mobility, your third question, we had an interruption in one of the plans here where we produce E-Mobility products based on interruption of production here of our customer. And that is mainly the case why we see here in Q1, a lower sales base. Now expectation is that in Q2, this plant is going to be operating again and contributing more than before because we were still in a run-up situation, will be contributing sales increase more than we have seen in the past. So that would be my assessment here that I would expect the E-Mobility share over the next quarters that we see a higher level here coming up.

[Akshat Kacker, analyst]

Just one follow-up in terms of cost recoveries from customers. Obviously, we are seeing very high inflation across key raw materials, as you mentioned, steel aluminum and plastic. Is there a rough guidance in terms of how much can you pass on to the OEMs and probably in percentage terms? Do you expect 50%, 70%, 20%? Just how should we think about your ability to pass on these cost increases because of all the contract negotiations you have done over the last few years?

[Stefan Wolf, executive]

As you know, I'm responsible for sales in -- here in the Board and the clear order that our salespeople have is to get 100%. And we do not at this time of the year think about what kind of percentage we're going to be satisfied with. Our clear goal is to get 100% of the increase of material prices.

[Operator]

The next question is by Christoph Laskawi of Deutsche Bank.

[Christoph Laskawi, analyst]

The first one would be a bit of a follow-up to the raw material question and the impact on earnings. I appreciate it's still a very volatile and fast-moving environment. So it's tough to comment. But if we assume current spot rates would persist throughout the year, is it fair to say that Q2 will probably see a bigger headwind on earnings than in Q1. And then in the second half, we should -- especially thanks to the pass-through, see an improvement of this headwind.

Then also related to sourcing in general, are there currently any parts of materials, which are in short supply to you specifically, which could cause your production to be disrupted? And then you highlighted the risk in China as well. Could you provide a bit more commentary around your capacity utilization in the market currently, the volatility of call-offs in that region and generally, the trends that you currently see in the short term.

And the last one will be quite a bit more forward-looking. You talked about adjusted EBIT margins again, while you have essentially taken out that KPI in the past. When you will provide a guidance, should we expect that to be on adjusted EBIT or stated EBIT margin?

[Stefan Wolf, executive]

Okay. Let me start with the second question, and then Mr. Jessulat is doing 1, 3 and 4. We're not really directly suffering from a shortage in supply, yes. We have, well, one or the other product in the aftermarket, you might know that we have those aftermarket kits, gasket kits where we buy products like radio seals and doves and cylinder head bolts, and we combine all those products with our products in a gasket set so that somebody that repairs an engine has every part that he might need during this repairing the engine that is available there in this kit. So some of our suppliers, they have some problems in supplying parts, but we have also alterative suppliers. So we're pretty well set up in the aftermarket.

In the OE business, we only need materials for our products. So we saw a shortage in steel, but I think we're pretty well set up here. We see -- what we see is, of course, that there are shortages as our customers. And if they are short, let's say, of wiring systems, they cannot build the car. And then, of course, they don't build the engine and then they might not get the parts from us or need the parts from us at this time of the day. That also explains the high order backlog of EUR 1.5 billion that they put all their demands in the system, but they don't really ask for the parts then in the short term. So indirectly, I would say we are affected, but not directly.

[Thomas Jessulat, executive]

Yes. To your first question on the headwinds in Q2, I would clearly say, yes, there's more headwinds in Q2 that I would expect. And they -- when we look at material from the one side, then we also have an overlay of course, of effects coming out of China. We have seen business interruptions in China. Our plans now operate. They do operate in fact, but on a limited basis. But as we all know, there is shutdowns of customer plans in China, and there is also a shutdown of logistics, elements of the logistics chain in China, such as ports and also local transportation. So this is clearly also an overlay going into Q2 that we have to deal with from a group mix.

And in regard to adjusted EBIT margin, I would not say this is a principle. We have done it here when it helps to explain the situation, but it's not the intention as of today to change to adjusted EBIT reporting.

[Christoph Laskawi, analyst]

And just a follow up on China. When you look at the current run rate in April, essentially is already done, we see headlines that production in the end might have collapsed around 20%, 30%. Is this something that you have observed in your operations as well and now it's quick and back up or too early to comment?

[Stefan Wolf, executive]

I think a reduction of 20% to 30% would be in my estimation, the low reduction rate. The realistic reduction rate, I see it as a little bit higher. And therefore, the impact here coming out of China is a more significant one.

[Operator]

The next question is by Marc Tonn of Warburg Research.

[Marc-Rene Tonn, analyst]

First question would be on the raw material theme again and perhaps the way you seek compensation from the customers. Could you give us some indication? Is it general price increases for your products? Is this, let's say, that will last in the next years is compensation payment for this or last year's increases. Anything in regard to that would be helpful.

Second question would be coming back on E-Mobility again, and you mentioned that there's a lack of production of one of the customers as a reason behind the, let's say, a bit lower or not a bit more but lower revenue generation in the first quarter. Could you give us some indication what you might be expecting for the full year for the E-Mobility part of the UE business as a revenue number? Overall, that would be the second question.

Third question would be coming back to working capital. With all the shortages in the market and price increases, you are seeing in the volatility. Is there anything you would, let's say, have in mind as a reasonable midterm working capital ratio, what you would be prepared to share with us, which we should assume, let's say, for the mid- to longer term at ElringKlinger to stay.

And the fourth question, a bit more housekeeping. The tax rate, I think in the first quarter was pretty high at 65% if I'm not mistaken. Could you give us the reason what was behind that and what you would be expecting for the year as a whole?

[Stefan Wolf, executive]

Yes. Thank you. Let me start with question number one, and Mr. Jessulat is doing the rest. Well, it's totally different what we get and what we negotiate with the customers. We have under negotiations onetime payments just to compensate the increase of raw materials. We also are working on price increases that means general price increases that are then sustainable for the years to come. We also work on index systems. If you look at the materials that we have -- where we have alloy surcharges like nickel or aluminum has also an index on the metal exchange. This would give us a situation that we are safe in the future. If prices go up, they pay more, if prices go down, they pay less.

So we have a broad variety of different approaches with regard to the customer. It always depends on the product. If you look at our cam covers and oil pans and other injection molding parts where we use PA66, which is a plastic material that had a tremendous price increase. There is no index, there doesn't exist in index. So it's hard to get here on a situation that you agree on a price level that adjusts automatically because there's no index like with nickel or with aluminum. So it's a broad variety. The clear overall goal is that we want to have 100% compensation of what we have as a price increase on the material side. This is the clear goal for our salespeople, and we do not change that as of today.

[Thomas Jessulat, executive]

Okay. To your other questions. E-Mobility, of course, the uncertainty that we have effects also the E-Mobility products and the sales. And therefore, I cannot give you a figure right now because we may still go into some situation where we have to deal with shutdowns. Generally, I would have said, my expectation would have been for this year in its double-digit figure as an initial expectation from my side. Now it seems like we are going to be eventually -- we're going to be short of that. But to what extent really I cannot say as of now.

From a working capital perspective, here, we still put very much effort in keeping our supply chain in a good situation. I really don't like so much that we have -- after we have come down to the 25% that we have to increase inventories right now, but I think it's for 2 reasons. It's the right way to do coming out of last year, of course, pricing that we had stopped more materials with a lower pricing so that we have some positive effects here.

And number 2, of course, that we have availability and service rate to our customers not impacted by interruptions and delays of the supply chain. Generally, I want to stay as a midterm target below 25%, yes. And this is the figure that I would want to give now that I want to go back to below 25% as a short-term target, once we -- things are a little bit more stable. And then on further goals and targets, we could talk later if there is more visibility.

So on the tax rate, the high tax rate is related to an accounting policy that we have. We have the condition that to build deferred tax assets as so to say, compensation for a loss-making situation that we have to have a 3-year profit experience in an entity before we build deferred tax asset position. So we have really a conservative accounting approach here because we do not want to have high volatility here based on movements in deferred taxes. And this is really the technical reason why you see here a high tax rate simply because we don't build deferred tax assets. Yes.

[Marc-Rene Tonn, analyst]

Perfect. Just coming back on the raw material side, if I may say so. You talked about this time lag when it comes to passing on raw material costs. Could you give us, let's say, an indication how long that would be? Let's say all raw material prices that they would be stable from today in the future to achieve the 100% compensation? How many months or quarters would that then need from that specific date on?

[Thomas Jessulat, executive]

Yes. From a tactical thinking, it would be -- I would not expect too much in Q2, and I would expect more in the second half. But to talk about quantities, it's difficult. We need to report on that on a quarterly basis. But to make a forecast on that, I would not want to do that right now.

[Stefan Wolf, executive]

It depends very much on customers. Some of them are much faster. Some of them have still big organizations where you need 25 signatures before they can issue a payment. So it's totally different. We have -- if I look at the new OEs, they are much faster with regard to that. So -- but I agree to what Mr. Jessulat said, I would say we see rather no effect in Q2, and we will see all the effects that we achieved in Q3 and Q4. or maybe even later. If we can get a good deal, maybe with increase of prices up from January 1, 2023. And also with the new orders that we get in combination with new orders, then we would, of course, accept price increases from January 1, 2023. So it's really up to the specific situation with every single customer. But we work on that really hard, I can tell you.

[Operator]

The next question is by Michael Punzet, DZ Bank.

[Michael Punzet, analyst]

I have only one question with regard to the mentioned provisions from contingent losses. Is that related to a specific group of customers, for example, the new OEs or is it a wide range of customers, which lead to these provisions?

[Stefan Wolf, executive]

No, this is broad product portfolio. No, this is broad product portfolio. It's not related to individual customers or products. And this is the reason why I said this along with the different commodities, aluminum, steel and also plastics. It's not a single risk, so to say, that we have here.

[Operator]

The next question is by Frank Biller of LBBW.

[Frank Biller, analyst]

Just 2 left on my page here. The one is again on this adjustment line here. Can you remind me what was the adjustment on bonus payments for Q1 this year and also no adjustments for Q1 last year then? Or what is the related figure here? And the other question is -- so next question on net debt to EBITDA, so it was 2.1%. Is there any midterm target with the normalization in working capital?

[Stefan Wolf, executive]

Yes. On the adjustment personnel, this is the reason why we brought it up. We didn't have that position last year. We didn't have that event based on, of course, the performance of the group in 2020 Corona related. And in terms of net debt to EBITDA, it's clearly to stay below 2. And if possible, to improve to between 1 and 2, let's say, as a midterm target, that's very clear that this is our goal.

[Operator]

As there are no further questions I will hand back to Dr. Wolf for some closing remarks.

[Stefan Wolf, executive]

Yes. Thank you very much for joining us today for this conference call. Thank you for your questions. As I said, rough times, it's not easy. We are working every day very hard to improve things to really get safe through this terrible time with regard to energy prices, materials, all kind of other things that we have to deal with. Of course, we take this challenge, we work on it, and I'm pretty sure that we get this company good through this hard time. But as I said, times are rough. So thank you very much again for your attention. All the best. Stay healthy, and I'm looking forward to our conference call on August 4, 2022. Thank you very much. Bye-bye.