Hello, and welcome to the Agfa Half-Year 2021 Results Call. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero on your telephone keypad, and you will be connected to an operator. I will now hand you over to your host, Pascal Juéry, CEO, to begin today's call. Thank you.
Hello, everyone. Good morning, welcome to the Agfa earnings conference for Q2 and the first semester of the year. I'm sitting here with Dirk De Man, our CFO, the rest of the executive committee is also in the room, ready to take any questions if need be. First, rather very good set of results for Q2. We've seen an improvement across the board in our activities, that translated in a very significant increase in EBITDA, about 30% higher than last year, knowing that last year, of course, was the first quarter of the year that was impacted by the pandemic. Inflationary pressure. I would like to try and give more color to the comments here on the slide. What do we mean? We mean that we've seen some inflation already in the first half of the year.
We have started, as you know, to increase pricing accordingly in various business areas. However, the P&L impact of inflation will be more significant in the second half of the year than in the first half, simply because the inflation has been building up during the first semester. Price action are in place, contracts permitting. We have various situation in terms of contractual arrangements with our customers. Every time we can, we increase price. However, we do expect an overall lag, a bit of a lag, in the implementation of the price increase. That will impact margins, and especially for offset. Third, our confidence in our ability to make up for the inflation over time is high. It's mostly a timing issue. That's what I want to clarify on this statement.
I think one of the key achievement of the quarter also is we are reporting back to you that we have concluded our pension de-risking plan. Dirk will walk you through on the details of this achievement, which I believe is very positive news for Agfa. We continue to manage our working capital tightly. Even in a seasonal impact of increasing inventory, we have kept working capital under control at the same percentage of sales of the last quarters. It's an area of really focus for us. It shows the cash focus of the company. We have been continuing our cost reduction programs in a number of areas. This resulted in a positive net profit for the group of EUR 15 million. Now, if we walk through the P&L. Sales 13.5% higher when corrected from currency impact.
Quite a significant rebound, I would say, in most of our businesses, with HealthCare IT being an exception. As I repeated over time, we are not so much today after top line, but more about quality of the business in HealthCare IT. Apart from that, overall, very nice rebound. We'll give you more color on each of the business on where we stand. Gross profit pretty well-oriented, so it means the top line did translate to the bottom line, even with an increase of margin. SG&A is higher than in 2020, purely because we have cost back with the activity. If I compare this number with 2019, we are 15% below. That shows the very tight cost management we are implementing at Agfa. R&D a bit higher, but it's just a timing issue. It will be globally in line with last year for the year.
That results into an EBITDA of EUR 40 million or slightly over 9% on sales and an EBIT of EUR 25 million, almost 6% of sale. If we go further down the P&L, the big difference, the big swing between the two years, of course, is restructuring non-recurring, which turns positive in this year. The reason being we have a few asset sales as well as our CR recovery plan does not cost as much as first anticipated. Last year, it was the impact of the Leeds Pont-à-Marcq announcement. Overall, the only difference as well, of course, is in Q2 2020, we recorded the sale of the HealthCare IT, which resulted, of course, in a huge profit from discontinued operation. Overall for this quarter, back to a positive net result. All divisions are improving. That's really the key takeaway. HealthCare IT continues to make progress.
Last year in the quarter, we'll come back to that, we did recognize a specific, very large contract. Overall, when I look at the overall situation in HealthCare IT, very healthy. We continue to make progress in order intake. Our order book is, I would say high single digits, almost double digits higher than last year, which is a good predictor for future activity. We continue to improve our operations in HealthCare IT, quite happy. Digital print and chemicals continue to recover. Most of the activities are above COVID. We still have two activities that are below. The NDT part, which is linked to oil and gas and aerospace, we expect a recovery, but later, in line with the sector expectation. Inkjet, for which I would say the order intake has recovered, not yet the sales.
There is a slight delay in, of course, turning the order book into sales in inkjet. We see a good trend, but not yet in the sales. Radiology Solutions, significantly better performance than Q1. Q1 was indeed a quite weak quarter. Although we are still impacted in our film business by COVID, because we sell in countries that are still suffering from the pandemic. India, Latin America, Russia, South Africa, being a few countries that are significant for us. DR continue to increase, double-digit. We have put price actions in place in the film. Overall, I would say it's a satisfactory result in Q2. Offset that improved significantly its performance also in Q2. We have seen through the first wave of price actions. Every time where we could, we did increase price the first time, and that was a success.
More to come, but as I say, the bulk of the inflation is going to impact the P&L in the second half of the year. We'll continue with price actions, but there will be a delay in some implementation due to contractual arrangements. Overall, for the quarter, gross margin improves. Net profit of EUR 15 million, I've already said it. I'm going to turn to Dirk to comment the cash flow performance for the quarter and the semester.
Yeah. Thank you, Pascal. Good morning, everyone. Free cash flow of the quarter, obviously, a strong EBITDA result. Working capital is the seasonal buildup that we usually see in Q2. CapEx, normal spending, nothing special. In regards to provisions, this is also a bit of a seasonal effect in Q2 that we see regarding employee benefits. Income taxes were positive, and that mainly is due to the fact that we received cash-wise the R&D tax credits. That is more a timing effect as well, leading to an adjusted free cash flow of EUR 5 million. Regular spending on pensions around EUR 10 million, and restructuring non-recurring EUR 14 million. This is really the restructuring in Leeds and Pont-à-Marcq that is coming to cash payouts, and that is increasing the spending in restructuring and non-recurring. Leading to a free cash flow before the extra funding of minus EUR 19 million.
Then we had in Q2, the buy-in program in the U.K. for EUR 113 million. I'll explain a bit more all the steps that we took in the next slides when we talk about the pensions. Leading to a free cash flow of minus EUR 132. On the next slide, you can see the year to date. I don't have many additional comments to make. Basically, you can see the EBITDA result. Trade working capital, net only EUR 5 million cash out. Again, we also had a good first quarter on the working capital. CapEx at normal levels. Provisions is still at positive 8. Then in total, I'll just jump to the extra funding of pensions, the EUR 129 that was spent year to date. In Q1, as you remember, we did the Swedish plan. In Q2, we did the U.K. plan.
In total, there was EUR 129 million of extra spending. On the next slide, you can see the cash position of Agfa. We still have a very strong cash position of EUR 425. We really continue to have a good cash position. Working capital, it's stable as a % of sales, despite the seasonal working capital buildup, which we usually have in Q2. That really says that we're continuing to do well on working capital management. We're 2 percentage points of sales below 2020 Q2. Quite an improvement versus last year. We're even, on an absolute basis, below Q4, which is traditionally the quarter where we try to manage inventories to a very low level. For three quarters in a row, we maintained the 27%, we're quite pleased with that result.
The key point to make, though, is that inventories are suffering a bit from the global supply chain issues that we are seeing. There's two effects. There is the raw materials increasing, which obviously makes your inventory more expensive. There are also some transport delays. Due to the disruption in logistics globally, we are seeing a delay in delivery of, let's say, intercontinental transport. Also some delayed delivery of components. It's primarily in the equipment business, but we are seeing some slowdown of the execution of our supply chain. We had a very good result in trade receivables, notably in the reduction of overdues. I think quarter on quarter, we reduced overdues by EUR 10 million. We're continuing to focus very hard on, let's say, the quality of the receivables, and that had some very good results in the quarter.
Let me maybe switch to the pensions. As you recall from the divestiture of part of our HealthCare IT business, we decided to invest around EUR 350 million in de-risking and funding pensions. We're happy to report that we completed that program in Q2. In total, we have focused on the funded plans. With the exception of Sweden, I'll get back to that later. In total, they are now 100% funded on average. There is a bit of over-funding in the U.K., some underfunding in U.S. and Belgium. As we said before, also the German unfunded plan will remain unfunded. It is very predictable for us in terms of cash flows. They will continue to reduce with about EUR 1 million a year. The other good news is that we said our target was to get our net liability below EUR 700 million on the material countries.
We actually already achieved that result, and I'll explain in one of the next slides also how we did that. The key reason is that not only did we contribute to the pension plans, but also we were able to register a better discount rate on the liabilities. From that, and I'll share that with you later as well in a slide, is that we're expecting the cash outs on the pensions, the regular cash outs, to decrease from a EUR 66 million predicted for 2021. That's excluding the extra contributions to EUR 52 million in 2026, and they will continue to reduce over time.
The last key comment to make here is that when we look at the midterm in terms of what we plan to do, again, we're not planning to do another program requiring cash, but we are going to explore, I would call midterm, maybe five, seven, eight years from now, to see whether there is an option to create a buyout for U.K. and U.S. with minimal cash contributions. That's more midterm. That's not anything for the next few years. On the next slide, you can see what we did do in the past 12 months. This is quite an intensive program that we had. Here you can see the overview. In Belgium, we basically focused on extra contributions, so there was no de-risking activity there.
In the U.K., we did extra contribution in both years, and they were used for a buy-in, which we completed this quarter. On the left-hand side of the slide, you can see the definition of a buy-in. Basically, the buy-in creates an asset on our balance sheet that balances with the liability of the pensions, taking away all the risk and the volatility on that part of the buy-in. In the U.S., we did some extra contributions. We did an annuity purchase. We also did a lump sum project. Finally, and that is not part of the material countries, but EUR 16 million is what we did in Q1 with a complete annuity purchase of the Swedish pension plan in total amount of EUR 16 million. That was the program. On the next slide, you can see the impact on the funded status.
Versus 2019, as I mentioned, it's almost EUR 380 million reduction of the net liability. Versus year-end 2020, it's a EUR 211 million reduction. On the left-hand side, you can see the EUR 211 million explained. On the one hand, we did the EUR 129 extra contributions. There was EUR 35 million of normal contributions that we did. We had an impact of remeasurement. Over the past few years, we each year had to come back with, unfortunately, lower discount rates, which continue to increase the overall net liability. We're happy to report that the trend is turning. The new discount rate was established at 142 versus 1.05 at the end of 2020, and that created another additional lift of around EUR 80 million. Overall, good news, and maybe also to note, the funded status of the non-material countries evolved from 38% to 16%.
That's basically the elimination and the revaluation that we had on the non-material countries, which included Sweden, which is now not anymore part. There, if you add the two, you have the total amount. On the next slide, and again, just a bit of numbers for transparency purposes. I think the key point here is that we wanted to share with you where we are in the first half, but also where we're going to be estimated at the end of the year. Again, I'm not going to give much detail. I think this is just useful information for the financial community. On the next slide, I think that's the more important one. This is the outlook, the projection that we have made for the next couple of years. Basically, obviously, we had to make assumptions.
The assumption number one is that we maintain the discount rate, so there is no improvement of discount rate, and also no experience gains or losses or demographic adjustments. It's basically a ceteris paribus projection of the pension liabilities. As you can see, we're projecting for 2026 a reduction of EUR 133 million down to EUR 440 million, more or less. The pension cost will go down to EUR 28 million. You can see that we basically broke down the total cash costs into the different components because that's useful for financial modeling. The extra cash out this year was EUR 113. The regular cash out, EUR 66 million, of which a part is included in the EBITDA and some part is below EBITDA.
There you can see that the regular cash out is going to come down from EUR 66 million estimated this year. That's down from, I would say, EUR 75 million-EUR 85 million over the last few years. As you recall, this year is already a series of reduction versus the past and continue to go down to around EUR 52 million in 2026. Overall, I think a very good achievement, very good work done by our risk management and treasury departments, and I think overall a very successful program delivering exactly on the expectations that we were having for it.
Thanks a lot, Dirk, for this very comprehensive explanation of the pension situation. Let's turn now back to the business and look into more details at the various divisions of the company. We're starting with HealthCare IT. Well, this is the exception to the top line. As I told you, it's not the first priority right now. On top of that, we have a comparable in Q2 where we had a very significant contract that was recognized in one go, which is not, by the way, typical of the way the business is done. Actually, when you look quarter to quarter, you see a decrease of the activity. If we take into account the overall more steady state, we are still happy with where we are in HealthCare IT, 14% EBITDA. Costs are under control. The gross profit is at a very good level.
There is nothing broken with the business. On the contrary. The division still performs well. We are looking at the order book, which is for us the way to describe where our business is going, and we are encouraged to see that order intake is picking up. What's interesting, it's picking up also because we are gaining customers. We have made a new customer contract in the past quarter, especially in Italy. When we renew customers, we renew it with an expanded scope and a new generation of products. That's also part of the progress we are making. I told you, the order book is round about close to 10% increase compared to last year, which is very good, and we expect this trend to continue over the next quarters.
We are more and more offering, we are becoming, I would say, one of the strong players in this market. We have concluded this quarter our first full cloud-based contract. We have started to sell actually artificial intelligence solutions to our customers. We are recognized by market organizations such as KLAS as good players also for cybersecurity. Overall, I think the momentum that we see in this market is very positive. We are confirming, of course, our objective of a high teen EBITDA % in the midterm. Actually, you see that we are getting close to this target almost, I would say, every quarter. That's for HealthCare IT. Radiology Solutions. Radiology Solutions, so clearly a rebound from a rather weak first quarter. You see currency adjusted almost 10% growth over last year. Profit-wise, not exactly in line in terms of EBITDA, but close to it.
If you will look at the detail of the business, as I told you already, DR continued to grow double-digit in a market that is rather subdued in terms of context and growth. Medical film volume still impacted by COVID. Even with this recovery, we are not yet back to normal in terms of these geographies that are representing a significant part of our shipment. We have put in place a selective price increase policy as well to tackle the inflation pressure with, I would say, success. Overall, I would say it's a back-to-normal situation for radiology and a satisfactory performance. If we turn to Digital Print and Chemicals, well, here you see a 23% growth over last year in terms of revenue. We are not yet fully back to pre-COVID level in the division as explained, but it's a very good progress.
That translates as well on the bottom line, because we continue the ride of the first quarter with even some improvement, with a good profitability for the business. If we look into more details, we have three businesses, I would say, to keep it simple in DPC. The first one is Inkjet. Inkjet, all the consumables and the service are back or higher than pre-COVID levels, meaning that our customers are busy printing and digital printing has some momentum, I would say. The equipment business is not yet back in terms of sales here the capital decisions are a bit slower than usual. However, when we look at order intake and even our sales, we are making tremendous progress, and our order intake, I would say, is now back to a very satisfactory level.
Now the name of the game is to translate it into sale, and that's where, what Dirk was talking about regarding supply chain challenges, transport, part supply, is basically slowing down a bit or extending, if you want, the time between order intake and recognition in sales. Frankly speaking, we're encouraged. On top of that, when we look at the mix of our order book for printing equipment, it's more on the high end. Meaning more ink consuming and I would say more expensive machines, more productive machines. We're encouraged with what we see. We have introduced a few months ago, the fastest Jeti Tauro printer and actually, the success we had in the market exceeded our expectations. Right now, the name of the game for us is to make sure we can fulfill the order.
That's an extremely good sign for us of the health of the business. All our solutions in decor printing, laminate floorings, leather, are ramping up. It's not yet significant in our numbers, but we are very confident going forward. At the same time, we are looking at new applications. The Jeti Tauro printer was a machine that could do also some packaging jobs and this is an area for us that is very promising and that we are going to develop. The second business is what I would call the more legacy film business from Agfa, and especially the largest one is NDT, non-destructive testing, which is going to aerospace and oil and gas. Here, that's one of the area where we're not back to normal volume in this area. Our specialty chemical business is actually above pre-COVID level. The reason is quite simple.
The positioning we have is very favorable. I discussed already our ZIRFON membranes potential. It's not yet material in our sales, but it will still be multiplied between two and three for the year. When we look going forward, the project pipeline at our customers, it's absolutely tremendous. The project pipeline has been multiplied in the industry of green hydrogen by, I would say, more than 10 in a year. Very bullish going forward, not yet impacted fully. We have launched our latest membrane, ZIRFON UTP 220. Basically, that's a membrane that gives higher yield in terms of hydrogen production. You can see that here we have extremely good momentum. Our conductive polymers that are used in hybrid and electric car technology are doing well as well, as you would expect.
Overall, apart from film and foil that are continuing to be a bit subdued, except for a small niche we have in printing. We have synthetic paper printing for which it's taking off, but NDT is really the one that does not yet improve back to pre-COVID levels. Very positive on DPC. Offset. Offset here again, pretty positive sets of results for Q2. 20% improvement in sales. We are not back to COVID level, and we don't expect to be back to COVID level, by the way. We made progress, as you see, on profitability of the business during the quarter. As you know, we've taken a lot of actions in order to restore the profitability of this business. A lot of cost action, but also reviewing our revenue model and so on. Overall, a satisfactory quarter.
As I already mentioned. We are impacted the most in offset by the cost inflation for the group, not only for aluminum, but also I think across market by chemicals, packaging, and shipment cost as well. It's a significant impact that we had to absorb already in Q2, but the impact is going to increase in Q3 and Q4 in terms of P&L. We are taking actions on pricing. We are taking the lead actually in price increase, I would say, in the offset world. This is already the second round of price increase that we are offering. As explained, we do have contracts in place that are aluminum indexed, but the index is kicking in at a later date. It's not a question of if, but when.
We have also some fixed contracts that we are busy renegotiating, that implies a lag, somehow a lag of implementation of the price increase across the board. We are looking at indeed a more challenging S2 in offset, although we are taking all the steps to preserve profitability. One other thing also I would like to mention is we are continuing to review our business and the latest decision that was made. We had actually a kind of a Tier 2 approach in terms of digital plates for offset with a subsidiary in Spain. We have decided to wind down this activity over the next six months and to reintegrate it back into Agfa with a Tier 1 approach. That's another example of all the actions we are taking to sustain profitability of the business.
We are making progress also in setting up the business in a standalone, as announced at the beginning of this year. Overall, if I look at what's in store for the rest of the year, we do expect a continued recovery on volume. That's pretty clear across the board. We are seeing a positive momentum. The one event that I've been talking about is really the inflation impact on the P&L that's going to be more significant. I'm not coming back to that. I think that's really the main subject for us going forward. That's mainly for offset. The rest of the business is, I would say, much less impacted. That's pretty much an offset-specific subject. Overall, we will continue to take price action. We will continue to manage our costs very responsibly and continue to have cost reduction initiatives in a number of areas.
Of course, we will continue to manage our working capital very tightly. We expect this also to show during the second part of the year. That's where I'm going to stop for the presentation and open up for questions. We do have some people in the room, some analysts in the room, and maybe we'll start with the room, Viviane?
Yes.
We're going to start with the room, and then if you have a question over the phone mainly for the press, maybe, okay? We are going to take the question from the room.
Okay. Thank you. This works. Good morning, Kris Kippers of Degroof Petercam. First question, logically, on the lagging price increases. I was just wondering if you look to industrial players, they are mentioning that price increases are being accepted today by clients mostly. To what extent are you hindered by your fixed contracts? Could you give an idea of the percentage of the group level or at least some indication? Why is the impact so big in H2 and not yet in the second quarter? That might be on the contract side of the purchasing, perhaps. A second question, linked to that a little bit on your working capital. To what extent actually do you need to pay your suppliers in advance to obtain raw material? Is there any shortage yet, or is that not an issue today? Thank you.
I'm going to start with the price and the contracts. I would say, and Luc, you can step up if you believe it's not exact, but I would say you have three situations. Mainly it relates to offset. I would say the situation is a bit different in other areas, or I would say in other areas, it's less material than in offset. In offset, we have three situations. We have customers for which we can increase price immediately, and we already did so in Q2. You have customers who have some aluminum-based contracts with index that are kicking in with some delay. That could be three to six months, I guess. You have fixed contract. That's the three kinds of contracts that we have for offset.
Now, to quantify it, let me say that we have a sizable part of our business that are on contracts that will induce a delay, either through an index or through a fixed contract for the year. I'm not going to put numbers on it. So that's where we are. However, so far, every time, the first price increase that we pushed through was a success. I can say we have not lost material volume. We can always have something happening at the fringe, but that's it. That's where we stand. Again, it's mainly for offset, this situation. Why is it so significant in the second half? Aluminum, freight, chemicals, packaging, they have not increased on January 1st. They have been continuing to increase.
It's leveling off in packaging, in chemicals, but not yet in the freight and not yet in the aluminum. Which is why the impact is much more in H2 than it was in the first half of the year.
Okay, just a small follow-up. You as a price leader, mostly, of course, you raise prices first. Competition is following, generally?
We have seen for the first wave of price increase, we have seen indeed some of our competitors issuing price increase statements, I would say. Basically, that we have seen. Most recently, we've seen the market leader in Japan do an announcement of price increase in Japan, which is typically a bit late, by the way, but it's part of the culture, I guess, business culture in Japan. They did it. Overall, I guess everybody is confronted to the same challenges in the industry. The price of aluminum is pretty global anyway these days. To your question on working capital, are we obliged to do advance payment to suppliers to secure raw materials? I'm not aware of that at all. Not at all.
If you look at our working capital and the DPO in terms of number of days, it has stayed and improved, by the way, at a good level. What is bothering us in the everyday life is lead time are getting longer, and it's difficult to ship. As you know, we source some of our components in Asia, of course, as you would expect. Therefore, we are seeing this difficulty, but not to the point where we have to pay in advance our suppliers.
Thank you.
Yes, good morning. Guy Sips, KBC Securities. I have two questions. First is on the pensions. Thank you for the very good explanation and numbers you give on this one. It's mainly on the Swedish pension fund. The cash outflow was in the first quarter, it was in the second quarter that you booked a profit on that in the restructuring and non-recurring items. The real question is, can you break down a little bit this EUR 3 million+? What is the impact of Sweden and what's the impact of the Spanish business that you closed? Can you give us some guidance on this restructuring and non-recurring items? I think previously you were hinting for EUR 40 million on a full year basis. Is that still the case? Can we expect there quite a large number in the second half of this year?
The second question is on HealthCare IT. In second quarter 2020, we saw this big contract, which is not recurring. The question is actually, this kind of bigger contracts, how many times can we expect this? Is that once every two years, once every year? Is it just once, and it's not recurring?
You want to start with the contract? Dirk, are you ready?
Yeah.
Anytime, okay.
That's fine. Yeah, indeed. In the non-recurring and restructuring, there were some special effects in there. The restructuring for Ipagsa was around, let's say EUR three and a half million, and again, these are all approximate numbers, not exact. The reversal on the restructuring regarding South Germany was around EUR 10 million. I covered the Swedish pension was around EUR four and a half gain. The guidance, I think at this point in time, I'm not sure exactly what I said last time, but around EUR 30 million, EUR 31 million is what we're predicting right now, but that depends on certain decisions to be made still in the second half of the year. That would be more or less the guidance.
Luc Thijs is heading our HealthCare IT business. Can you answer on the contract?
Sure. If you look at the business of HealthCare IT, you first have about 55% of the business, which is, I would say, recurring. It's very stable. It grows gradually. It's based out of your support and maintenance contracts and so forth. Very predictable. Then you have projects, and these projects are recognized based on milestones, as you know. Sometimes you reach such a milestone, and sometimes you don't. The quarterly evolution of the project business will continue. That's something that you will see on a continuous basis. Particular in Q2 of last year was that you had a significant customer and at the same time, a significant milestone that was reached for the entire customer. That's what is making it an exception. What you typically need to do for the HealthCare IT market is to look at not quarter per quarter.
You need to look typically at a yearly cycle and how the improvement takes place on a yearly cycle. That's a general thing to keep in mind when you look at that business.
Of course, we look at the delivery. For us today, the main area that we are looking to track the business is the level of order intake and the level of our order book.
Yeah.
As well as, of course, the quality of the order intake. What do we sell? The quality, therefore, of the order book.
Yeah.
That's really what we are looking at in this business. Looking at this, we feel pretty confident.
You can have a quarter where you have less project implementation and a quarter where you will have more.
Voila.
There is a bit of variation on the project side, as explained by Luc. Overall, what you need to look at is this indeed.
Yearly
basis.
Yeah.
Yeah.
Maxime Stranart, ING. If it's okay for you, 4 questions on my side, 1 for each division, actually.
First of all, on HealthCare IT, you mentioned that the order book is the way you appraise the performance of the business. Is it something that you plan to publish in the future, and could you already quantify it? On the Radiology Solutions side, obviously still a negative impact from hardcopy, which, well, decreased product mix performance. Could you quantify, or do you see the hardcopy business evolving for the second half in 2022? Thirdly, Digital Print & Chemicals with the new ZIRFON UTP 220 and membranes. Again, can you quantify in terms of volume or in terms of amount, what you're selling right now and how the pipeline is looking like? Finally, in Offset, could you quantify the impact of the wind down of the activities in Spain? That would be all for me. Thank you.
All right. Are we going to publish our order book? I listen to you. For the time being, we do not, indeed, although we give you indication on the evolution of this order book. I note what you say. We need to think about it. I need to look at what can be done in this area, but I heard you. UTP 220, let's face it, I'm not going to quantify right now. It's impossible to quantify. For the time being, it's not yet a material business. You understand, if you look at things in the green hydrogen market, for the time being, you have a lot of projects being committed in the market. We sell membranes when the projects are being implemented. There is a lag in such implementation. For the time being, it's not easy to quantify.
UTP 220 is the latest addition of our range. This is a top-of-the-range product. It's just being launched. I would say for very large projects, that will probably be the membrane of choice for our customers. Quantifying the potential of the membrane business, that can be done, but you're talking three to five years, and you're talking three to five years, a business that with what we see currently, will start being material for the group, but not before this period of time. Giving numbers is premature. However, if you want to look at it, there is a good proxy. There is an inventory being done of the projects announced in green hydrogen. That's about 80 GW today, I guess, more or less.
Therefore, you need to look at the share of the alkaline technology in this, in terms of gigawatt, and that's also information that can be found. Then what is necessary for you to understand is basically how does it translate for us in terms of sales, okay? That's what you need to understand. In a project, our membranes are critical to performance. They are not the bulk of the cost of building a green hydrogen plant. This is a way you can look at it. Look at the evolution of the portfolio of projects, and you will see you have a way to understand what is the potential for us. Now, radiology quantification for H2. Oof, that's a bit. Well, typically, the seasonal pattern for hardcopy is Q3 is a bit weaker and Q4 a bit more active.
From what we are seeing today, it's difficult to as I said, this is an area that is still a bit COVID impacted given the nature of the geographies we sell in. What I can tell you is, for the time being, we see some continuity. We don't see any disruption with the seasonal variations. In China as well, we are seeing the VBP process being on pause. For the time being, we also have a stable outlook in China. That I can share.
I had a question on offset, yeah.
Question on offset, the wind down of Ipagsa and the impact. Boy. Luc, you want to take this one?
Ipagsa, there will be no impact. Ipagsa, it would be rather even a positive impact next year. It's not contributing to the EBITDA.
There will be a positive impact on three fronts for me. As Luc said, it's not contributing, it's going to contribute to the profitability. We have the opportunity to take over part of the business. Not a lot, some. Third, we are going to wind down the working capital associated with the business. Three benefits.
That's the reason why I say next year. We want to wind down orderly the business.
Yeah. We have a six-month period now to wind down. Which is why most of the impact will be next year, will improve probably a bit already this year, but most of the impact is going to be next year.
Correct.
Sorry for having forgotten Ipagsa.
That would be all for me. Thank you.
If you have more, go ahead, Kris.
Yes, still one question remaining. Looking at the comments on the cost base that you made, versus 2019. In view of the restructurings, could you share with us a bit on where the cost base should normally land on a full year basis? For example, going forward with all the restructurings which are now taking place being done, to have an indication of if your sales level is again stabilizing and structurally up, where should be the inflection point?
Okay. We're not guiding of SG&A. We will continue our efforts in SG&A. We will certainly continue our efforts going forward, in a number of directions, you'll have to wait for specific initiatives. As I said, part of it has come back from 2020 in terms of cost. We're still well below 2019, we still are working on productivity plans for the group. It's linked also to Dirk's answer regarding restructuring, you will see. My message is we have a track record of managing costs down, we will continue. Any other question from Maxime?
Thank you. Here again, one recurring one for me. Do you have any midterm targets at group level or divisional level that you would be keen on sharing at some point in time?
At some point in time, yes, we will do it. Yeah, I would welcome the opportunity to do it. You'll have to be a little bit more patient, I would say. Yes, we will do it. I believe we are giving you this for HealthCare IT. We have made a commitment, and we know where we want to be. We are actually working on our strategic plan for the rest of the group, and as soon as we believe we have something that is ready, we'll come back to you on this, and I note your point. Indeed.
One last question on the pensions from my side. As you stated that your only plan in the midterm, and you stated the three to five, seven, eight years from now, a de-risking intention. Does that mean that for now, in the next quarters, it will be quite calm on that front?
Yeah. Really, the program is done. Basically, we committed to that program, and we executed it, and it's done. We're not planning to do extra contributions, extraordinary contributions to the pensions in the foreseeable future. I know things can change in the future, but that's not the plan at this point in time. When I talk about de-risking, it is really playing the combination of, let's say, discount rates moving over time. The market premiums to do a buyout, potentially coming down in the future, and then getting to the right point in time to actually be able to take it off balance sheet and do a complete buyout. That's really what I wanted to say.
We think if we let time act, and again, I'm not pretending to know what interest rates will do in the long term, but I do think that there is a turning point that we have seen that I hope will continue to evolve over time. We could get to the point where we could do a buyout without any additional contributions on some of those funded plans. That's really what I meant.
Can you give us some guidance that every 25 basis points interest rates rises has an impact on your pension liabilities?
Yeah, we will redo the assessment. That's published in our annual report, and we will redo it, but I think we didn't do it for this half year. We will redo it for the full year.
Is it fair to assume that the overfunded status in the U.K. is balanced out by the underfunded status in the U.S.?
Yeah, it's U.S. and Belgium. Yeah, that's balancing. Those three together, they're close to 100%. There's a bit of overfunding. Again, it's IFRS valuation. The point is, for a buyout, you need to look at the market conditions, which are not complying with IFRS necessarily. Yeah, that's the way it is.
Sorry, last from my side on this. Why stating that your intention is to de-risk in the midterm and not earlier? Is there specific-?
Yeah, as I said, at this point in time, our intention is not to do any additional funding. Obviously, if you want to do a buyout, if you put the cash in, you can do a buyout. It's a premium that you would pay, but we're not willing at this point in time to pay that premium. We're really going to see how the market evolves and try to get to that buyout point without needing to add cash. We could do it earlier, but that would mean we need to put more cash in, and we decided that the program was going to be EUR 350 million and not more than EUR 350 million.
I think it's a good guidance. We are looking at any de-risking action that will not cost us cash. If it happens in a year, so be it. More realistically, we believe it's more midterm.
Yeah.
I think that's the point. We did what we believe is necessary. We are not putting more cash. All right. Maybe time for a one-minute concluding comment. Overall, a good quarter across the business. Clearly, an inflation challenge that will impact more in S2, but it's more a question of timing than anything. It's not a structural issue. It's more a timing issue. Very pleased with the development of HealthCare IT and DPC over the past quarters, and this will continue. Very confident going forward in this area. We will continue also our actions on cost management and working capital. Continue to run the company very tightly. That's, for me, the key takeaway. That's time to conclude the call. Thank you very much to all of you attending, and I look forward to talk to you soon. Thank you.