Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the DEUTZ AG Full Year 2022 Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Christian Ludwig, Senior Vice President, Corporate Communications and Investor Relations. Please go ahead.
Thank you very much, operator. You all, good afternoon and a very warm welcome from us to our analyst investor call, our full year 2022 numbers. As we are in the U.S. today, taking part at the CONEXPO Fair, our call takes place a little bit later than usual. Please note that this call is being recorded and a replay will be available on our website at deutz.com later today. Your participation in the call implies your. Joining me today are our CEO, Sebastian Schulte, as well as our CFO, Timo Krutoff. As usual, Sebastian will walk you through the highlights of the performance of the group and then hand over to Timo, who will provide some more details on our financial figures. Sebastian will close the presentation with our current market outlook and our guidance. After this quick introduction, we will be happy to answer your questions.
Please note that management comments during this call will include forward-looking statements which involve risks and uncertainties. For the discussion of risk factors, I encourage you to review the disclaimer contained in this presentation. All documents relating to our full year 2022 reporting are available on our website. Without much further ado, I hand over to Sebastian.
Thank you very much, Christian, and good afternoon from my side also to all of you joining in our today's analyst and investor presentation call for the fiscal year 2020. Yeah, before we'll go into the details of the number, which Timo will do today, let me look back briefly on the highlights, because we can probably say we are looking back on a strong performance, solid in a fairly volatile environment. If I may walk through the main aspects of that. First of all, we increased new orders by just 1%, but to a level of slightly above EUR 2 billion. That's a high level. We had already a high level in 2021, so that's why the increase isn't that impressive in terms of new orders.
The book-to-bill on the full year basis was 1.04%, still slightly growing business. That was a picture which we had throughout the year. We increased unit sales for DEUTZ Classic engines by almost 13% to 181,249 engines, and we increased revenue by 20.8% to EUR 1.95 billion. You see here already we increased revenue by a larger share than sales. That's due to mix and price. We'll talk about that later. Obviously extremely important is what it hit the bottom line.
Our Adjusted EBIT was increased by EUR 52.2 million to a level of EUR 89.4 million, which in terms of margin translates into 4.6% for the group, which is pretty much a doubling compared to previous year. Whereas, and that's something we're particular or particularly proud of, the Classic segment, we now achieved a margin of 6.8%, an increase by 3 percentage points. Going forward, we as a board will propose a dividend to be paid at EUR 0.15 per share. That's this time a dividend ratio of 24%. That's our proposal for the annual general meeting. We also released our new midterm targets for 2025. We'll come to that later in more detail.
That means revenue of larger than EUR 2.5 billion and the EBIT margin for the group between 6% and 7%. Earlier this year in January, we unveiled our new Dual+ strategy with the elements Classic, Green and Service. I will talk through that a bit more in detail later. A couple of weeks ago, we announced our first major proof point for the Classic part of the Dual+ strategy, that we entered into a strategic alliance with Daimler Truck, where we are working together, collaborating with the two engine platforms in the displacement between 5.1 and 15.6 liter. A few numbers from my side, but on a very high level.
Looking here in particular, at the Classic segment, as I said, a very high result, 6.8%, which was the best result in recent history. I mean, we are showing here pro forma, pro forma view on the, on the revenue into Adjusted EBIT in the segment DEUTZ Classic and DEUTZ Green. We had a very high sales level, the highest level in the last six years, in the Classic business. As said, 6.8%, the highest margin in the past 10 years.
EUR 128 million was the contribution, the EBIT contribution of DEUTZ Classic, which obviously means in turn that in Green we're still loss-making, but that is due to the fact that we are here facing still an increasing ramp-up cost, particularly due to the higher R&D costs when it comes to our hydrogen and electrification business. Like to look a little bit ahead, and here in terms of a strategic vision going forward, in the mid to long term, because that's a picture we've been using internally and externally to show how we are seeing the market and technology perspective for DEUTZ today.
You see on the left side, we have the capacity of roughly, give or take, 200,000 engines, depending on shift models, can be a bit more, can be a bit less. Obviously, as we all know, that's predominantly a combustion engine with diesel as fossil fuel. If we look forward, as if you fast-forward here, we see that for our areas, for our customers in our industries, we still see an increase in the combustion engine demand, and thus also our production and sales. That's the blue layer here. We see that by mid of decade, at, certainly, towards the end of the decade, we will get much, much stronger in adapted combustion engine.
That may be combustion engines, which are then run with synthetic and e-fuels. Also with hydrogen. We'll talk about the hydrogen strategy a bit later. On top of that, we are also seeing an increase in our technology change, whether it's going to be electrification or battery electric solutions or the fuel cell. The big picture is here, combustion technology is going to be around for quite some time in our industry for our customers, and jointly with the use, the adapted use of combustion engine and the technology change, we see DEUTZ on a growing path in the short, mid, and long term. We want to spend a few moments also on how we're positioning ourselves as DEUTZ.
First of all, it is our ambition that we continue to provide powertrains that move vehicles and machinery around the world. When we say around the world, we mean particularly off-highway. Construction sites, roads, farmland. That's as said just a few moments ago, we need to continue to work with the combustion engine. On the other hand, it's extremely important that we also set ourselves the target to become climate neutral for 2050, because we want to enable our customers to successfully master their own transformation. We are here in the same boat like our customers. In order to do so, we will continue to use our innovative strengths, in particular with an open-minded approach to technology.
I think that became very clear on the previous chart, where we see what the, with different ways of technologies, we are moving for. Extremely important for us as DEUTZ that we also grow as an organization. Here promoting a culture which puts entrepreneurial action and innovation first. Providing completely new technology, new solutions, requires a different mindset, that's something where we as an organization need to grow. Our claim, we've been using that since the beginning of the year with our new strategy. Our claim and ambition is we ensure the world keeps moving. We have a huge heritage for almost 160 years. Next year, we'll celebrate the big birthday, the big 160-year celebration.
It is our ambition that we also ensure the world keeps moving, that in the next years, ideally in the next 160 years. That's a bit the big step going forward. Let me reiterate our Dual+ strategy, which we introduced earlier this year. We have the two plus elements. The one element is the DEUTZ Classic business, which we want to grow significantly based on strong performance, but also on market consolidation. Then we'll have our DEUTZ Green segment, where we want to build a green ecosystem with relevant products, technologies, and also business models.
That will all be supported by our strong Service DEUTZ business, which is already strong, which we grew already over the last years, but where we want to intensify here the growth path in the years to come. We need to expand that highly profitable Service business around the world. Let me talk a few words about DEUTZ Classic. Here it's very clear, the goal is very clear: performance and growth, right? First of all, we continue to improve performance. We've done quite a lot in the year 2022. We need to make more efficient use of the existing capacities. We need to simplify our processes. We need to optimize our portfolio. We need to also, and that was certainly, you know, improve delivery performance and become an even more trusted partner for our customers.
Part for that improving performance is also our pricing politics, which I will tackle in a few moments. Beyond what we do internally, one big element for our DEUTZ Classic growth is also consolidation and growth. Because we know that in the field of the combustion engine, there are a lot of players who are leaving the market, and we want to position ourselves in a different way. We clearly say we are gonna remain, we're gonna be around in that field. By doing that, we will also focus on acquisitions, takeovers, and partnerships in order to continue here our growth and position. Our objective for DEUTZ Classic is very clear. We wanna become a top three producer in the field of the non-captive combustion engines by 2030.
First proof point on performance in the classic business is the situation in terms of pricing, right? The environment in 2022 was extremely challenging. We were all, not only we, but the entire industry was faced with raw material price hikes, with logistic cost ups and downs, unfortunately, mainly ups. Thus our production costs were significantly negatively affected in 2022. That's something which is extremely important or has been extremely important as a basis for the result we achieved in 2022. As management, we reacted very early and very strong already in the second half of February to systematically tackle this challenge.
We announced pretty early our objective to increase our prices in the range between 8% and 12% by the end of 2022. We managed to do so, right? But not only did we manage to increase the prices in this range, we also benefited here in the situation that demand, particularly for smaller 4-liter engines, significantly exceeded the supply which we could do. There we introduced the so-called fixed-volume program, based on which with our customers for this year, for 2023, we implemented a fixation level of more than 70%. We're almost sold out in the engines smaller 4 liters for this year.
That's very important how we work here with a stringent and structured approach to secure the profitability of DEUTZ Classic, and that has only been the beginning. When we talk about consolidation, as I mentioned at the first page, first proof point here is the cooperation with Daimler Truck. That cooperation showed or includes that we as DEUTZ take over IP and licenses of the medium duty, the MDEC, and the heavy duty, the HDAV engine platform for, from Daimler. We'll bring that into production by in the second half of the decade. With that, this cooperation allows us as DEUTZ to tap into new customer groups.
Of course, primarily in the off-highway segment, where we are already strong, perspectively, we can, in particular for the medium duty engines, also approach on-highway customers and expand here our customer base. We get a fantastic engine, a future-proof architecture and design. It's a proven modern platform, and that's particularly relevant for us, we can also bring that into technological developments such as hydrogen fuel ready. As a part of that cooperation, Daimler, as soon as that transaction is closed, will become a DEUTZ shareholder, 4.19% stake. The Classic is one various, very important aspect, on the need to increase speed when it comes to our Green DEUTZ. Green DEUTZ in the end will guarantee the future of DEUTZ.
Here, first of all, we're going to build on the capabilities we already have. You know, we built up a lot of things over the last years, the acquisition of Torqeedo, Futavis, our product developments in terms of E-DEUTZ, and also, the hydrogen engine. We need to see, we need to explore where we can improve and where we can scale here our growth in a profitable way. We need to also, and that's one of the findings, in our strategic development, we also need to pursue here a structured way M&A and partnerships where necessary, because that's such a wide field where no one can do everything alone. Here, we are in a structured approach of searching the right partners.
In the end, and that's something very important, it's not only about the engine or a new system for the engine, it's about creating the right structure and also the ecosystem. We will adjust our structure to make sure we have the right setup for a green ecosystem. When I say ecosystem, I mean that we are also approaching products around the engine, whether it's gonna be storage of energy, whether it's gonna be tanks. We'll see about that, but that's something because we need to go here together with our customers in their transformation path. There's lots of uncertainty in what is the final and the right solution for that. Here we will be there to support our customers in mastering this transformation.
We are not committing here to a top line or bottom line a number for Green. There's too much uncertainty still in there. What we are committing is very clearly, we invest more than EUR 100 billion in Green in 2025, whether that's gonna be related to partnerships in terms of M&A or whether it's gonna be increased and continuous development costs for hydrogen and electrification. We are already, we have already achieved good progress in Green. Most of the topics you have, we have reported throughout the year. The first hydrogen genset in the pilot application in Cologne, which happened in the first half of the year.
We joined as DEUTZ, the hydrogen combustion engine truck project, the HyCET project with Volvo and BMW, in which we will introduce one of our hydrogen engine in a truck. We have received the first PowerTree serial order for our mobile charging station. At bauma, we introduced the prototype of the first concrete ePump. Recently, we also signed an LOI for a small series of hydrogen gensets for the Chinese market. For the Dual+ strategy, the plus part is our Service business. Here, very relevant, obviously, the growth path in our Service. When we see where we came from in 2019, our Service revenue was EUR 350 million. In 2022, we closed with EUR 450 million Service revenue.
That was beyond our own expectations. Now based on that and based on our new, i n our new midterm guidance, we want to achieve EUR 600 million service revenue by the year 2025. How are we gonna do that? We're further pushing our inorganic expansion via acquisitions and alliances. We'll take over maintenance activities on the market in 2022. We closed two smaller M&A deals in Ireland as well as in the Netherlands.
Thank you, Sebastian, and a very warm welcome also from my side. Let me now take the chance to guide you through our financial numbers in a little more detail. 2022 was for sure a fairly hard year for everyone in the business, but I think it's fair to say that we navigated those rough waters pretty well. Our order intake again was higher than EUR 2 billion. That is up 1.1% in comparison to the already very high level of 2021.
Q1 and Q2 were already above EUR 200 million in order intake. That was up 3% in the first quarter compared to the year before and 8% in the second quarter. When we then saw quarter three, it seemed like the market got a lot more cautious and, we only achieved EUR 442 million in order intake, so a significantly lower number than the two quarters before that. While it's normal that the summer months are usually a little weaker, it was also, down 1% in comparison to the year before. Again, everyone was a little cautious, but, luckily we can say it has completely turned in quarter four.
Even though December is also usually a weak month, we achieved the second highest order intake of all three, four quarters, with EUR 514 million in order intake, and that is up 18% compared to the year before. That went very well. Unit sales, again, not quite a new record, but extremely high. Here our production did a great job to further optimize our production, and we could have sold even more. Everyone knows there was a lot of struggle in the supply way around the world, so the limiting factor here wasn't our production, but the components we could get from the market. We indeed did a good job on the pricing side.
You can see if we look at the growth rate of sales, which was 20.8%, compared to the 16.6% in unit sales. If we look at that from a price per engine level, that was, is now up from EUR 7,300 at the beginning of the year to EUR 7,800 at the end of the year. Of course, there are also mix effects sometimes in that, but we can see a steady growth over the year. That went very well. Service growth after we made the EUR 400 million, just a little bit above that the year before, it would have been of course now nice to hit the EUR 450 million, which we unfortunately were EUR 200 thousand short.
Anyways, that's of course a great achievement to again have an increase of 11.6%. Here we have to say it's a very nice mixture of organic growth, which we did by ourselves. Some of the unorganic growth with the two acquisitions we did, also of course, due to price increases, we were able to have in the market. We can say that we were able to keep the margin at a similar level than the years before, which with this growth is a great achievement. Let's now look into the revenue development a little more if we look at the different regions. Our biggest one for sure is Europe, including Germany, so 58% of our sales comes from this region.
This is super important and the second most important region is Americas. If we look at the sales development, Europe, yes, fairly well in total, a little above 16%, but the really, really big increase, at least in euros, came from Americas with a little above 50% in sales increase. Some of that, a little of that, is also driven by the exchange rate, but in general, the market went very well. Asia Pacific in comparison is our, it's our third biggest region. It's, it was only up almost 7%. This was due to the struggles in China. China, of course, was hit later with the lockdowns last year, so that had a very big impact.
Also construction industry didn't have a very good year in China. Luckily, we see some positive signs now on the horizon for this year. Last year it was hard. In China, we actually had a fairly tough development. Looking at the revenue breakdown by application, construction equipment is about a third of our total sales, almost with 30%, followed by Service. We already 5%. Both of them are nicely developing. Construction equipment was 17.6% up. Now we're getting to the higher increase parts, material handling, which is 18% of our revenue, roughly EUR 355 million, was up 25%.
Already very nice. Even better if we look at the agricultural machinery, which was up 36% and is now 14% of total sales of our business. Stationary equipment had the highest increase in percentage with almost 50%. This on a still fairly low level with 9% of total sales. Let's now focus a little bit on EBIT. In absolute numbers, we achieved an EBIT of EUR 89.4 million, which is EUR 52 million higher than the year before. Some of that, of course, is due to the higher sales volume, margin also doubled from 2.3% to 4.6%. That had different reasons.
One, again, is also eco-economies of scale, so we could cover our fixed cost a little better with a higher sales volume. One of the major contributors was the price increases. That we acted very quickly, you can see if you look at the margins by quarter. In quarter two, we achieved a very high margin with 5.6% because during that time, we were already able to increase some of the prices while not all of the costs had increased in a similar way. Next slide, please. R&D spending, that's also of course, a part of what's in our EBIT here. We again increased our spending. We're now roughly at 5% of revenue, but we increased it by 10%.
We came from EUR 82 million now to almost EUR 91 million. That is of great importance to us because, of course, the R&D is going to be our future, and especially with the transformation in the Green segment we have ahead of us, we need to start here. Capital expenditure is also something where we invest, keep investing in the future. If we look at typical increases on investments, we're a little above the year before, but we also did a big leasing project, which you can see here, which is about the consolidation of our logistics centers in Germany, which is actually going to give us a cost saving on the rental part over the long term, but on top of that, also efficiency increases in the work process.
Working capital is something we did on purpose. Of course, it looks a little tough when we look at the absolute numbers here from EUR 253 to EUR 346. There was a significant increase. EUR 77 million out of that came from an increase in inventory, and we did that on purpose. It was a very, as we said already, it was a very hard time to have a stable supply chain. We decided during the year to rather have a little more inventory on hand to also make sure we can produce parts, but also have the production running a little smoother. The highest effect of that you already saw in last year, that was in September, where inventories were actually EUR 50 million higher.
When you saw that it's a little more on the stable side, we were able, and especially in quarter four, to decrease the inventory by EUR 50 million. If we look at the DIOs of the end of 2021, we were at 85 days. The highest point in September was 100 days, and at the end of the year, we ended up at 84 days, so even a little lower than the year before. Inventory management is on an okay level again. That of course, also had an effect on our cash flow. EBITDA was EUR 183 million. That, of course, had a very big effect.
Again, the working capital increase of EUR 89 million then had the opposite effect of it. Also did all the investments which we did. In the end, we ended up at -EUR 16.6 million of free cash flow, which is unfortunately, of course, a negative effect. If we compare it to guidance, we're at the upper part or the better part, the better end of our guidance, which was a two-digit low to medium level in the expectation. That also went very well, especially if we look at the Q4 numbers. Let's look a little bit at equity. We can say 45.3% compared to 45.6% is, I would say, stable and on a very healthy level.
That is doing well, especially if we think about the cash flow situation and the build-up in the working capital. There is no bigger problem in that area. We were also able to have additional syndicated credit lines. At the end of the year, we were a little worried that we run into a recession in 2023, so we added another EUR 75 million, which we are going to have for the next two years. If anything is going to happen from a recession point of perspective, we are very well positioned here.
Since we're not expecting that at least in a very strong way anymore, I think the total group credit line of EUR 140 million, which is available, which we're not using right now, also gives us sufficient financial headroom to further develop our business, maybe even through acquisitions. What we're proposing, again, in EUR cents per share as a dividend, which is going to be on the same level as last year. A quick look at our two segments. The Classic segment still makes up the absolute majority of our business. I am not going to go through all the order intake and revenue numbers because they are very similar to, at least from the explanation, to what I've said before.
It is very important to see where we develop our EBIT margin with this. With 6.8%, I think we're very well-positioned, and that is crucial for our Dual+ strategy for the future, because we believe this is going to finance the transformation of our business over the next years to come. This is what we need at least a little bit of the money for. If we look at the results of the Green segment, with EUR 39.2 million negative, this is, Sebastian talked about that already, is where we spend a lot of our R&D money. R&D money here is not capitalized on the R&D side, it all goes to the P&L.
The biggest portion of that is really development for the future. Torqeedo business is also a portion of that, which unfortunately had a negative result again. The total number is still doable for us. Thank you for that, and I'll hand over back to Sebastian.
Thank you, Timo, for the detailed view on the numbers. I think we can see very clearly that it's been a solid year, and we really made progress, particularly when it comes to not only stabilization, but really pushing forward our Classic step by step. That's something which give us a good basis for the next quarters and years. Coming from a solid year 2022, now looking a bit what is really 2023. Let me first talk a little bit about both our industries as well as our region split here. We see here, we know we heard a lot about in the last months, is there gonna be a recession or not?
I think the clouds have cleared a little bit. Certainly that's what we hear when we talk to our customers. As Christian said initially, we're currently at the CONEXPO in the U.S and having a lot of conversations with our customers. Yeah, as I said, clouds seem to be clearing up a little. If we look at the European, at the EMEIA region, we expect for 2023 a fairly flat development in Ag, but certainly an increase in construction equipment, material handling. Similar picture in the Americas, relatively flat on a high level in Ag, but construction equipment and particularly material handling is booming. We talked to a lot of those customers here in the States, and most of them are sold out for 2023.
Some of them are now already opening the order book for 2024. Obviously, if the customer has these phases to strong demand, that's good news for us as well. APAC has been a bit of a mixed bag in the past year, in the past months, particularly due to the development in China. Here, development in Ag expected flat. Construction equipment, material handling are, well, clearly up, clearly upwards. Heavy-duty truck, which is relevant for China for us, is also, we also see slight silver linings. Particularly China, obviously, you know, as Timo mentioned it earlier, the lockdown's been stopped. Obviously now the whole country is waking up when it comes to their economic activity. That's something we believe to participate for.
Positive outlook underpinned by all the end markets. Yes, at the moment, no really no concern on the market drop in terms of any sort of recession right now. That's certainly good news and particularly if you compare it to the sentiment we had by the end of 2022. Right. What does it mean for our numbers, for our guidance? I mean, as traditionally as today with releasing the 2022 numbers, we're also releasing the first guidance for 2023. Let me summarize it. It's cautiously optimistic. We expect moderate growth. Unit sales, 175K-195K. Revenue would mean EUR 1.9 billion-EUR 2.1 billion. Yeah, a little uptick. Adjusted EBIT at the moment, we're still a bit cautious, as I said, 45%.
Free cash flow, we expect to be mid double-digit million Euro amount. Yeah, right. You know, we've increased the business volume already in the last quarter, but there's still a bit of an increase to come. That's why we are on that, on rep range. Extremely important and relevant with that high order backlog, almost EUR 800 million, and particularly in the smaller Four Liter business with that high fixation, we have a very, very good visibility for the first seven to eight months. That's good news. The price increases we've done in 2022 and are currently in the smaller next wave, you know, that should have a positive rollover effect. Not all of these price increases were effective January 2022, of course.
Some went, some went effective in July, some even in of your rollover effect. And that's part of why we're also a little cautious still. You know, the cost increases, that it's not all, it's not all done yet. Inflation is going down. Obviously we'll see that. You know, the negotiation position towards the suppliers has increased significantly now, so that's good. There is still gonna be a bit of a rollover on the adverse side. Yeah. That's pretty much it. We're looking cautiously optimistic into 2023. We're obviously, we're obviously also looking forward for the first quarter result, which we'll announce at the beginning of May. With having said that, I would like to thank you for your attention.
Since I hand over to Christian, who's gonna manage that. Thank you very much.
Yes. Thank you, Sebastian. Thank you to you. Operator, please open the line for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift your handsets before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from the line of Tore Fangmann with Berenberg. Your question please.
Hello, and thank you for your presentation, and congrats on the good results. One question from my side. Could you give us a bit of growth, maybe into price and unit increases, or like organic, inorganic, to reach the goal of the over EUR 2.5 billion in revenues in 2025? Thank you.
Yeah, sure, we can do that. I mean, one aspect or one part of that growth is the Service business. You know, we're coming from EUR 450 to EUR 600, so that's gonna be, that's gonna be EUR 150 million contributing. In last year we've been on the range of, 180,000-185,000 engines, and we expect here a level of, just above 200, maybe 210 engines. It's a bit of a mid-cycle picture. Pretty much it's all. In the new engine business, that's all gonna be organic. Inorganic moves will have a slightly longer horizon, because they involve transactions which may be fairly complex, and we do not.
We have not planned that actively into that guidance. To cut a long story short, service is a part, volume is a part, and then obviously a little bit of price as well when it comes to the to the to the engine sales. Yes, also a slight pickup in rebusiness, but here we're not talking about double digits growth rates. Hope that answers your question. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one. The next question is from the line of Jorge González with Hauck & Aufhäuser . Your question please.
Hello, good afternoon. Thank you very much for taking my questions. Good luck, Timo, on your new role. Looking forward meeting you soon in our roadshow. Well, my first question is regarding the free cash flow target for 2023. It will be interesting if you can share with us your assumptions for the working capital levels, just to understand better the number. Also it would be quite useful if you can comment a little bit on your assumptions for Torqeedo and China in both 2023 and 2025. If you can give us some color on the volumes that you are expecting in both cases.
Maybe also regarding the midterm, now that you have commented the 200, 210 volumes, maybe the question will be if this is for you, some kind of mid-cycle situation, because of some pre-buy effects, maybe because of the change of regulation in terms of the clean energies, or how you see this level of production for 2025, the 200,000 levels? Thank you very much.
Well, thank, thanks, this is Timo. Thank you for the kind words, and also looking forward to meeting you, of course. If we look at the free cash flow for this year, especially at the net working capital development here, we think we're now in a, let's call it, fairly stable situation, at least over the year. There shouldn't be any huge effects coming out of that. Having said that, we are planning to most likely increase pro-production in the second half of this year. In order to do that, we've to increase the components parts at least a couple of months before that, and we're going to see an effect of that probably in the second to third quarter.
Right. When I take over on the question on Green and Torqeedo, indeed, we haven't actively mentioned it, but what we see in our Green business for 2023, we know we're coming here from a revenue of EUR 64 million, and we're expecting for 2023 a range between EUR 60 million-EUR 100 million, obviously mainly driven by further ramp up of Torqeedo. That's clear. Your third question related to the 210,000 units or to the revenue in 2025. Yes, it's a mid-cycle assumption, right? I mean, at the moment, we've said it a lot of times, and we feel it every day that demand significantly exceeds supply.
I think Timo said it also, we could have sold much more last year, but we just weren't able to produce it due to the shortness in the supply chain. This picture is relieving a little bit already this year. We are considering increasing capacity in the second half of the year. If we do that, we manage to do that, and once more, at the moment, it doesn't look like demand is a constraint, it's more like parts. If we manage to do that, we'll actually We are quickly on a full year basis higher than 200,000. This is why we cannot commit or not give a prognosis for 2023 in that range, because it will take a while until we're able to increase capacity.
Yeah. Yes, mid-cycle picture in that range. That's also part, Jorge, as we explained in that sort of chart at the very beginning with that layers. That fits very well to the question you asked.
Thank you for the input. Very interesting. Maybe if you allow me, two quick follow-ups on this. The first one is if you can give us... I'm sorry if you have already answered this because the line is not working well for me. If you can give us a reference for the R&D cost in 2023. If we could still expect something similar to 2022, maybe? Looking through the annual report, it was very interesting, these works that you have performed in China. I was wondering if this also has affected the China contribution in 2022, and maybe you can give us some color on that too. Thank you very much.
Right.
Yeah. Yeah. The first question was about the R&D. We are going to see again. First question would be on your real estate s ell, in Cologne, DEUTZ. When I read it right in the annual report, you're now saying that there's no firm date, or no firm date could be made, because everything is looking for the approval of the city of Cologne. Could you please elaborate more on that? What is, what is missing there, or why is this delayed? That would be my first question.
Thank you. Thank you for that question. As we already put it in our annual report, I mean, this is actually pretty much everything. Obviously, we are in very close contact with both the City of Cologne as well as the investor. Quite frankly speaking, this situation has been turning in circles. Recently we got some positive signs mid-year that it's all about to be cleared. You know, what it's all about, in fact, is there is still the I use here the German word briefly, the Bilanz and the Nutzungsplan. The plan for building and utilizing, and utilizing the facility.
There are some, I would call it almost minor issues to be solved, but sometimes minor issues take a long time to be here between the parties. It is in principle about how many square meters are being, you know, for nursery and for school, and for how many square meters can be used for social, for social housing. Obviously, which has a very, very big impact for the, for the new investor because he can sell the non-social housing part and the non-school and nursery parts for much higher price. That's going forth and back. We are doing our utmost to push here in particular the city of Cologne to bring forward that project.
Realistically speaking, we cannot expect this to be solved finally within this year. That's why we will continue to inform you on the progress. In the end, you know, it's a safe contract, so it's not a question of if, it's a question of when.
Okay, great. Next question would be on your midterm target. Your former EBIT target was 7%-8%. Now it's 6%-7%. The missing 1 percentage point, is this the China strategy, which is not developing, as you might guess? Is this the green segment which is making more losses than maybe anticipated? Or what is behind the 1 percentage point missing?
Well, you handled already. It is the China impact. You know, three years ago, three, four years ago when this old midterm guidance was first released, there were very, very bullish assumptions on the China growth, particularly coming to the joint venture. We did already this couple of years ago. Obviously, this was a top line correction. We did. This has an impact on the bottom line. Not saying we have given up to go beyond what we now guided, we need to be realistic, we only want to promise what we truly believe in, and that's part of our, I'd say, new transparency. Yes, from a numbers point of view, that delta is due to China. Absolutely. Spot on.
Okay, great. Great. Then looking again at the Green segment, you gave us an update on the 23 guidance. We're talking that Torqeedo is picking up. Looking at the intangibles and the goodwills of this segment, especially Torqeedo and Futavis, do you see any impairment needed? Because my feeling is that the earning situation should be better or was guided better in the past.
Yeah, I mean, talking particularly on your questions regarding impairment, we do not see any impairment risk here on the goodwill. That's also due to the fact that the goodwill, which initially entered the DEUTZ balance sheet as part of the acquisition of Torqeedo, is not, you know, as you know, I mean, goodwill accounting, it's allocated to cash-generating units. Torqeedo is not a cash-generating unit. We're talking here about the cash-generating unit, Classic and Green.
So the allocation of that goodwill has happened over the last years in several steps due to the change also of the segment structures in a way that we see sufficient headroom in the goodwill impairment test. I mean, we just Obviously, this is why we're talking today. We just closed the books for 2022, and there's no imminent risk in the accounting of the goodwill. Having said that, in the HGB financial statement for DEUTZ AG, so not the group accounts, we reduced partially the book value of Torqeedo. That's not nothing you see in the group numbers. Right.
Great. My, my final two questions, more housekeeping question. The first one of is looking at the financial result on a quarterly basis, there was a much higher negative result in the fourth quarter. Are there special reasons or is the fourth quarter financial result more or less a run rate for the fiscal year 2003 because of the increased interest rates?
I mean, It is as you said. I mean, we have, we know our funding, our financing, is with a syndicated loan and, obviously the fund, the finance cost for that syn loan are relate to the current interest rate level. We have two effects. We're not talking here on major effects, right? But we have two effects. Net debt increased a little bit throughout the year and interest rates as well. That is, there is no more than that.
Okay, great. My very last question is, on the write down on receivables. You also mentioned in the press release, when I analyze it right in the annual report, it increased from, roughly EUR 5 million-EUR 10 million. Is this a very conservative approach because your results are so good, or is there anything special in this number?
Yeah. We have an ongoing dispute with one of our customers in Asia about a receivables position, and that's what we, you know, put into the box for that. We are putting, yeah, let's say How is it correctly said? A realistic but cautious view on that particular receivable. That's the only reason for that increase.
Okay, great. Many thanks and good result for 2022. Thanks a lot.
The next question is from the line of Tore Fangmann with Berenberg. Your question please.
Hi. Thank you for taking my second question. just a quick question on how the new year, 2023 so far worked out for you, and how do you see like orders coming through? I think in Q3 and Q4 we now had book-to-bill ratios of below one, maybe you could just shed some light on how the first two months basically of the new year worked for you.
Yeah. It's always difficult. We're in the conference for 2022. You're asking questions for 2023. We will provide the full details in May. I can only say one thing. It's looking all right. No need to worry for management at this point in time.
Okay, thank you.
The next question is from the line of Hans-Joachim Heimbürger with Kepler Cheuvreux . Your question please.
Good afternoon. I have two questions related to your midterm guidance. I mean, this EUR 2.5 billion by 2025 sounds a little bit ambitious at first sight in the current macro environment. It implies a sales CAGR of at least 9% compared to 2022. Can you give us a little bit of bridge? I mean, we already know what you target for the Service business, but what do you target for the two divisions? Secondly, can you remind us which activities in China are consolidated at equity that is excluded in the sales guidance of 2.5 billion EUR and included in the EBIT guidance? That would be very helpful. Thank you.
EUR 2.5 billion obviously, yes, it's ambitious, but we are ambitious and we don't want to targets, but we believe it's possible, otherwise we wouldn't have put it here in the public. You mentioned already one part of that bridge. One part of that bridge is indeed the service. I mean we closed last year with EUR 1.95 billion. The service EUR 600 million is already EUR 150 million. We said already earlier that we still have at the moment significant limitations in terms of capacities in our DEUTZ Classic business. Significantly more this year. Sorry, last year, particularly on smaller four-liters. We expect this demand to remain strong. At least that's what we hear from all the customers we talk right now.
Obviously, focus is on 2023, but also approaching 2024. We see room here to improve and to increase all areas in our Classic business significantly, fueled by capacity increase on the German plant, but also by capacity increase on the Tianjin plant. Here I'm already giving a bit of an answer to your second question. Tianjin plant is fully consolidated, whereas the joint venture we have with SANY is not fully consolidated. Here you will only see we only see the fair share part in the bottom line, but not the top line in the results. Then we'll see a little bit of growth in Green as well. These are pretty much the.
Last but not least, there is still an effect on price increases, becoming effective on the full year. We see four elements, pretty much. Service, volume increase, price increase, and Green. These are pretty much the elements of that bridge. I think on China, it was the question what's consolidated, what's not, I gave that already. I'm just looking at my colleague. Am I missing something? No. Okay, great. I hope that answered your question.
Very helpful. Thank you. Have a good day. Bye-bye.
Ladies and gentlemen, as a final reminder, if you would like to ask a question, please press star and one. We wait some seconds. There are no further questions, and I hand back to Christian Ludwig for closing comments.
Yes. Thank you very much, operator. Thank you very much all for participating and for your questions. Should any additional questions pop up, the investor relations department is at your disposal. Otherwise we'll hear from you at the latest early May, when we will report our Q1 numbers. Have a great day. Thank you and goodbye.
Thank you.