Earnings Call: Q2 2021

Aug 13, 2021

Good day and thank you for standing by. Welcome to the GEA Group Akhtar and Gverdechaft Second Quarter 2021 Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Oliver Luckenbach, Head of IR. Please go ahead. Thank you very much, Sharon, and good afternoon, ladies and gentlemen, and thank you for joining us for our Q2 2021 earnings conference call. With me on the call today are Stefan Klebert, our CEO and Markus Ketter, our CFO. Stefan will begin today's call with the highlights of the Q2 2021, And Markus will then cover the business and financial review before Stefan takes over again for the outlook 2021. Afterwards, we open up the call for the Q and A session. As always, I would like to start by drawing your attention to the cautionary language that is included in our Safe Harbor statement as in the material that we have distributed today. And with that, I hand it over to you, Stefan. Thank you very much, Oliver, and good afternoon to everybody. It's my pleasure to welcome you to our conference call today. After a strong start into the current fiscal year, the positive momentum continued in the Q2. Order intake grew strongly by 30.2% year over year in organic terms. And it is worth noting that this Growth was achieved without a strong large order inflow. In fact, the volume of orders above €15,000,000 was with €18,000,000 €4,000,000 below last year's Q2. Therefore, When looking into the order intake development by order size, the trend from Q1 2021 has continued with strong growth in small and medium sized orders. Sales increased by 3.4% year over year in organic terms. However, Reported figures declined on the back of negative currency effects and the disposal of GEA Bock in Refrigeration and Royal De Boer and Sharpen Farm Technologies. EBITDA before restructuring expenses increased by €14,000,000 to €145,000,000 and the margin improved by 1.2 percentage points to 13.3 percent. As in the prior quarters, better execution contributed to that increase, but also an overall lower operating cost ratio. As you know, we had a great fiscal year 2020. The management board, therefore, decided to by a special bonus to our employees as a sign of gratitude for their extraordinary work during the corona pandemic. And this bonus payment of in total €10,000,000 was included in our EBITDA before restructuring. Finally, return on capital employed improved by 6.6 percentage points to 21 point 4% driven by higher EBIT before restructuring expenses and lower capital employed. Once again, we achieved a strong improvement across all our financial KPIs. The combination of record order backlog, which is at €2,650,000,000 And a highly attractive order pipeline allows us to raise our guidance for the current fiscal year, which I will discuss with you in some minutes. Let me elaborate on our share buyback program, which we announced yesterday evening. Our plan is to buy back About €300,000,000 or about 4.3 percent of our outstanding shares, Half of that volume will be executed during the next 6 months. The entire program runs until the end of next year. So what will we do with the shares? Well, as you know, we are interested in growing the company by acquiring other companies. However, during the last quarters, we experienced that it might have been useful if we had the opportunity to finance a deal at least partly Whether we will cancel the shares, we would like to leave this decision open. For now, as this step is dependent on whether we can strike a deal and how much might be needed for a strict dividend. Let me now present you further highlights of the quarter. As you can see on this slide, our progress in ESG is also recognized by external agencies. In the ISS ESG Corporate Rating, we are now ranked prime status, meaning we are among the leaders performance in our Industry Index Group, which is a great achievement. And we are not yet done to become an even more environmentally friendly company. On June 17, we have already disclosed our ambitious in our industry unique climate strategy. 1st, by investing globally in gold standard certified project to generate clean energy from wind, sun, biomass and waste gases. GEA's own operations are already climate Neutsch neutral since the beginning of 2021. And second, we have set science based targets to reduce our GHG emissions from own operations, which is Scope 1 and 2 by 60% and from the customers use phase of our product, Scope 3 by 18% until 2,030. And third, we are committing ourselves to net 0 GHE emissions along our entire value chain by 2,040. With these targets, GEA is pursuing an ambitious path in the mechanical engineering industry. As of today, out of the 52 European machinery equipment which form the STOXX Europe TMI Industrial Engineering Index. Only 8 other companies have so far adopted science based targets. And I think we can say that we are, with our challenging targets, rather at the forefront of this development. Our climate strategy is, however, only the first building block of a comprehensive environment, social and governance strategy at GEA. The ESG strategy will become a foundational element of our new corporate strategy, Mission 26, and will be presented to you at our Capital Market Day in September. As part of our commitment to sustainability, we have signed Gewehrshaft, the UN Global Compact agreeing to conduct business in line with 10 universal sustainability principles encompassing human rights, labor standards, the environment and anti corruption. In addition, Refrigeration Technologies has joined the coalition of the UN Environment Programme in order to share its experience in the transition towards climate friendly cooling and heating solutions. To put that into perspective, As the planet heats up, the International Energy Agency estimates that we will require 3.5 times more cooling By 2,050, then today and that the refrigeration and air conditioning system already consume around 15% of global electricity production today. There's a clear need for action in the transition towards net 0. The Kultkolisen is a fantastic opportunity to be able to contribute our part. Regarding our manufacturing footprint, the cornerstone for our new factory in Poland was late on May 21. Our target is to complete this factory this year and to start shifting production hours at the beginning of next year. Finally, our portfolio optimization. We took another step within our portfolio process and signed the agreement to sell the refrigeration contracting business in Spain and Italy. Thus, the portfolio optimization process is almost completed and leaves currently just minor assets on the list to be disposed. Let me now turn to a topic, which we already addressed on our prior call, cost increases. Due to our close monitoring of raw material prices within our new procurement structure, We were able to react early enough to take actions to mitigate the effects. Regarding raw material prices, we are passing on price increases to In some divisions, we have or we are currently conducting second price rounds in this year. On the supply side, we extend the delay material price increases into the future. So the situation has not eased And we expect further price increases in the short term. During the last two quarters, we have implemented countermeasures to mitigate the price inflation. Some of them, such as design to cost measures, where it is possible, will be permanent. Moreover, We tackle supply chain obstacles and shortages. In some areas, such as semiconductor based supplies, we do see the lead times are further increasing. We are mitigating this effect by temporarily increasing inventory levels for such products. However, in the short term, We expect that lead times will further increase before they will decline again. Coming to logistics. Prices for logistics services are currently increasing, partly strongly. Where possible, we pass the increased cost for transportation, but also packaging on to the customer. Mitigation was especially possible for packaging costs, whereas For logistic costs, the mitigation effect was a mix of passing on and saving from changes from the optimization of supplier structure. Looking forward, the situation for logistics is comparable to raw material costs. Further increase in prices must be expected. To sum it up, with our new procurement organization, we are much better prepared than we used to be when I joined GEA. Developments are recognized much earlier, and we can therefore also react much faster. The situation is currently tense, But if it does not deteriorate significantly, it remains well manageable for us, and the impact should be limited. We quantify the impact on EBITDA level to a maximum of €25,000,000 Based on the most recent development of raw material and freight costs, the impact could amount to up to €25,000,000 This potential headwind is, however, already reflected in our upgraded EBITDA guidance of €600,000,000 to €630,000,000 Okay. So thank you, Stefan. Also welcome from my side. As Stefan has already highlighted, Good morning. Take sales and EBITDA before restructuring expenses. I will focus on the additional KPIs of this chart. The higher profitability and the very strong year over year reduction of net working capital resulted in a higher return on capital employed of 21.4%, making a new record level and already exceeding the upper end of our prior guidance for the current fiscal year. On net liquidity, the sustainable reduction of net working capital was the main driver for the increase in net liquidity, including financial leases, rising by €277,000,000 to €203,000,000 now. The improved processes to manage net working capital enabled us to keep the net working capital to sales ratio basically flat. I will explain this topic in detail a bit later. To sum it up, Q2 2021 was a great quarter with solid organic sales growth, further increase of margins and significant improvements of capital efficiency. Coming here to GEA Group. Order intake increased organically by 30.2% year over year, And all divisions reported an organic growth in the double digits. As Stephan stated earlier, this growth was not driven by large orders. The large order volume was actually down by €4,000,000 from prior year's level. The growth came from small and medium sized orders. Sales were up by 3.4% year over year on an organic basis. Our service sales continued its growth path with an organic improvement by 6.3% and accounting now for 33.8%, the highest level ever recorded in Q2. EBITDA before restructuring margin reached 13.3%, which is also a record level. The improvement was driven by higher gross margin, especially in the new machine business. Now let me continue with the figures for separation and flow technologies. Order intake reached a new record level with €356,000,000 and increased by 28.3% organically year over year. All major customer industries grew year over year. Sales grew by 2.3% organically year over year despite the starting backlog in the quarter was almost on par with last year. Sales was driven by solid development of our service business, which grew by 9.8% organically. EBITDA increased strongly from €64,000,000 to €74,000,000 The EBITDA margin increased by 3.4 percentage points to 23.8%. This development was driven by better new machine margins as well as a higher service share. To sum it up, momentum at SFT remains strong. The backlog is at an all time high, indicating further growth in the coming quarters. Let's move to Liquid and Power Technologies. Order intake increased organically by 28.2% year over year. As mentioned before, This was not driven by large orders, but an impressive development of small and mid sized order sizes. The large order in the current quarter amounted to €18,000,000 and was booked in the customer industry food. Speaking of customer industries, in Q2, especially beverage, food and chemical grew. Dairy Processing was down compared to prior year's level as negotiations take a bit longer in the current pandemic environment. Sales developed flat year over year with a growth of just 0.1% organically. At a first glance, This growth looks uninspiring. However, while considering that COVID-nineteen restrictions still weigh on order execution The starting backlog of Q2 2021 was significantly below prior year's level. The flat sales development is quite an achievement. Service sales were up by 1.3 1.4 percent on an organic basis year over year. You might wonder why the service sales share is down by 1.9 percentage points to 20.1 percent despite being now above The divisional organic growth rate. The reason lies within the topic, which we have explained in more detail in the prior conference calls. It comes from the split up of those entities, which included businesses related to 2 or more divisions. This means you would see in some divisions a visible structural impact like here. EBITDA before restructuring expenses declined slightly to €36,000,000 while the margin increased to 9.5%. This development was due to another remarkable improvement in gross profit. As in prior quarters, better order execution In combination with better backlog quality, we have strong contributors. The 4 quarter trading margin already now stands at 8 0.5%, exactly in the middle of the guided range of 8% to 9% for next year. Let me now talk about Food and Healthcare Technologies. Order intake increased organically by 32.7% year over year and was driven by significant growth in the food as well as the pharma business. Growth was broad based and came from small and medium sized orders. Sales declined on an organic basis by 5.7% year over year. This is related to the order intake development in the second half of twenty twenty. Also, Starting backlog for the quarter as well as COVID-nineteen related restrictions are reasons for that. Reported sales developed almost flat year over year despite the organic sales decrease. The reason is the same as for LPT, The changes in the internal structure of our report. EBITDA before restructuring declined by €1,000,000,000 and the margin grew to 9 0.2%. This development was driven by a very solid increase in gross margin as well as a higher service sales share. Moving on to Farm Technologies. Farm Technologies even accelerated the strong growth momentum from the Q1. Order intake grew organically 36.1 percent year over year. Order intake was once again driven by a solid demand for automated milking systems in the European markets as well as for manure equipment in North America. This was the 4th consecutive quarter of double digit order intake growth. The strong order intake of the prior quarters resulted in a record order backlog at the start of Q2 2021. As a result, sales momentum is now picking up. Sales grew by 14.6 percent organically year over year, driven by strong new machine business. New machine sales grew by 20.4% year over year. As service sales grew by just 8% organically year over year, Its share of total revenue actually dropped. If you wonder why reported sales is just slightly above last year's Q2, The internal structural impact is the reason again. EBITDA before restructuring grew by €1,000,000 and margin grew by 10.9%, Driven by higher volume and better margins in the new machines and service business. To sum it up, 4 consecutive quarters with Very strong order intake growth result in an order backlog, which is currently at a record level indicating further sales growth going forward. The 4 quarter trailing margin now already stands with 11.5% at the lower end of the guided range for next year. Pharm Technologies is very well on track. Finally, let us turn to Refrigeration Technologies. Order intake increased organically by 28.9% year over year, also here driven by smaller and medium sized order. The organic sales declined by 1.1% year over year was due to the lower backlog at the beginning of the quarter. This is a result of the weaker order intake, especially in the second half of twenty twenty. On a reported basis, the sales decline is explained by the disposal of GEA BOK. EBITDA before restructuring increased by €3,000,000 and the margin increased from 7.9% to 10.7%, resulting from a higher gross margin in both new machines and service. The improvement is a result of our restructuring and efficiency measures as well as the portfolio optimization process. Closing the divisional chapter now with the overview on Slide 16. The strongest driver for EBITDA was clearly Separation and Flow Technologies. Across all divisions, a better gross margin was behind the margin improvement. On the right side of the chart, we have added back the translation FX effect coming to €3,000,000 Excluding this FX effect, as we have defined it in our full year guidance, our EBITDA would have improved by €17,000,000 to even €157,000,000 Let's now continue with the net working capital on Slide 17. On a year over year view, we reduced our net working capital by €247,000,000 to €383,000,000 While the respective ratio improved by 4.7 percentage points to 8.3%. All divisions contributed to that positive trend. The strongest improvements were at LPT, Refrigeration and Separation and Flow Technologies. The strongest improvements in net working capital were achieved in trade receivables followed by net contract assets and inventories. To sum it up, as you can see on the chart on the left, since Q4 2020, net working capital remains stable. The increase from the most efficient quarter in terms of net working capital, the Q4 is more than modest. Thus, Our networking capital is well under control, thanks to the new processes we have implemented since 3 years ago. This leads us as always to another important topic, cash generation. Operating cash flow came to €108,000,000 which is below last year's number of 100 and €8,000,000 which is below last year's number of €197,000,000 This decline is due to a significantly lower contribution from net working capital. Last year's contribution was an inflow of €64,000,000 This year, it is an outflow of €21,000,000 as we are since Q4 2020 at the lower end of our guided range for net working capital. And instead of a decrease, we had a slight increase since then. Taxes and restructuring related cash outflows came to €13,000,000 and €7,000,000 respectively. CapEx related outflow is €5,000,000 higher than last year and totaled €23,000,000 The disposal of the refrigeration contracting business led to a cash inflow in the bracket others. This results in a net free cash flow of €78,000,000 Due to our dividend payment of €153,000,000 Our net financial cash position, including lease liabilities now, declined in the quarter from 2.70 to €203,000,000 Let me now talk about our financial headroom. On the left, you see our available cash credit lines as well as the respective utilization and maturity structure as per end of June 2021. Since then, there were some significant changes. Of the €281,000,000 cash credit facilities due in 2021, €81,000,000 constitute evergreen credit lines, of which are currently only €12,000,000 utilized by subsidiary companies abroad. The remaining syndicated credit facility of €200,000,000 which was solely set up due to uncertainty from the global pandemic expired at the beginning of August and was not prolonged by us. This has also an impact on the financial headroom in the table on the right side. It was €950,000,000 at the end of Q2 2021 due to the expiration of the €200,000,000 credit facility, which was not replaced due to our excellent liquidity, the financial headroom now stands still very high at 750,000,000 Of the €750,000,000 maturities due in 2022, euros 650,000,000 constitute a syndicated credit line, which was replaced by an equivalent credit facility this week, which is due in 2026. The remaining €100,000,000 consists of a credit line with European Investment Bank, which had an expiration date July 2021, but was also extended till end of January 2022. Continuing now on the right side of the slide. The only KPI, which slightly weakened compared to last year's Q2, is the absolute equity position. The decrease in absolute equity is a result of the dividend payments. Last year's dividend payment was split into 2 single payments, euros 76,000,000 were paid in Q2 2020 and €78,000,000 were paid in Q4 2020. This year's dividend was entirely paid in Q2 2021. Thus, the total burn on equity from dividends is then €231,000,000 since the end of Q2 2020. Nevertheless, our equity ratio went up from 33.8% on January 1st to 35.2% end of Q2. All other KPIs in this table have improved partly significantly compared to last year's Q2. Especially the positive trend of our net liquidity, Including lease liabilities has continued improving by €277,000,000 year over year. As I mentioned earlier, We have added further information for the calculation of net liquidity by disclosing the amount of lease liabilities. With that, I hand back to Stefan. Thank you, Markus. Let me now come to our upgraded outlook for the fiscal year 2021. The general Positive trend of the customer industry has continued. The recovery of Value added output is still gaining momentum according to the data of Oxford Economics. Compared to our last presentation in May, Growth expectations for all customer industries have increased. Only for Food, the assumptions are now a bit lower with an expected growth rate of 4% year over year. However, this is still a very solid figure. There are several important growth drivers one should bear in mind. First, the reopening story. An increasing number of countries are reopening again. Take the U. K. As an example. And it seems that the reopening scenario is increasingly sustainable, and this seems also to have an impact on categories with a stronger dependency on foodservice businesses, including breweries. 2nd, the category new food. We are very confident about the growth prospects of this category. Most recently, we won an order to build the world's first pilot plant to produce krill protein. And this is just the beginning. Based on data of Euromonitor and several other institutions, the market for new food is expected to grow from 21 to 25 at least twice as fast as sales of traditional food. Depending on the segment, The growth rate could be even 4 times as high. And this is also what we see in our pipeline. In feedback from our customers, negotiations and so on. The demand for new food related products and projects is increasing. So this altogether allowed us to raise our guidance for the current fiscal year, which I will discuss with you in the next slide. Due to the very good development in the first half, the promising order pipeline and the highest ever order backlog, We upgraded our guidance for all three KPIs. We now expect an organic sales growth of 5% to 7% and EBITDA before restructuring expenses of €600,000,000 to €630,000,000 and a return of capital employed between 23% and 26%. Please bear in mind that the guidance for EBITDA and for ROCE is based on constant exchange rates. I'm not going to discuss the divisional guidance at this point, but would like to refer you to our half year report available on our website. This brings me to our roadmap for 2021 2022. The next very important event is our Capital Market Day with our Mission 26 on September 28 29 in London. If the pandemic situation will not worsen again, we will meet you at the Landmark Hotel opposite of Mary Lee Bone Train Station. At the evening before, we will invite you for dinner at the hotel. You will meet the entire Executive Board and the IR team. With that, I hand back to Oliver for the Q and A. Yes. Thank you very much, Stefan and Markus. And back to you, Sharon, and please open up the lines for the Q and A. Thank Your first question today comes from the line of Arsalan Abadoullah from Deutsche Bank. Please go ahead. Your line is open. Good afternoon, everyone, and thank you for taking my questions. The first one is just on the service share and The progress you're making there, which has obviously been very positive and you've highlighted in the past active strategy within each division to appoint a Chief Services Officer, which is clearly paying off. I just wanted to get a feel for whether you have sort of targets in mind, Whether sort of to where you want to get to, whether at a divisional level or at a group level, I think Sort of figure for the last 12 months now looking at about 34% and where you sort of see that going. That's my first question. In terms of my 2nd, that's to do with in terms of, again, the margin progress has been very strong across divisions with most of those now Sort of hitting your targets for next year. I was just wondering whether your thoughts on sort of whether you're going to look or there's something for the Capital Markets Day look So potentially, we consider those and they've come under review or whether you sort of do see some still some uncertainties there, which means you don't necessarily want to Sort of become too aggressive too early on that front. Thank you very much. Okay. Thank you for your comments And for noting that we are improving our service share. And it's right, like you said, That we made some organizational changes with the Create organization and to strengthen the service. When it comes to targets and what our ideas, how to develop the service further, I would like to postpone this answer until the Capital Market Day to keep it interesting to come and to join us because this is a part of the Mission 26. And that is, let's say, the answer I would like to give at that stage. But you can expect that we have a clear intention to develop that further. Okay. And with the margin goal for next year, it's also I mean, we are not about Disclosing already any guidance for next year. So I would also like to invite you for the Capital Markets Day to learn No, that's fine. Thank you. Thank you. Agtengeweich haftien today. Your next question comes from Lucy Carrier from Morgan Stanley. Please go ahead. Your line is open. Good afternoon, gentlemen, and thanks for taking my question. I have three questions. I will go one at a time. The first one maybe is a bit of a follow-up on ArcelorM's question around service, but maybe from a different angle. I was just wondering how much visibility you have around what I would call the pipeline of your service business. I'm just wondering how much of the strength you've seen now is really a resumption of activity by a lot of your customer And the sustainability of that in the future or whether the strength you are seeing is simply because you are able to leverage more your installed base. Okay. Maybe, Lucy, I take Your first question about the service, of course, the service pipeline is not as long lasting compared to our pipeline, which we have in new installations. It is about, I would say, on average, maybe 2 to 3 months, what we see here. And I mean, we also see, of course, growth opportunities when the lockdowns are disappearing, when The pandemic comes to an end. We have more opportunities that our service technicians can travel again. So we see rather upside potential than any downside potential. And also the numbers we delivered during the pandemic also shows that we have a quite stable service business, which is mainly driven by spare parts. But like I said, if all the lockdowns and travel restrictions are disappearing, we might also see additional uplift here. Okay. My second question was more around the capital allocation and some of the comments you've made around The buyback and perhaps the need of the buyback for M and A purposes. I remember exactly a year ago actually, You were talking about doing large M and A. Nothing really has happened so far and you now seem to suggest that maybe there's Something more imminent when you would actually need to share. I was just curious to understand here a little bit the strategy, whether you're more heading towards merger type deals. As usually a lot of target when they are acquired, they tend to prefer cash rather than share. But Just to understand the rationale there of what you were trying to allude to earlier. Yes. So let me comment on the question of M and A, nothing changed to what we said 1 year ago. Preferably, we would like to do any acquisitions of larger sized companies. However, You know how it is. It always takes 2 to 10 go. So you need also action level targets. And this is, at the moment, not so easy. And if there are targets, prices are quite high. And we also see that we have a lot of potential within GEA to continue with our sell type story to create additional margin quality To grow, so we do not need to acquire if there is no meaningful acquisition. However, as said, We are very much open. We are looking out. I'm personally spending a significant amount of my time to come in touch with other companies, to find out what kind of opportunities are there. So it is not that we are saying we Stop any ideas to do acquisitions by doing this buyback program. It's simply that we believe in our equity story, and we think it makes more than to invest in our shares instead of having The money at the bank account where we are sometimes even obliged to pay negative interest for the money. So this is a rationale behind, but it has nothing at all to do that we changed mind concerning M and A strategy. Thank you. That's very helpful. And my last question was a bit more ESG oriented and Thanks for the details you have provided and I guess we get more of the CMD. But just for now, I was just curious to know if you could Give us maybe a bit more visibility in terms of how much you expect your portfolio to benefit or to qualify Rather for under e taxonomy criteria, if you already have a number in mind. So for you, taxonomy, we are, of course, preparing ourselves for the reporting, which is Gvocha. And therefore, we are in the midst of working the requirements out, which we need to fulfill. So we don't have a number yet. But as we said today, we are want to be and we will be on the forefront here of net 0. And therefore, we're also going to provide sufficient reporting then for you with taxonomy and our products will actually also support The target that we will help the environment and sustainability. Thank you very much. Thank you. Your next question comes from the line of Richard Schwam from HSBC. Please go ahead. Your line is open. Yes. Good afternoon, gentlemen. I have a question concerning this topic, new food you mentioned as an interesting structural growth driver. Could you be a bit more specific? What's you define in this respect as new food business. How much was this in your incoming orders in the first half? If you can Give here a number or share of the incoming orders. And can you also Tell us a bit about the customer structure here. How much of this business is really coming from new customers? Or is it not so that also the well established customers do invest in this area A lot because they see that there is a change on the consumer side they have to follow. Thanks. Thank you very much, Richard, for this question. This is a very, very interesting topic, and it will be also a topic Where you will learn and hear much more during our Capital Market Day. However, to try to answer your questions, New Food will be in a short term, I would say, definitely a 3 digit million business for us. And we have a mix of new customers, mainly start ups. And we also have customers, traditional customers who are starting with new food. When we talk about new food, what is it? It is mainly alternative proteins. So it's cell based proteins, it's plant based proteins, it has a lot to do with precision fermentation. And I would say there is no other company As good prepared as GEA to serve this market. And this is simply because of the fact That we combine in our organization a lot of competencies, which are necessary for this production of alternative food. It's not about Mixing and grinding only. It's about precision fermentation where we have a lot of knowledge coming from our Pharmaceutical business. We have, Of course, all the experience in the separation, homogenizer and decanter business. Last but not least, we understand Cooling and Heating Techniques and How TO Combine IT TO Create Sustainable Solutions With Optimized Energy consumption. So we really own all the technologies, which are necessary. We also have the Extrusion technology when it comes to plant based proteins with our company in Italy. So we have really a full portfolio of technologies, which we can ideally combine. We will also invest heavily in that sector. We have a lot of very interesting offers out where we expect also interesting order intake for the Q3. By saying so, I also and that is, of course, not only something to do with New Food, but for the 3rd quarter, we are very optimistic that we see our order intake in the range up to 1,300,000,000. So we also see interesting large projects coming closer to a decision where we feel that we are positioned quite well. So this is what I can say to this topic. But I, of course, also invite you again to the Capital Market Day To hear and learn more about this very, very interesting topic, new food, because this is really a key driver for GEA in terms of growth for the next years. Okay. Thank you very much. And coming to another point, you mentioned here you mentioned also the Reopening of economies as a positive factor for the good development you have seen, Especially in Q2. However, we have seen over the recent past that there are also, especially in Asia, Some tendencies to turn back this status and become More restrictive again. What do you see in your business here on a global scale? Where are the points you would be a bit more cautious than, let's say, 1 or 2 months ago? Thanks. Thanks for that question. I mean, when I made the comments with the lockdowns and opening in services was more directed to the future. So if lockdowns are releasing more and more because Asia many, many companies in Asia are In a lockdown, it is very difficult to travel. It is very difficult to bring specialists from abroad into many different countries. So there are still a lot of restrictions going on. So we hope that the 4th wave will not be A large one and a strong one. So we also do everything in our company to motivate people to go to vaccination. We had a lot of investments made also to for vaccinations for our staff. We are encouraging our people Also by different means to go to vaccination because this is, of Of course, necessary that lockdowns will be avoided in different countries. So we rather Are optimistic that once the world hopefully got rid of the coronavirus, that then there is a Kind of additional potential coming up in service because we can bring in top specialists in different countries, Which was not possible in the last month. Okay. Thank you very much. Thank you. Your next question comes from Daniel Gleim from Stifel. Please go ahead. Your line is open. Yes. Good afternoon, gentlemen. Thank you very much for taking my questions. I actually got 2 of them. Also taking them 1 by 1. The first one is on the COVID-nineteen restrictions that hold back order execution, as you mentioned, on your group slides. Maybe you can elaborate a little bit How this development was sequentially within the Q2 and how this has developed into the Q3? That is my first question. I mean, We so far, we've found in the majority of the cases good workarounds to manage our sites. We had at the very early beginning of the COVID situation, large installments in the U. S. Where welders were planned to fly in from Eastern Europe, which was not possible, which we then had to rearrange and reorganize by using American welder. So normally, we find some workarounds, but it is I would say there is no difference What we see now between Q2 and Q3, I don't expect any neither positive nor negative impact By travel restrictions, I mean, let's hope that there are no other lockdowns or additional lockdowns in Europe and North America Coming. And this is, of course, our assumption, yes. So realistically, this is going to stay a topic with us till the middle of next year probably. Yes. Hopefully not, yes. I hope that The majority of the people are clever enough to go to vaccination. So we are struggling, especially here in Germany. And let's see how it evolves. But yes, of course, when travel opportunities are coming back, we will Also have a chance to accelerate sales growth and also service might pick up again. Very clear. My second question would be on the large order development. There's a certain disconnect in between the small and medium sized orders into large order category. Maybe you can elaborate what the reasons are for that. There's no clear trend. If I see it, the second half of past fiscal, we had a Kind of recovery of large orders that has now winded down again. Can you maybe give us a little bit of a hint How this is going to develop in the Q3? Are we seeing the resumption of the large orders here? And if not, what the rationale behind that is? Maybe you can put a little bit more color on the large order trends. That would be very helpful. Yes. So the majority of the large orders normally you can find in our LPT division. This is the division where we normally see the bigger orders, the larger orders. If we compare this year, the first half year with last year, we are even slightly below last year with the large orders. And this is a good signal, I would say, because The order intake and the improvement of order intake, the growth is not coming by 1, 2, 3 or 4 large orders. It is really coming from a broad base. And we saw that during this corona pandemic, Customers are, of course, a bit more cautious when they when it comes to investments of €50,000,000 €60,000,000 €70,000,000 Because this has simply something to do with the fact that this is not a machine you buy, which is delivered out of a factory. These are always installments where you need people traveling in from various countries, which is, as I said, Always a problem in the corona situation. Therefore, we have a as we always had a very good pipeline. We think and we are quite optimistic that now in the Q3, we will see more Larger orders coming in, in addition to a very good solid ground. And therefore, we are, as I said, also Very optimistic that we can see another very good quarter in terms of order intake, which might be Another improvement compared to the other last quarters. And as I said, €1,300,000,000 order intake for the Q3 is not unlikely. Very clear. Thank you very much. Thank you. Your next question comes from the line of Will Turner from Goldman Sachs. Please go ahead. Your line is open. Hi, everyone. Thanks for taking my question. The first one, I wanted to just go into a little bit more detail on your Slightly higher raw material headwind guidance. First thing the first one I wanted to ask is, when do you expect this €25,000,000 headwind to impact you, at what quarter during the year? And then The second question related to that is could you just explain a little bit more of the mechanics of the increase? Because when I look at your procurement bill, it totals up to about €2,000,000,000 And then obviously, you had a 20,000,000 euro headwind at 1Q, which is only really a 1% increase in that year. And now you've obviously Increased that to $25,000,000,000 but it's still a 1.25% increase on your total $2,000,000,000 Procurement bill. And when I look at Most components, most steel and most capital goods equipment, the price increases in the last year have been much greater than 1% So those are my two questions. Thanks. Okay. Hi, Will. Let me answer on this. So the raw material price Increases which we expect with €25,000,000 is going to be in the second half of the year and it's included in the guided range we give for this fiscal year. So then the calculation you did, well, You need to see when we look internally at the raw material, especially steel and stone, it's just a very small part on our products. That's a B, revenue purchasing organization in place. We have diligently renegotiated in the last 1.5 years contracts and we are still doing that. So at the time at this time when the prices are going up actually We are bundling our demand on the supply side, renegotiating contract. And this is, of course, the countermeasure why you're not seeing These kind of big material increases. There was a lot of opportunity actually also on the purchasing side here at the company To be get in. And that's why we also have a new colleague here on board, It's years before, and that's the reason why the effect so far has been quite limited of male price increases. Okay. Thank you. Thank you. I would now like to give the call back over to Oliver Luckenbach. Please go ahead, sir. Over to you, Stefan. Okay. Stefan is speaking here. I try to make some closing remarks. So Just to sum our call up, we had a very good Q2. We had the 4th consecutive quarter of order intake growth and we expect as I said this positive trend to continue. €1,300,000,000 order intake Are not unlikely for the Q3, and we also might see larger projects kicking in, in this Q3. Secondly, we proved again that we can improve profitability and liquidity. And thirdly, we raised our outlook for the full year 2021 and announced a share buyback program. This is, in a nutshell, what is important to say. And I would like to thank you for your interest in GEA. And we better hand back to Oliver. Yes. Thank you very much, Stefan. Thank you to all of you for participating in our call. And within the next few days, we will send out our save the date for our Capital Markets Day. And yes, I would be very delighted to meet many of you in person in London for the pre evening event and then also for the CMD itself. With that, thank you very much. Stay healthy and talk to you soon. Bye bye. Thank you. This concludes today's conference call. 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