Good morning, ladies and gentlemen, and welcome to the SCHOTT Pharma Conference Call regarding the Q1 Results for the Fiscal Year 2024. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now hand the floor over to Jasko Terzic.
Good morning, everyone, and welcome to SCHOTT Pharma's earnings call for the Q1 of the fiscal year 2024. My name is Jasko Terzic, Head of Investor Relations, and I'm delighted to host the call today. I'm joined by our CEO, Andreas Reisse, and our CFO, Dr. Almuth Steinkühler. Andreas will start today's presentation by giving an update on SCHOTT Pharma's strategy and business development in the Q1 of fiscal 2024. Following Andreas' update, Almuth will present our financials in detail.
Afterwards, Andreas will round up the call. The presentation will be followed by a Q&A session. Before we start, I would like to direct your attention to our disclaimer, which we encourage you to read. Additionally, please note that when we talk about the fiscal year 2024, we are referring to the period from 1 October 2023 to 30 September 2024. This means that the Q1 relates to the period from October 2023 to December 2026. With this, I would now like to hand it over to our CEO, Andreas Reisse.
Thanks for the kickoff, Jasko. Good morning, everyone, and thanks for joining our Q1 earnings call. We are very pleased to share the highlights and financials of our Q1 2024 with you. Let's dive right in. I'm aware that many of you joined our recent fiscal year 2023 earnings call, where I discussed the attractive injectables market we are operating in. Today, I would therefore like to point out a few recent developments in pharma that you can see on the right-hand side of this page.
These trends and developments are not only fueling the injectables market but also supporting our business growth. First of all, Big Pharma continues to expand their GLP-1 offerings. For example, Eli Lilly recently received FDA approval for Zepbound. Also, Novo and Lilly are investing heavily in new production sites in Europe, and especially Novo taking over Catalent.
Roche acquired Carmot Therapeutics to ramp up their development of GLP-1 analogs. Secondly, we are witnessing a boost for mRNA vaccines. These include COVID, but also RSV vaccines, the flu, or a combination shot. mRNA cancer vaccines are in the next trial phases and have lately shown powerful results. On top of that, existing mRNA COVID vaccines are now being equipped with replicase genes, making them last longer and reduce side effects. Lastly, I want to mention the promising developments we are witnessing in the antibody-drug conjugates field, also referred to as ADCs. These drugs offer new possibilities for the treatment of cancer but also result in challenges for the stability of the drug. We therefore see an increasing number of ADC projects where our special device enables a shorter time to market.
As you know, SCHOTT Pharma is actively enabling these trends as we have the broadest portfolio on the market. So now let's take a look at our performance in the Q1 of 2024. Overall, we had a good start into the fiscal year 2024. In the Q1, we managed to increase revenues to EUR 232 million. Please note, from this quarter onwards, we will also disclose revenue and EBITDA at constant currencies. Almuth will elaborate on the reasons why a bit later. The revenue increase at constant currencies translates into 8%. We also achieved a good level of profitability. At constant currency, we reported an EBITDA margin of 37.9%, which is a good start into the year. This development was driven by both segments. Our Drug Delivery System segment saw strong profitable growth.
At the same time, we are happy to note that our Drug Containment Solutions segment also contributed to these results. On top of that, we further increased our share of revenues through HVS, which accounted for 53% in quarter one. A very good start. We are already ahead of our fiscal year 2024 ambition for HVS. This should give us good momentum for the rest of the year. I would now like to highlight the source of strength of our business. The content of this slide is probably also familiar to most of you, but I want to emphasize one more time. With our pure-play focus on the injectable markets, we are a global market leader in a highly attractive industry.
With our extensive and innovative product portfolio, we are serving megatrends that ensure high demand, and some of which you can see on the left. Our long-term relationships with our customers and partners are built on trust. We are a reliable partner to them and serve them with high-quality products to help ensure that life-saving medications reach the patients. With our strategy based on pharma trends and our focus on innovation and expansion, we strive to capitalize on the growing demand for strong margin HVS products, which will subsequently amplify our profitability and broaden our market share. So by continuously innovating and expanding our production capacities, we are able to stay ahead of the curve while accommodating the high demand of our customers. We are really strong in executing our strategy.
By doing so, we are well on track to achieve our goal of over 60% of revenues through HVS in the midterm. As I mentioned earlier, more than half of our revenue share in Q1 already came from HVS. We see this as a strong proof point that our strategy is paying off and HVS remaining the growth driver and are enabling us to expand our EBITDA margins. I will now present key developments which demonstrate our progress in both innovation and expansion. There's a world beyond GLP-1 and mRNA. Today, I want to highlight another topic, home care treatments.
Pharma companies are increasingly interested in home care solutions, which simplify the drug administration process for the patient and reduce costs for the healthcare system. We are supporting this trend with our extensive ready-to-use product portfolio, including large-volume polymer syringes for wearable large-volume injectors.
These syringes come in 10 milliliters, 20, or 50, and are used to treat autoimmune diseases or chronic diseases at home, among others. In the Q1, we focused on the continued commercialization of these solutions and are looking to enter into additional contracts with partners to offer patients even more convenient home care treatments. So now let's take a look at the second cornerstone of our strategy, expansion. As you know, the demand for our products, particularly our HVS solutions, is growing rapidly. To meet the high demand and ensure future HVS growth in all regions, we are making strategic investments to expand our global production network. One of our highlights from Q1 is our new site in Hungary for prefillable glass syringes. We are seeing great progress with the project.
The site will be our second manufacturing hub for syringes, and we are planning to inaugurate in the next quarter. The added capacity will greatly benefit the global market and strengthen supply security for major pharmaceutical companies and contract manufacturing organizations. At the same time, we are moving our ampoule production from Hungary to our new best-cost site in Serbia. Here, we are investing also a double-digit million EUR amount to strengthen our competitiveness in Europe. As you can see in the picture, we are well on track with the construction, and I'm expecting to ramp up manufacturing lines this year. Now I hand over to Almuth for a closer look at our financials for the Q1.
Thank you, Andreas. A very warm welcome to all of you also from my side. I'm very happy that you're joining us today. I'm pleased to guide you through our financials of the Q1 of the new fiscal year. As mentioned by Andreas, we had a good start into the fiscal year 2024 and laid a strong foundation for the remainder of the year. Before I start, I would like to point out that from this quarter on, we disclose revenues and EBITDA at both reported and constant currency basis. In doing so, we want to be even more transparent and disclose currency effects, which we do not forecast. Please be in mind that our guidance issued in fiscal year 2023 is based on constant currencies. Now to our Q1 financials.
Building on a strong basis from the previous year, we grew our revenues in the Q1 of our fiscal year to EUR 232 million, an 8% increase year over year on a constant currency basis. With currency headwinds of around 5 percentage points, the reported revenue growth resulted in 3%. The bottom line also showed a good performance. On a constant currency basis, EBITDA increased by 7%, resulting in a margin of 27.9%. This means it is approximately on the same level as in the Q1 of the fiscal year 2023. We achieved this development mainly by the strength of our DDS business and positive effects from countermeasures in our DCS segment. Thanks to currency tailwinds, our EBITDA grew even stronger on a reported basis.
An increase of 15% year-over-year led to a margin of 31.3%, which is more than 3 percentage points above the same period of the previous year. Furthermore, we continue to invest a significant amount in the Q1 with EUR 28 million. The largest share of this was related to our growth investments. I would like to emphasize that due to our strong operating cash flow, we continue to fully self-fund our investments. Our EPS amounted to EUR 0.29, a strong increase of 16% compared to the same quarter last year.
The next slides will provide deeper insights into our KPIs. Firstly, I will focus on the top-line development. Our revenue development was mainly driven by the Drug Delivery System segment, short DDS. It is the light blue bar in the chart on the left-hand side. Please note, the DDS segment features only our high-value solutions.
More precisely, this includes both glass and polymer prefillable syringes, which are used in fast-growing markets such as GLP-1 and mRNA. The segment continued the strong momentum from the previous year. Once again, we achieved double-digit growth with an increase of 25% to EUR 103 million. The growth rate was equal on both reported and constant currency basis. As in fiscal year 2023, our current growth trajectory in this segment was fueled by our newly introduced capacities and the beneficial demand for glass and polymer prefillable syringes.
We continue to focus on meeting this demand as these products drive our revenue growth and also our profitability. Our second segment, the Drug Containment Solutions, short DCS, is shown in the dark blue bar. As a reminder, the DCS segment includes our core vials, cartridges, and ampoules, as well as high-value solutions like ready-to-use and specialty vials and cartridges.
As expected and discussed in fiscal year 2023 call, Q1 revenues in this segment continue to be impacted by customer destocking for our vials. As a result, revenues amounted to EUR 129 million, a decline of 3% at constant currencies and 10% as reported. This temporary effect continued to develop as planned, and revenues increased slightly compared to the last quarter. With this in mind, let's proceed to the following slide for an in-depth examination of our EBITDA performance. In the Q1 of the fiscal year, the EBITDA increased 7% on a constant currency basis, primarily driven by the strength of the DDS business and effective measures to mitigate the underutilization resulting from destocking in DCS. This resulted in an EBITDA margin of 27.9%, close to the high level of the same quarter a year ago.
The margin development compared to a year ago was partly impacted by a ramp-up cost of our expansion projects in DDS and the underutilization in DCS. On a reported basis, the EBITDA increased even stronger with 15% year-over-year due to the positive currency effects resulting in a significantly higher margin of 31.3%. The EBITDA growth was mainly driven by the strong EBITDA performance of the Drug Delivery System segment. The segment benefited from the strong demand for our higher-margin, high-value solution products, as well as associated operating economies of scale.
The DDS performance resulted in an EBITDA margin of 37.6% in constant currencies. With that, the margin was slightly below last year due to the ramp-up cost of our expansion project in Hungary, which I expected to continue throughout the year. It was not only the DDS segment that contributed to our good bottom-line results.
The EBITDA development in the drug containment solution segment was also very encouraging. The effect of declining revenues and the resulting underutilization were largely offset by implementing efficiency measures. In addition, EBITDA was positively impacted by government grants of EUR 1.7 million. As a result, the EBITDA margin for the DCS segment came in at 21.7% in constant currencies, an improvement of 150 basis points compared to the previous year. In our view, a strong result. With that, I would like to jump to the next slide to give you some details on our cash flow and investments.
In the Q1, we continued our track record of generating strong cash flow from operations, which we were able to increase significantly compared to the previous year. This has enabled us to continue our important investments in the expansion of production capacities, which we fully self-funded.
Overall, we achieved a strong free cash flow of EUR 37 million in the Q1, which was significantly above the previous year's figure. All these lead us to our guidance for the 2024 fiscal year. Our priority remains to be a profitable, sustainable, growing business. With our strong results from the Q1, we are confident that we have laid a strong foundation for achieving the targets we have set ourselves.
Based on the current market environment, we reconfirm our fiscal year 2024 outlook at constant currencies, revenue growth at the lower ends of the guidance range of 9%-11% as mentioned already last call, and an EBITDA margin approximately at prior year's level. Our midterm revenue growth in EBITDA margin guidance on a constant currency basis is confirmed as well. With that said, I will now return the floor to Andreas, who will conclude today's call.
Okay. Thanks, Almuth. And before we proceed to the Q&A, I want to quickly summarize key takeaways from today's call. So our strategic pillars, innovation and expansion, still remain our priorities in 2024. So we continue to ramp up our capacities across all regions and execute on our strong innovation pipeline, particularly through the extension and further commercialization of our HVS product families. Overall, there are many reasons to be optimistic about SCHOTT Pharma in this year and beyond. Let me give you five. Firstly, we had a good start to fiscal 2024 and delivered good financial results. With this, we are well on track to meet our full year guidance. Secondly, our offerings cater to some of the most significant emerging trends in the pharma industry that are driving future growth.
Our leading market position enables us to benefit from this growth and continue to innovate and deliver state-of-the-art solutions to our customers. On top of that, we understand and fulfill that our customers and partners need through our close and collaborative ties with them. Our product portfolio is mission-critical through every step of the pharma supply chain, from development to administration. Fourthly, our strong-margin HVS solutions are the future.
We are seizing this opportunity, and we will be further expanding our production capacities for HVS. And lastly, we are convinced that sustainability and accountability contribute to our long-term success. This is why we continue our ESG efforts and firmly integrate sustainability into our strategy. Our motto, "Because human health matters," underscores this commitment. So with that, I would like to end today's presentation. Thank you all very much for your attention, and we now look forward to your questions.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and star on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. We kindly ask all participants to limit their questions to two per person. Please press nine and star to state your questions. And first up is Julien Ouaddour from Bank of America. Over to you.
Thank you very much. And good morning, everyone. So my first question is that I appreciate that you confirmed the sort of end of destocking around March, like a month ago. We've seen some peers saying that destocking could maybe last a bit more than that. So could you maybe provide a bit more color about what makes you confident and the visibility that you have at the moment?
Second question is that you I mean, you deliver a strong performance for both sales and EBITDA at constant currency despite the impact from the destocking this quarter. You seem to be off to a good start of the year with the coming normalization. Do you still expect to achieve the sort of lower end of the guides for sales, as you said a month ago? And also, any color about the phasing for the EBITDA margin would be super helpful.
I have one quick follow-up. I think, Andreas, in your opening remarks, you said that Novo and Lilly are opening new sites in Europe for GLP-1. Could you maybe share, if you're part of the discussion, for any contract there and if we can expect anything at this point? Thank you.
Hello, Julien. So let me take the first part of the question, and then I hand over to Andreas. So yeah, we obviously closely listen and basically assess what our peers are basically saying about the destocking. For us, the important thing is that our Q1 was a very good start with 8% revenue growth at constant currency basis despite the destocking. And Q2 is currently developing as well in line with our expectation. But what you see with the destocking comes as well a reduction of the lead time to two to three months. And with this, there's a reduction of the basically visibility. Therefore, it's very hard to predict how the next quarters will be. But with the current development, what we see in Q1 and Q2, everything is developing as we have expected it.
Thereafter, we always said there will be a slow ramp-up, and we still consider this to be absolutely in line as we have assumed it to be. And for us, the important thing is that for DCS, as we cannot fully control the top line, that we make sure that we control the, let's say, the bottom line. Initiating the countermeasures to ensure that the profitability has come up again in quarter one, that is a key driver because the growth overall for our business never came, let's say, from the core part, or especially this one product group which is only impacted by the destocking. The growth is coming from HVS, and there they were well positioned, and our expansion projects are ramping up as planned. That's in terms of the destocking, and that's as well the first question.
I think then there was a question on the sales being at the lower end. We still stayed with the sales at the lower end considering that last year we have achieved the guidance at the very upper end of our guidance. Just by mathematics, you come to the lower end. Considering that where we stand, we have only one quarter, we cannot adjust our expectations for the guidance as of now, and we don't know it with the visibility, which is part of our business being shortened. Once we are progressing more in the year, we will be able to more elaborate on our, let's say, bring it shorter together, the guidance. At the moment, we stay with what we have said last time. Can I please see the second part of the question?
Second one was the sales guidance?
That one I've just answered.
That was the second. Then the third one was about the contracts.
Oh, that was the EBITDA margin. Yeah. It is still.
Yeah. Just the phasing, please. Thank you.
Thank you. I have so many screens with text, but no questions anymore. So the constant guidance, what is important to keep in mind that we have this fiscal year as well, the impact included from the ramp-up cost for our eastern expansions or, let's say, relocations. So both for DDS, where the expansion of the Hungarian plant for glass syringes is ramping up more and more, there will be a larger part of the ramp-up cost in the quarters to come in comparison to quarter one.
And especially if we look then at DCS, where we are planning, let's say, the shift to best-cost country, Serbia, there's a majority or nearly the majority, the large majority of the ramp-up cost as well to come in the next quarters. And this will have an impact on the EBITDA for the next quarters to come.
In addition to that one, we see as well an impact of our summer shutdowns. So usually, the biggest impact is in Q4. Q4 is a weaker quarter. But as well, if you look at Q2 in comparison to Q1, you have to keep in mind as well that in our South American plants, we have summer shutdown in our Q2 of the fiscal year, so that this one is a bit lower, probably currently based on our expectation than in Q1. And with this one, it would be now the question for you for the Carmot deal.
Last time, you said already that we don't disclose any more contract details about customers. But perhaps one remark to that one. We are in good discussions, I would say. Yeah, but I cannot disclose any more details. I think what is interesting at the moment with GLP-1 and how the markets are developing. Will it be that the U.S., for example, be a syringe market and auto injector, or Europe promotes probably more pen market? So that's an interesting discussion that's also ongoing because it is, of course, important for the future demand. So we are also watching carefully what's happening there. Yeah. And the rest, as said, good discussion with the customers.
Perfect. Perfect. Thank you very much, Reisse.
Next up is Falko Friedrichs from Deutsche Bank. The floor is yours.
Thank you and good morning. My first question would be coming back to destocking. Can you add a little bit of regional flavor here with regard to which regions are you seeing coming back now, and are there still regions that are a little bit behind in terms of ordering? And then also related to destocking, one of your peers made this interesting comment that it's also affecting their High-Value Solution products. Can you share if that is also something that you are seeing or not? And then secondly, on the FX hedging tailwind that you witnessed in the Q1, can you provide a little bit more flavor on what is behind this and how we should be thinking of this over the next few quarters? Thank you.
Thank you. First of all, regions, that's very much in line with what I told you last time. You can basically say South America and APEC is over. The destocking effect is over. It's really normalized. The only change in comparison to past year, I would say Europe, we are more optimistic because we see the recovery. It's not completely back, but really picking up. So that is also good. What is behind still is U.S. a bit. Yeah. So it's very much in line with the last call, which we have had five weeks back from Novo. So that is one. Then the second one with the peers, I have to ask, you are asking about West Pharma. Is it correct, Falco?
Yes, correct.
Okay. Because as they explained during the IPO process, the definition of HVS is different. Yeah. And according to my understanding of West, the FluroTec stoppers are defined as HVS for the biopharma industry. So that's a bit different to our HVS definition. Yeah. So you cannot directly compare. What I can tell you, in our case, the HVS business is not affected or almost not affected. Yeah, because it's too large a portion of DCS, which is not affected at all.
And the only little topic which we have had already explained in the past was with the sterile vials because there was less risk capital for developments of drugs in the U.S. and global. So that had a little effect on our business, but not much. But I would not call it destocking. Not at all. Yeah. Okay. I hope that is answering a little bit your question.
Paul, then let's take me over the hedging impact. So the biggest impact we have for hedging is basically coming on the one hand from the U.S. dollar and on the other hand from the Swiss franc and how they have developed in the Q1. If we now look at how these currencies have developed, let's say, since December, we would say that probably a lot of this positive impact has, or let's say, exchange rate development has reversed back as well. So we would currently not assume this to continue more to be the opposite in terms of currency developments.
Okay. Thank you. And that's only.
For the future, we make no comments. Yeah.
That's super helpful. Thank you. If I can briefly follow up, are you, by any chance, able to quantify the destocking headwind in the Q1?
I don't have that number in mind now. Sorry for that.
I would no, we don't have it in mind. Overall, if you look at the segment DCS in comparison to last year, the majority of this one is coming from, let's say, the core vials with this destocking. The impact, even though from the sterile vials, as Andreas mentioned, it's limited. So you can consider the majority of this effect being destocking because the other product groups within this segment continue to grow.
Yeah. And for us, Falco, the focus was for us more that we concentrate on cost improvements to stabilize the EBIT. If you remember the last quarter of past year, there were also some special effects, but the result was relatively low. And for us, priority number one was to get up with the results. And I think we have made good progress by reaching better numbers now.
Okay. Thanks a lot.
The next question comes from Veronika Dubajova from Citi.
Hi. Good morning. Thank you for taking my questions. I have three, please, if that's okay. The first one is I just want to go back to destocking, and I'm sorry. We keep asking you about the same thing. Looking at the decline in the Q1, it does look a lot less drastic and dramatic than what you had reported in the Q4. I guess I'm just trying to understand.
I think Falco was trying to ask the same question, which is it does seem that the destocking headwind to growth is smaller. If you can help us quantify that in any way, that would be helpful. Or should we just look at the decline that you had in Q4 and the decline in Q1 and the delta between the two as the lessening impact? I don't know if you can help us understand that.
That would be the first one. The second thing is just curious, Andreas, to get your thoughts on Annex 1 and what that might mean for your business, if anything. It has come up in a number of conversations that we've had. So that would be super helpful. And then I appreciate this as a forward question for fiscal 2025, and you've just reported the Q1. But in some of the conversations that we've had with some of your customers around destocking, there is some suggestion that obviously we've seen a significant decrease in inventory on hand among your pharmaceutical and biotech customers. And then at some point in time, it's likely that they will have to rebuild some of this inventory, which could support a strong 2025.
I'm curious if that is part of your fiscal 2025 guidance, or to the extent that it were to materialize, that would come on top of the guidance that you've given us for 2025 already. Thank you so much.
Okay. So then maybe I start, then I hand over to Andreas, and I do the last one again. So in terms of the destocking, if you compare the Q1 to the last quarter, you see for the DCS segment that the sales are slightly ahead, especially if you look at constant currencies. And the important topic for us is that the bottom line is controlled and has significantly improved. For the next quarters to come, we see on the one hand to see there that the destocking impact, which we said, will have an impact this quarter, Q1. We see it as well in the quarter Q3. Sorry, Q2. And from quarter Q3 onwards, you see the improvement thereafter.
What you have to keep in mind if you look at the quarter two is that we have summer shutdown in the South American plants, which are DCS plants. In Brazil, in Argentina, in Colombia, we have as well the summer shutdown therefore. Therefore, we assume that in quarter two, it will be slightly behind the one from Q1, but that has nothing to do with any impact from destocking. It's more the impact on, let's say, our production having an impact from the summer shutdown of a different side of the continent.
For the quarters thereafter, we assume there's a gradual improvement, which we said before. Given the, let's say, shorter lead time, it's hard to predict exactly how this gradual improvement will look like. We are very confident that we are in a position that we will see an improvement as so far included in our guidance. I hope that helps.
That's great.
Veronika, I've asked the question was Annex 1 and how is it influencing your business? Okay. And that is something that has not really influenced our business, not changing anything.
Sorry. I mean, the question I was asking more is, do you expect the implementation of Annex 1 to change the types of products that your customers are after or how they operate at all?
I don't think so.
You don't think so? Okay. So you don't think this is a big deal at all for the pharmaceutical industry?
If you want, you can have a separate call, but I have to really check it a little bit more in detail.
Okay.
I could be aware of it if it has a major impact. That's for sure. Okay.
Fine.
Okay. Let me answer the last one, Veronika, in terms of does the destocking or, let's say, the reduction of inventories at our customers have an impact on our growth for fiscal year 2025? It probably will have, but the guidance which we have set up did not include this impact. I mean, the guidance for fiscal year 2025 is on the one hand that we say in fiscal year 2025, there was no quarter including anything from destocking because in 2024, we said partly has an impact from destocking. The year thereafter wouldn't have it. And we would continue, let's say, the normal growth underlying for the core segments.
We see the growth in HVS on the one hand from the market side and from the ramp-up of our capacities, especially from the glass syringe production, which will come in operation, let's say, end of this fiscal year and then in 2025 have a full year of additional capacity adding to our growth. That are the drivers for next year. We have not factored in any, let's say, inventory measures the customers are currently taking to have a positive impact next year.
Understood. So in summary, there's no restocking assumption built into fiscal 2025 if you were to see that that would come on top of that guidance.
Yeah. It's just without any impact on destocking, which we have included. Yeah. So back to normal. But you have to keep in mind as well that prior to COVID and the extremely long lead times, we were used to having shorter lead times. So there's no expectation from our side that we will go back to this more than 12-month lead time. It will always operate on a shorter level.
Okay. Understood. Thanks so much, guys.
The next question comes from Hugo Solvet from BNP Paribas Exane. Over to you.
Hi. Hello, guys. Thanks for taking my questions and congrats on the print. I have three, please. First on destocking, and sorry to push you on that again, but can you maybe elaborate a bit on the quantum measures that you are putting in place? And when are you expecting them to run at full steam? What was the impact, if you can quantify that, for this quarter? And second question, DDS revenue continues to grow at a high rate coming in at 25%. So do you view this as sustainable level, or do you see that normalizing throughout the year? I'm conscious about the closing and maintenance over the summer, but just excluding that, or should we think about DDS growth? And lastly, just a follow-up on Veronika's question.
I'm conscious, Almuth, what you said about the fact that inventory will continue to run at lower level, but should we expect to see any inventory rebuilt in 2025? Do you think that with the capacity expansion plan that you're expecting, you will be able to cope with a higher demand for your products and inventory rebuilt? Thank you.
Okay. Hugo, I would like to start with the beginning. As you asked about the measures, the main measures at the end of the day, it's reduction of workforce. Yeah. And we have reduced roughly in DCS 300-400 people in total. In some plants, we had the opportunity to transfer people from DCS to DDS, kind of plants like Müllheim or like Hungary, where we are building up capacities for DDS.
So that was the main one. Or the value in millions, I really cannot tell you at the moment because it was spread over several plants, and I don't have the precise number in mind at the moment. Yeah. So then DDS growth, if we keep it at 25%, yes, something in that range we will definitely keep because also past year, we had these maintenance from the clean rooms and so on and so on.
So that will be very much in line with what we have seen so far. And final inventory buildups can be, but difficult to say. I would not calculate with that. I would just start assuming that as in virus, that the demand is recovering to the normal levels, 29 plus a certain growth over the years. But I'm not calculating in my planning or our planning with inventory buildups.
Maybe to add, because you asked as well on our capacities, I mean, we are ramping up the capacities in HVS. This is not, let's say, impacted by anything of this kind. There is no impact coming to that one. In the business where we currently see this temporary impact, where the capacities is not increased and there's sufficient capacity as well to basically answer to that demand.
Okay. Super. That's very helpful. Thank you. If I can squeeze just one quick follow-up, CapEx spend for the quarters at slightly below EUR 30 million, I remember the time of the IPO you were guiding EUR 230 million for the fiscal year. So how do you envisage phasing for CapEx throughout the rest of the year, please?
We still assume that CapEx will be in the range what we have guided. So there's no change to that one as of today. We always have, let's say, a backload in terms of that the last quarters will see a higher CapEx figure than we see in the Q1. So we do not foresee there any changes.
Okay. Thank you very much.
The next question comes from Annapurna Bang from Barclays. Over to you.
Hi. This is Gaurav Jain from Barclays. I dialed in on Anna's line. I have two questions. One is on this FX effect. So clearly, it's a headwind on revenues, a big tailwind on EBITDA. It's very unusual, I think, across a large number of companies that we cover. So is the flip side that when FX is a tailwind on revenues, it will be a major headwind on EBITDA? So that's my number one question. And number two is on vial capacity utilization, not only for you, but across the industry. It's probably pretty low right now and unlikely that it hits like 85%-90% in a very long period of time. So do you need capacity shutdowns across the vial side of things, not only for you, but for everybody else?
Okay. So then let me answer the first one, and then I hand over for the second one to address. What you have to keep in mind that our, let's say, FX impact in the Q1, it's always relating to different currencies. And we have, on the one hand, a large impact on this quarter was the Swiss franc. Currently, the majority of our HVS business is basically produced in Switzerland. And therefore, we have an impact. While on the other hand, a major currency impact was the US dollar.
So there is no general rule how both of them will develop to, let's say, sales and EBITDA to each other. It's more the question how the different currencies are changing, considering that we have, let's say, a bigger sales impact from the US dollar side, and we have a cost impact from the Swiss franc.
Okay. And the second one was about vial capacities and loading. Of course, these are numbers we don't disclose, not about any product group. But for us, to be honest, it was expected. It's nothing which is surprising us that this pandemic demand will go down, yeah, and that will lead, like always, to destocking effects or reduction of inventories. That's normal. Yeah. So what we are doing is now we are concentrating on productivity. That has changed because in the past, when we had COVID, we were concentrating on expansion. Yeah. And now we are concentrating on productivity, which we did also the years before COVID. Yeah. So now we are optimizing our manufacturing network. That is the main task for the DCS segment, as to bring costs down and to improve the EBITDA levels.
Sure. If I could just follow up, if, let's say, you have unused vial capacity, can you repurpose it for something else?
No, no. You cannot use it. It's specialized for this product group. That is the same for all product groups. Ampoule machines are for ampoules, cartridges, syringes, all the same.
Okay. Sure. Thank you so much.
Next up is James Sherborne from Jefferies.
Yeah. Hi. Thanks for taking my questions. Just one, actually. It's more theoretical than anything else. I know management teams don't like to do anything theoretical, but it'd just be helpful to kind of understand. So we understand in terms of the number of projects which you have ongoing, to some extent, that is management's bandwidth to make sure that you can deliver on what you essentially laid out in terms of objectives. Similarly, I understand, I think, that Hungary is 90% forward sold. And so from the perspective of being able to deliver as we move out the next few years, the capacity is essentially spoken for. So my question is more a case of we've had some industry discussions in terms of what potentially could happen with Novo's acquisition of the Catalent facility.
So if, for example, they were able to put in a lot more lines, which could potentially come on stream in three years' time, per se, and a new facility was needed, and let's say a new facility is EUR 200 million, I was just sort of interested in terms of the capital structure which you've got, the firepower that you've got, the bandwidth that you've got. Is that the type of thing which could be financed theoretically from internal resources? If you were ever to have to make another investment like that, that would require external financing. Can you help us sort of understand the ability to essentially take on potentially larger projects as we move out over the next few years? Thank you.
Okay. As Novo Nordisk, of course, an interesting for us, also a surprising move, I have to say. Yeah. Has that an impact, direct impact? I would say no, but because we are already in very close contact with Novo since long, and we are discussing, of course, further expansions also of productions. So the second question was about new investments which we cannot finance by ourselves, by our own cash flow. No, I would also say no to that one because we are generating enough cash flow to finance our projects. And we have already seen in our longer-year guidance a huge amount of new investments to increase capacities for HVS products. That is in our business plan already. Yeah.
I think, James, that's the key point. I mean, in our guidance, both for this year and the years thereafter, we already included a significant expansion for our HVS capacity, which we haven't decided yet exactly where it will be. But this is included in the CapEx guidance, and that's something which we believe we are capable to basically finance from our cash flow generation coming from our business.
Understood. So the way we should think about it is independent and potential customer. Over the next few years, you've included some expansion for another site in HVS, and that will fall somewhere within the business, but that's already factored into the existing expectations.
Yes. Absolutely true, James.
That's great. Thanks very much.
You're welcome.
At the moment, there are no further questions. So if you have any additional questions, please press nine and the star key now. nine and star for any additional questions. And the follow-up question comes from Veronika Dubajova from Citi. Over to you.
Hi. Since we have time, I hope you don't mind. I'm going to ask a couple very boring sort of admin-type questions. But just one, Almuth, I was surprised to see the FX headwind to the DCS sales growth in the quarter. Can you help us understand what currency that's being driven in particular by, and kind of what's the disconnect between the -3 that you had in DDS and the -7 or -8 that you lost to currencies in DCS? Where is that coming from? And then second, I noticed in your notes that you received a government grant in DCS in the quarter. Can you comment on whether that was expected and whether you are anticipating any further government grants or support as you move through the rest of 2024? Thank you.
Okay. So then let me start with the second question, Veronika. In terms of the government grant, yes, it was expected. It has been signed already more than a year ago, and it's supporting our ramp-up of capacities. There is, on the one hand, a subsidy for the investment and for the cost coverage. This has been one portion of that one. There will be further to continue, but it is stopping, let's say, within this fiscal year for the one topic which we are currently speaking about. But we have other sites where we have grants, but this is usually a grant in terms of our CapEx that we have a subsidy over there.
In terms of the impact for DCS, in terms of the FX impact, it is a combination coming from our, let's say, it's widely spread all over locations which we have where we see an FX impact. If I look at, let's say, the regions, the biggest impact we see in South America, driven by the Brazilian real and the Argentine peso. So it is really happening everywhere. That's the biggest impact. But we see as well an impact in EMEA coming from the development of the Hungarian forint or the Swiss franc. We have an impact in APAC. North America, let's say, is by far the smallest impact. But there's not one currency where I can attribute to.
Okay. Okay. That's helpful. Thank you. And then just very quickly, did I understand you correctly that the FX, the hedging gain you had in Q1, your expectation is that it reverses fully in the Q2, or you're saying there is a negative in Q2 but maybe not as big as the positive that you had in 1 Q?
Yeah. We have a negative impact so far which will be, let's say, very close to being reversing. But that is as of today. So we don't know yet what the, let's say, we fully will end up in February and in March, but we see a very, let's say, reversing effect.
Okay. Very clear. Thanks, guys.
Thank you very much. We do not have any further questions. With this, I hand the floor back to Jasko Terzic.
Thank you, everyone, for your questions. This concludes our call on our Q1 results for fiscal 2024. As always, I'm available should you have any further questions. Please do not hesitate to reach out to me. And also on behalf of Andreas and Almuth, we wish you a great rest of your day. Thank you and goodbye.
Thank you. Bye-bye.