The conference is now being recorded. Welcome to the conference call regarding the publication of Gerresheimer AG's Q3 Results 2020. At the moment, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Now I hand over to Ms. Carolin Nadilo, Head of Investor Relations.
Welcome everyone, and thank you for joining us to review our Q3 results. With me today are Dietmar Siemssen, our CEO, and Dr. Bernd Metzner, our CFO. As we did in the past, we are presenting a set of slides accompanying the management's notes in this conference call. The interim statement, the presentation, and the press release are posted on the Investor Relations website. Please note, this call is being webcast live and will be filed on our website, too. Before we start, I would like to remind you that the presentations and the discussions are conducted subject to the disclaimer.
We will not read the disclaimer, but propose taking it as read into the records for the purpose of this call. Our agenda for today starts with a presentation by Dietmar Siemssen and Dr. Bernd Metzner. After that, we will enter into a Q&A session. Now it's my pleasure to turn the call over to Dietmar Siemssen.
Thank you, Carolin, and good afternoon, ladies and gentlemen. Good morning to those of you joining us from the U.S. or overseas, and welcome to our Q3 conference call. I'm pleased to have you on this call today and hope everyone is healthy and also remains healthy. These times of the global COVID-19 pandemic require brave, dynamic, and innovative measures to learn from the pandemic and to forge the long-term growth opportunities. It's important for me to emphasize that Gerresheimer does. Our second half of 2020 will reflect the whole picture, stating the very positive developments and the high dynamic in our Gerresheimer. Let's look into Q3 and the outlook for Q4 now and the growth opportunities we are clearly facing. Let's start.
Q3 is stating the obvious. Our core business proved very robust, growing organically with 2.1% despite the COVID-19 impacts. No doubt, we have been facing temporary headwinds in our cosmetic business, but the growth we have been able to achieve in the other businesses or business segments are able to overcompensate these impacts. We are continuously advancing our growth strategy, implementing the foundation for profitable, sustainable growth. We are looking into a very strong Q4 , meaning a backend-loaded fiscal year.
Looking at the top line, reported revenues in the Q3 2020 came in at EUR 349 million, including the before-mentioned impacts on parts of our cosmetic business. Bottom line, the adjusted EBITDA increased to EUR 75 million with an as well increased adjusted EBITDA margin of 21.5%. Also good to see that our free cash flow significantly improved year-over-year to EUR 38 million, reflecting the strong earning quality in our company.
Bernd will definitely elaborate on the financials in more detail later, but what is very important for me to mention is that we should not isolate the Q3 and look at the Q3 only, but look at the second half of our fiscal year as a whole. Our growth plans remain unchanged, and we continue to invest into innovation, capacity, quality, excellence, and digitalization. The Q3 reflects only partially the fiscal year's full picture, which is, as already announced, strongly backend loaded. We deliver on our promises, and we see a very strong Q4 ahead, supported by strong orders, new business SOPs, and additional capacities showing now first results. This gives us the confidence to confirm our guidance for the full year 2020.
The dynamic of the transformation in our Gerresheimer is continuously high, and the initiatives we are taking enable us to benefit from the global mega trends in pharma and also healthcare. Today, I selected two examples of the various activities in all areas of the Gerresheimer's portfolio. I would like to give you more color on Gerresheimer's opportunities in the increasing biologics markets, as well as the increasing importance of our pharma products, especially here in glass vials and also syringes. For sure, biotechnology is a highly promising market for Gerresheimer. We see strong growth potential in the market for injectables in general. While the market for smaller molecules will remain strong, we see even larger growth potential for biotech-based drug products, implicating an overproportional growth in large molecules.
That means the fast-growing biological sector will offer significant opportunities, and we will make sure that Gerresheimer, with its unique broad portfolio of products, will serve the biotech companies with the right product solutions and that Gerresheimer will be part of this strong biotech market story or market development. We launched in the last month, Gx Biological Solutions, a dedicated unit with technical and development experts offering enhanced services for pharma packaging solutions in both the U.S. and also Europe.
We are adding essential laboratory and regulatory services for biotech companies during the different stages of their drug development. The team offers these services in the two innovation and technology centers in Bünde, Germany, Europe, and Vineland, New Jersey, U.S. Thus, Gx Biological Solution is a full service provider serving the needs of small, mid, as well as also large biotech companies, continuously enhancing its product and service offering.
The potential of Gx Biological Solutions is promising, and the unit already contributes to the implementation of our growth strategy. Of course, this is just the beginning. Our clear target is to serve the biotech customer's needs with the whole Gerresheimer's portfolio from standardized pharma products over customized product solutions to smart and digital devices. Main contributors for both revenues and margin acceleration in biologics for the next years will be the ready-to-fill syringes and our Elite glass vials, as well as ready-to-fill vials as well.
Growth in injectables is one of the strongest global mega trends. Besides the growth opportunities of new drugs like biotech and biosimilars, we see increasing healthcare access globally, which offers an increase in vaccination in general. Furthermore, we see the trend towards more self-medication and individual customized drugs. All of these global mega trends will require, with significant portion, injectable solutions.
I already spoke about the promising growth in biologics, but worth mentioning is the increasing market for vials and syringes, also further fostered by COVID-19. Depending on the recurrent necessity of flu or COVID-19 vaccination, we are convinced there will be a continuous increase in demand for prefilled syringes. As of now, the demand is clearly above existing market capacities. Thus, the syringes and also the vial business play an important role in our growth strategy. Having said that, some more words on COVID-19 vaccination. Right now, it's not yet clear which drug will make the race for a COVID-19 vaccination in the end. My personal expectation and hope is that we will have several solutions in the market. The tremendous demand for vaccination units will be served through single or also multi-dose vials.
In case of a regular vaccination need, we expect this effect to generate a strong increase in the demand of ready-to-fill syringes in the outer years as well. Closely cooperating with our pharma customers, we assume the global demand for COVID-19 vials of about 2 billion-3 billion units served over the loop of the next two years. We also assume that Gerresheimer would serve one-third of that. As of today, we see this assumption to be proven rather conservative. Looking at the orders we receive from our customers, meaning by nearly all key pharma companies, it seems the demand is even higher than that. We, as Gerresheimer, will take a larger stake. In 2019 and 2020, we have invested in vial production lines, glass forming lines, and syringes, and we will also do so in 2021 in order to cover the increasing demand.
Furthermore, our new ready-to-fill vials machine in Bünde is now ramping up production. Our ready-to-fill line 5 for prefilled syringes is ramping up with production as we talk. We actually started it this in June. Ready-to-fill syringe line 6 will start production by mid 2021. We are at the moment producing the machines. We are preparing our Gerresheimer to serve this high demand for vials and syringes being a reliable partner for our customers and the patients out there worldwide. Being a reliable partner for our customers, this is what Gerresheimer characterizes. We are clearly aware of our responsibility towards our customers and patients. Within the last months, we have put huge effort in focusing on our customers' needs, knowing that quality and availability are key for our customers. We proved highest quality and delivery accuracy, also in times of COVID-19.
With our global footprint, we serve our customers locally without any interruptions in supply chain, independent from the region in the world. Gerresheimer stands for long-term customer relationships, accompanying our customers through a huge part of their product's life cycle. Dear ladies and gentlemen, we are in the middle of our Q4 , clearly preparing for a strong finish of the year. Our Gerresheimer is transforming at full force. We are pushing on our strategy implementation, and we are about to close our budget plannings for the next year.
I'm pleased to invite you to our Capital Markets Day, taking place fully virtually on December 8, 2020. There, we will provide you with deeper insights on our growth strategy, as well as our investment plans. We are looking forward to elaborating on digitalization and innovation, as well as providing insights on our ambitious ESG strategy. It is a pleasure for me to give you the opportunity to interact with some of our international experts on innovation, excellence, and also sustainability. Looking forward to meeting you there, and please save the date. With this, I hand over to Bernd for some elaborations on the financial figures in detail.
Thank you, Dietmar, and welcome to everybody, also from my side. Before we go into the analysis of our figures, some introducing words. As already mentioned by Dietmar, our fiscal year is strongly back-end loaded. Why? Three main reasons. The cosmetic business is gradually recovering in Q4, but affects us in Q3 by around EUR 6 million versus Q3 2019. Second, in Q3 2020, we had negative phasing effects in P&L amounting to a mid-single digit million EUR amount, which will support us in Q4. Third, we will start with our delivery of COVID-19 vials in Q4. Backed on our high forecast accuracy, we should realize a high single-digit organic growth in Q4 2020.
Now let's dive into the P&L analysis of Q3. Organically, our core business delivered revenue growth of 2.1% in Q3 2020. This includes the temporary COVID-19 one-time effect of about EUR 6 million in our cosmetics business. If you look at our core business. Without cosmetics, the quarterly organic growth rate would have amounted to 4.5%. Reported revenues in Q3 2020 came in at EUR 349 million from EUR 359 million in Q3 2019, mainly impacted by negative currency effects amounting to a total of EUR 9 million. Let's turn to the earnings. We achieved a strong adjusted EBITDA of EUR 75 million compared to EUR 72 million in previous year's quarter, resulting in an excellent organic growth of 8.6% in our core business.
Organic growth means FX adjusted and without considering the EUR 2 million-EUR 3 million positive effect from the first time application of IFRS 16. Below adjusted EBITDA, I would like to highlight three aspects for Q3 2020. First, the positive one-off effect is caused by the sale of our Küssnacht real estate. Second, as in Q2, amortization declined due to the extension of useful life of Sensile's core technology. Third, income taxes amounting to EUR 13 million lead to a tax rate of 33% in Q3. Normalized, that means without considering the Küssnacht sale, we would have had a tax rate of 30%, 31%. For the full year 2020, we expect a tax rate close to that number. Midterm, we foresee, as you know, a tax rate of 25% only.
All in all, a solid Q3 with a very strong Q4 ahead. Having now a closer look into the divisions, the above-mentioned parameters are well reflected. Plastics and Devices. This division grew organically mid-single-digit, precisely 4.3% year-over-year. Due to negative currency headwind in the amount of approximately EUR 7 million, reported revenues developed rather flattish compared to previous year. In the Q3 , we saw strong revenue growth in primary plastic packaging and our syringes business. Centor performed according to plan.
In the medical plastic systems business, we saw some phasing effects in our tooling business amounting to a mid-single digit million EUR amount, which, and that's important, will support Q4 correspondingly. The adjusted EBITDA margin improved from 23.6% by 3.3 percentage points to 26.9%. Main contributors have been all business units, plus a positive impact of EUR 1.6 million due to the first time application of IFRS 16. Without considering the IFRS and FX effects, this resulted in a remarkable organic adjusted EBITDA growth of 13.5%. Let's turn to Primary Packaging Glass.
Organically, revenues of the PPG division remained nearly flattish. Negative currency effects, mainly from the US dollar, impacted the reported revenues of our PPG division by about EUR 2 million, resulting in EUR 156 million revenues. As already mentioned, we had a temporary one-time hit due to COVID-19 of around EUR 6 million within our cosmetic business.
If you look on our PPG business without cosmetic, you see even an organic growth of 5 percentage points. It shows that our PPG revenues in the pharma business is developing strongly. The adjusted EBITDA increased from EUR 30 million in Q3 2019 to EUR 32 million in Q3 2020. This increase of EUR 2 million is remarkable given the temporary negative impact in our cosmetic business due to COVID-19. We got supported by efficiency gains and further insurance compensation in the magnitude of a mid-single-digit million EUR amount, which compensates damages. This insurance compensation is mainly caused by damages linked to the furnace leakage in the U.S. last year. One part is associated to lost business, representing revenues of approximately EUR 3 million in Q3 2020. Another part to the demolition and repair of the furnace in the U.S.
Let's turn to Advanced Technologies. Four topics to consider. Advanced Technologies is an innovation driver by developing intelligent drug delivery systems and steered as a long-term investment case. Please remember, all the potential benefits of this division are not included in our midterm guidance. As you know, end of last year, we changed our revenue model. Instead of getting reimbursed for the development costs from pharma co, we prefer to get a higher portion of the revenues from our pharma co partners instead. In other words, we evolve from a contract developer for pharma co to a revenue-sharing partner of pharma co.
The development of our micropump for chronic heart failure treatment with SQ Innovation is on track, with significant sales contribution expected in 2020. Without any settlement proceeds, we see in Q4 around EUR 2 million revenues and a similar EBITDA level like in Q3. Let me now highlight the main points on the cash flow development on the next slide. Our free cash flow of EUR 38 million represents strong earnings quality for Gerresheimer, clearly outperforming Q3 2019, when the free cash flow amounts to -EUR 3 million . A positive swing of EUR 41 million. This outperformance is triggered by our good performance in the core business, excellent operational working capital performance, and the sale of our Küssnacht site with a positive cash impact of EUR 13 million.
In Q3, we achieved a significant improvement of inventories and receivables, contributing to the net working capital reduction. Compared to Q3 2019, we improved this number by EUR 17 million. With regards to CapEx, we stick to our investment program for 2020 and are on track to invest around 12% of revenues in 2020. Without the Küssnacht sale, we spent EUR 42 million CapEx in Q3 and aim to implement the CapEx projects according to plan, even so there have been minor shifts due to COVID-19. Let me now elaborate a bit more on the financial position of our company.
As you can see, despite a dividend payment of EUR 38 million, our net financial debt has been rather stable at EUR 981 million compared to the end of May 2020 figure. The adjusted EBITDA leverage, calculated as net debt to adjusted EBITDA, has been at 3.2x as of August 31, 2020, accordingly. The financial covenant for our revolving credit facility stands at 3.75x EBITDA, which gives us still solid financial headroom in the amount of about EUR 170 million. On October 1st, 2020, we signed a promissory loan agreement amounting to EUR 325 million.
We saw a high oversubscription, which reflects the confidence in our business model and in the long-term success of Gerresheimer. We achieved attractive conditions, which will support our net financial expense by EUR 4.5 million per year going forward. We will refinance the promissory loans maturing in November 2020 and further reduce our drawing in our revolving credit facility agreement. Closing of the transaction is expected for early November 2020. This is positive news. I now hand back to Dietmar.
Yeah. Thank you, Bernd. It's exciting year we had in the beginning with Bernd. You might have heard this, some problems with the microphone. I hope it's better with my start now. A small remark on your presentation. Thank you, Bernd. Before everyone and the good listeners become too nervous, to start the first sales in the SQ Innovation business, we are expecting actually for 2022 and not for 2020. With this, I think I start to summarize a bit, the key message in a few words. We actually are looking into a very strong Q4 , most likely the strongest quarter in Gerresheimer history so far, because my plan is to do it better and better.
In the Plastics and Devices divisions, we anticipate high single-digit growth in the Q4 . The phasing effects of the Q3 affecting our tooling business, as Bernd mentioned, will be offset in the Q4 , and we will see these sales. We are producing syringes at full capacity. The Primary Packaging Glass division is about to contribute even stronger with high single-digit or even double-digit growth. What is most important for me to mention is that our investments into innovation are now starting to pay off.
We will show first significant revenue contribution of our Elite glass in the Q4 of our fiscal year 2020. We see first sales from also starting COVID-19 vials deliveries. We expect a first recovery in our cosmetic business also for high-end perfume bottles. A short update on our Advanced Technologies division. The SQ Innovation project is on track. Overall, our expectation to achieve FDA approval at the end or by the end of 2021 is still valid. The conclusion for today is the following. We confirm our full-year guidance. We stick to our plan to deliver mid-single-digit growth for Gerresheimer in 2020. These challenging times are putting extra responsibility on our shoulders. We take this very seriously. We are working on full steam to cover the extra demand on vials and syringes.
All our machines are running at full capacity, and the team is fully committed to deliver. Considering the global mega trends in pharma and healthcare supported or forced, driven by COVID-19, we are 100% dedicated to deliver our story, becoming an innovative growth company and solution provider. Thus, we also confirm our midterm guidance. For the adjusted EBITDA margin, we confirm the 21% target for 2020 as well as the steady increase up to the 23% midterm. To sum it up, the full year 2020 is the turning point in terms of growth for Gerresheimer. All COVID-19 unaffected areas are proving strong growth rates already.
We confirm our guidance and are looking forward to a strong Q4 . Consequently, take the opportunities and advantages out of the pandemic, adding capacities and anticipating growth, opportunities in areas as of connectivity and also digitalization. Our goal is to become a key market driver for the global pharma and healthcare industry. Our future Gerresheimer will be the smart choice for pharma, biotech, and healthcare for customers and patients worldwide. With this, I'd like to hand it back to Carolin and look forward to your questions. Thank you.
Thank you, Dietmar. Let's enter into our Q&A session. The lines are now open for your questions. The first question comes from Veronika Dubajova from Goldman Sachs.
Good afternoon. Thank you for taking my questions. I will keep it to two, please. My first one is just your degree of confidence in the growth expectations you've outlined for the Q4 . Obviously, it's a very unusual year this year in terms of how heavily it is weighted towards Q4. If you can maybe help us understand how much of that high single-digit growth that you're expecting for the core business is underpinned already versus what are some of the remaining risks that you see. That would be very helpful.
My second question is just on the profitability, looking at sort of the type of margin that you've delivered year to date. Normally, the type of margin step-up that you get to normally deliver in the Q4 , I'm a little surprised that the guidance on the EBITDA front is unchanged. I guess, is there any sort of one-time cost or headwinds you are anticipating for the Q4 , or is this more a function of being prudent at this stage, given that you still have two months to go?
Maybe, I would take over. I do not know, Dietmar, do you want to take the first? Both? Okay. I just start with the first question, how confident we are regarding our revenues, Veronika. Quite confident, as we have the guidance ranges between 3% and 7%. We have a level of forecast accuracy of 98% now. We are in the middle of the quarter. We have certain effects which are really important for us. For example, one is the phasing of tooling. You know that we have a high volatility during the years, as far as tooling revenues are concerned. We are basically EUR 6 million, which we don't do in Q3, which we would normally, if you compare this to 2019, would have done, but which are shifted now in Q4.
The other thing is that we see a recovery in Cosmetic, which is very important now for Q4. We have the same level as in Q4, like in 2019. What is very important also for 2021 overall, our plan is that we will be for the full year 2021, that's our actual seeing in line with our business as Cosmetic 2019. We really see improvement in this regard, and this should help us on this end. Level of forecast are very high. You have no, let's say, business continuity assumed, and we should really be there, in this kind of range between three and seven%, but obviously on the lower end of our guidance, that's clear.
Maybe adding to that, also from my side, we should not forget, maybe a bit unusual, but we planned this year was backloaded from the very beginning. Independent from COVID-19. Why was this the case? We knew that the new RTF line syringes would start in June, and it would steadily ramp up, and we would principally mainly see this in Q4. Also the successful launch now, which finally leads to deliveries of the Gx Elite glass takes place, and it was planned in that way. There's a couple of start of productions that are really planned like this from the very beginning. Bernd spoke about the toolings.
We should not forget, it's not a game changer in total, but we will start to deliver the first COVID-19 vials also in the Q4 . Yes, that gives us a certain confidence. Coming back to the question towards the profitability, now you might call it prudent, but, I think it's reasonable that we stick to the guidance, and if we would overachieve, maybe it's also not so bad, yeah. It's time that Gerresheimer learns to do this, yeah.
Yeah. Understood. It's always better to underpromise and overdeliver than the other way. Can I just ask a-
Veronika, just to add on this. The thing is, this will be definitely Q4 regarding our margin. If you look now, Q1, we had 17% EBITDA margin. Q2, we had 22% EBITDA margin. Q3, 21%. Q4 will be our strongest quarter regarding our margins. This is our expectation, just to be totally clear, yeah.
Excellent. Good. It's great to have that confirmation. If I can just ask a quick follow-up, Dietmar, just on the RTF, it seems to me that maybe you're accelerating the timeline for RTF 6 a little bit. Is that fair? Should we be reading that as a sign of confidence from you around the growth prospects that you're seeing for this business? I guess just remind us the opportunity that you see there, in particular with 5 and 6 as you think about the next couple of years.
Yeah, I think I need to bring some explanation into when we talk about RTF, because there are two areas of ready-to-fill we are talking. One is the classic glass ready-to-fill syringe, which the syringe market is 95% in the glass business ready-to-fill. Here we launch in June our next ready-to-fill line, which will add around at least capacity by end of the year, hopefully up to EUR 100 million, up to this total EUR 500 million for Gerresheimer. The RTF six we are talking about is actually also for syringes. That's the line that we are setting up at the moment and will start to deliver first volumes probably in the same period of the year in 2021, which is in June, and ramping up steadily to the end of the year.
The other aspect of ready-to-fill is, of course, the vials. We have also set up the ready-to-fill capacities in Bünde, the first vial line, and we have added ready-to-fill capacities in the North America region here in Querétaro, in our Mexican plant, where we now have started to deliver ready-to-fill vials. It's the two things that you have to keep in mind.
Understood. Thanks so much, guys.
Now we have Scott Bardo from Berenberg.
Yeah. Thanks, guys. Thanks for taking the question. Just a question on the top-line dynamic. I think that your guidance at the beginning of the year and reiterated in the Q2 was for mid-single digit growth. If I understand your comments correctly, you're more steering us to around 3% growth for the full year. That sounds a little bit light of mid-single digit. In which case, I'd just like to understand, was it that this quarter was a bit softer than you expected? If so, in which areas caught you a little bit by surprise here? Do you expect, therefore, a bit of a catch-up effect into next year, such that you have slightly better or towards the upper end of this sort of bandwidth that you have identified, this 3%-7%?
That's the first question, just a bit of discussion on where Q3 sits within the guidance framework you set at the beginning of the year. Second question, please. Without stealing too much thunder from the upcoming capital markets day, but profitability for the business seems to be doing pretty well. Has this at this point triggered any reassessment as to the medium-term margin projections for the business? And have you developed any thoughts related to your ongoing CapEx expenditure over the medium term? Thank you.
Maybe I take the first question. I think one point is very important, Scott. You have to see we are not steering the business completely in quarters. I think you have to, especially here, there were some shifts from the Q3 into the Q4 . You definitely have to see the second half year together, and that's the main surprise beside, of course, the impacts that we see in the perfume business here in the cosmetic area for COVID, which definitely we did not plan in the beginning of the year, and we did not appreciate. Also here, we are very well underway. Take the cosmetic out.
It is, for me, extremely satisfying to see that if you take the cosmetic, this temporary effect at the side, that we have been very successful to bring what we call the core business, the remaining business, to growth. You see, and that's what I always wanted, you see that we are back in a real strong growth phase in the glass. This is something where I'm totally confident that we will see this also in 2021 and the following years. That is very good. Of course, that the other business is also showing very reasonable growth, all in the very strong area of the mid-single digit. I don't know whether you want to add something, Bernd.
Well, I think there's two things, two aspects to it. In addition, maybe you have one is regarding the guidance. We had, including basically GAT, Sensile, we are on the lower end. If you take GAT out, actually because of the special circumstances of the last year, you really see a nice organic growth, which we should not forget, which is more in the midpoint direction and fueled by our strong performance in Q4. If I look now at Q3, it was basically like planned. Maybe we had this kind of pull-in effect shift going more into Q4. We have not foreseen by the magnitude of EUR 3 million or so.
As you have this catch up in Q4. Nothing worth seeing in this direction. It's a good thing, Scott, regarding your question regarding margin development and the Capital Market Day . Indeed, yeah, we have now all hands on deck to make our budget preparation. We are doing the cost now of October and November, and we'll talk about it also when we are at the Capital Markets Day. Regarding the margin, what we can say is that if you look in our midterm guidance, what we have said, that we go into the direction of 23%, it's no question that this will be no surprise also at the Capital Markets Day.
The only question is when you actually can achieve this, and we want to show also a nice trajectory going forward now from 21%, direction of 22%, direction of 23%. You really see a nice development into this direction over the course of the next years. Other thing is, it's not a secret that part of our investments, what we are doing, you just tackled on it, goes also in the direction for digitalization, also making more efficiency gains here and there. This is something also testimonial that we get there, with this kind of margin improvement. Probably, I'm just calculating off the top of my mind, maybe 20% of our CapEx, what we are investing also goes into this kind of efficiency gains. This is something what you need always to consider.
The rest, you need to be patient, and we talk about it at the Capital Markets Day more in detail.
Understand. Thanks. Maybe just a quick follow-up on the CapEx point, because I think previously, under previous management teams, there was this notion that we're at the top of the CapEx cycle and that that should moderate. Now I know, of course, Gerresheimer is becoming increasingly growth hungry. Can you give us some directional comments as to whether you believe that CapEx will naturally moderate from this point, or will it be sustained at these higher levels? That would be helpful to avoid any sort of surprise in December.
Yeah, we are not ready with the budget, but it's clear, I don't disagree to that the growth is demanding quite some CapEx. It's not my key target to keep the CapEx at a super small level. My key goal is to make sure that the CapEx we are investing is also translating into growth or profitability improvement. What is good, and you might not be able to see this from the outside, but we see this, it's maybe not proven one-on-one now in the financial results because the COVID is mixing up it a bit. It's, for me, very satisfying to see that the investments we are doing are actually already now starting to show results in both sales, but also in the improvements.
Some goes far too far into the detail, but some of the improvements of the process capability that we invested are clearly showing, that for example, the cost of non-conformity or cost of non-quality are going down, and you see these effects. Yes, you might also be able to see them in the profitability over the loop of the next quarters.
Very good. Thanks very much, guys. I'll jump back in the queue.
Yeah.
Now we have Falko Friedrichs from Deutsche Bank.
Thank you and good afternoon. I would have three questions, please. Firstly, on the vials opportunity for COVID vaccines. Based on your presentation today, it sounded like the opportunity for you could be a little bit larger than you initially expected. Can you tell us if that is a correct assessment on my end and whether pricing for these vials has been stable? Secondly, on your cosmetics business, do you expect it to be back on the prior year's level in Q4 or even slightly growing again, or would that be too optimistic? Thirdly, on the last call, there was a bit of a discussion around potential funding from government authorities for all your expansions to deliver the COVID vaccine vials. Can you tell us if there's any update here and whether you're still hopeful to receive some funding?
I take the first one. I think I already see in the reaction of Bernd that he's absolutely eager to take, especially the third one and also the second. I start with the vials. There are still quite some variables within the vials. One, I start with what is really a factor. There will be a vaccination as soon as there is the right formulation found. There will be probably several pharma companies that find a solution for vaccination. There will be a vaccination, and there will be a demand of, let it be some 5 billion- 6 billion shots.
The filling capacity is the more critical factor than actually the vials, because due to the filling capacity, a lot of the pharma players that are close to the solution have decided not only go into multi-dose solutions, which means one glass vial for every single vaccination, but into multi-dose. We have now demands that we are discussing with our customers from single dose, one shot per vial, up to 18. This is actually reducing the number of vials in total. That's where our guess, and that's a pretty realistic guess meanwhile, as we are deep in the process of discussing the things, of two and a half to 3 billion vials that are needed worldwide within, let me say, the next two years, over the group of the next two years. Who will be the supplier of these vials?
There are, in principle, the majority of these vials will come from three big players. We are one of these players. As we are discussing the things, it seems that we might even be able to take more than a third, which is also a question of having the capacities available. We, in principle, invest in 2019, not in a super genius anticipation of COVID, because we didn't know this, but we had to replan some renewal of some lines, and we just now had some of the older lines running for some more months or years. We invested in 2019. We also invested in further capacities in 2020, and we will also, in order to fulfill the market demand, invest in 2021. This will bring us in a very good and favorable position to help our customers out here.
This is, by the way, a big added value for Gerresheimer, far beyond the pure euros of sales, because we are opening the doors with some of the pharma customers at the moment because they need these vials, and we are able to support them where we, for example, today, had no access to, at least not for glass vials. That is, it's for us, very important on a long-term run, not only for COVID-19, but also for other customer access to be successful here. This goes in a very, very positive direction for us, no doubt. You take over the cosmetic.
Thanks a lot, Falko , for the question regarding cosmetics. In practices like as follows, we had in Q4, now in 2020, we see that we will be the first time at the same level as Q4 2019. This is true also for the full year 2021. In 2021, we expected our cosmetic business will be at par with our cosmetic business in the last year, so 2019, actually. That's the situation for cosmetic, and this is how we plan and also how we plan for our capacities going forward. We have a good proof point now with our Q4 now in this quarter. Regarding the second question, regarding the government funding. As we are all around at federal, state level, also at European level, but it's too early to call it a day.
We don't plan for that, but we are asking, and there are really nice funding pots available, and they are available starting from the 1st of January, especially on the federal level here in Germany, where we're quite hopeful, but we don't plan for that. I think this is a prudent approach, but we see definitely that we meet the requirements, and we are one of the companies which might get finally also funding from the government. We don't plan for that. It's simply too early. Maybe you ask me in the Capital Markets Day, I can give you an update on this topic.
Okay. Thanks a lot.
Next question comes from Daniel Wendorff from Commerzbank.
Yes, good afternoon, thanks for taking my questions. Three, if I may. Maybe a follow-up question on the vial opportunity for COVID-19 vaccines. Do you get the impression from discussions you have with vaccine manufacturers that eventually, COVID-19 vaccines might also be something which has to be applied also in, let's say, regular terms with time intervals of a few years, so that this opportunity will not end in 2022? My second question is on the Elite glass vials. How big do you see your revenue opportunity there, and for what product in particular, just to get a sense of how important this product line could become for Gerresheimer?
My last question would be on the new development deals you once saw at Gerresheimer Advanced Technologies. If I recall that right, you targeted one to two new deals every year, development deals. Is that something you would still see, or how should we think about this? Thank you.
That goes in my direction.
Yes.
Yeah. The question with the regular vaccination is a very relevant one. It's difficult for me to answer, but yes, we see more and more indications in the market that a single vaccination probably will not bring sustainable results. We are looking into this. I do not know whether it's 2x , 4x , or maybe annual, like you do for the flu vaccination. It is clear to us, we are ready to help. If you need a more regular, if it comes 2x, 3x , it will most likely still be in vials. If it comes really regular, that is something we are looking into, because that would then mean it will steadily transfer from vials into syringes.
That, of course, if you just imagine that there is a world market demand of 1 billion or 1.5 billion more syringes, that is something that takes time, at least two, three years before the capacity worldwide are built up. We are definitely looking into this because 1.5 billion more syringes is almost 50% more of the worldwide capacity that is existing today. That would also for us mean I would have to add 50% to my capacity to only maintain my market share, which I definitely want.
We are at the moment definitely looking into opportunities to expand our syringe capacity, by the way, not only in Europe, but also we would look into other regions like NAFTA region or also in Asia here, most likely China. Elite glass, also a perfect question. Thank you for that. It's almost as I would have asked you to ask this. The Elite glass is a significant improvement of the total cost of ownership within the production process of our customers. Yes, the Gx Elite glass is more expensive, but it's much smaller in the tolerances. It's significantly harder, so higher in the resistance. The total cost of ownership of the customers are especially lower because they can run their line significantly higher. We are now starting the first deliveries in the Q4 with the first customer.
For us, this is strategically extremely important because the results of this customer will prove the efficiency of the Gx Elite glass and then show the potential of the market. I clearly see quite some significant potential in the Gx Elite glass in the next years to come, definitely. It is difficult to tell you how much. The last question was.
On Advanced Technologies.
Advanced Technologies. Here, you should not limit the Advanced Technologies story into pump only. We have the SQ Innovation that I can talk about. We are in discussion with one or other player, and you will understand, I will definitely then can't disclose here who this is, but we are in discussion with various other customers. The story of Advanced Technologies is significantly bigger than only the pump. You have to see what happened in the Sensile that we once acquired in the last two years. We have now built Advanced Technologies. We have hired new capabilities, new players, and are working on what I call one of the future growth areas of our Gerresheimer, which is smart devices. It's not only necessarily the pump.
We shouldn't forget we acquired the small company Respimetrix with the inhaler, but we are also looking into further other devices. I can't go into too much detail. We might show you something on the Capital Market Day, but I can't go into too much detail. Our vision very clearly is that Gerresheimer is supplier of a broad portfolio of different smart devices, whether it's a pen inhaler or an injector pump, and this all will be developed with an advanced technology. That's we are working on. That's not just hope and pray only. No doubt, we are also in discussion with one or other customer. That's music for the next years.
Okay. We should expect more news flow to come here on the partnering front.
I mean what I told you. I clearly see that this advanced technology will be a strong further leg, whatever you'd want to translate it into. My English may not be good enough for this, for Gerresheimer in the future.
Okay. Thank you.
Now we have Christoph Gretler, Credit Suisse.
Thank you. Good afternoon, Dietmar, Bernd. Thanks for taking the question. Actually, two. The first relates to the midterm guidance. Can you just remind me, when you said that in terms of growth guidance, this mid-single digits. We didn't know about this COVID vaccine opportunity. Now basically if I just look at this EUR 800 million, at EUR 0.05, I get to EUR 40 million, which is now something like 2%-3% top line growth. Is this now kind of on top of this midterm guidance or how should I think about that? The second question actually also relates to, by chance, to this COVID topic. Could you elaborate how these contracts work actually with these vaccine companies? Especially what type of risk you're taking on, because none of them is now kind of approved.
There is still a lot of regulatory risk as we learned overnight from J&J, for example. I was just wondering, is there any chance you can get upfront payments, for example, as a reservation fee? I guess now you have to, if they have some orders, now you have to set aside some capacities and then while you're unsure whether it's called up. Thank you for any thoughts.
Maybe just as I take over the first one, Christoph, regarding the midterm guidance. We have a broader range of between 3% and 7% for our mid, how we call it, mid-single digit growth. This is our midterm guidance for our revenue growth. This is one topic. The other thing is that we go on the Capital Markets Day, elaborate a little bit more on it and being more precisely on what does it mean and translates to. Regarding the COVID-19, how does it work? Actually, we have EUR 30 million, EUR 35 million, maybe EUR 40 million additional revenues because of COVID-19. However, it's basically spread over 24 months. It comes not in one moment or one year, but it's really spread actually over three years.
You have it now a little bit in Q4, you have it in 2021, and you have it in 2022. Therefore it comes not on top, from today's perspective. Let's look at our capital markets day when we have also our budget ready, and when we can present the outcome of it. That's where we stand as of today. Mid-single digit growth, including COVID-19, with a range of 3%-7% and the spread of the COVID-positive COVID effects over basically three years, if you want so. 2020 a little bit, 2021 and 2022.
Okay. Got that. Thank you.
You should probably have felt meanwhile that this team that we have on the management is not satisfied long-term with single-digit. We will present it to you as soon as we have found the solutions. Coming back to your second question.
I'm hopeful as well, so.
The second question is an important question. It's tricky because the prepayments you were mentioning or the pre-reservation payments, they don't come for free and they carry a certain risk, and that's one of the reasons why I'm not overly motivated to go in this direction. Why? We do today not 100% know who are the real winners of this vaccination race. I get a prepayment of one of the players, I fix my whole volume or a certain part of the capacity volume on this player. Let's assume this guy is not the winner. I have a reserved prepaid portion I can't sell. The other customers with the worldwide demand are hungry to get this, and I can't sell it. That's why I rather keep this neutral here. I'm convinced that the worldwide demand is coming.
We are one of the players that can satisfy the worldwide demand, and it might sound a bit brutal for you, but if I don't sell it to winner A because he's not winning, I sell it to B or to C. That's the strategy that we are following at the moment.
Do you also, like kind of the airlines, kind of oversell your capacity because you know that it is unlikely that all of them will be successful. Is this not a strategy you would consider? I guess, given, as you say, there is very limited capacity in the market.
Yeah, but-
We're not doing it like airplanes, yeah.
Yeah. We don't.
You don't get in. No.
Wait a second. Let me. I have to do this like this, yeah. The point is, this is not a game. You have quite some responsibility on your shoulder. We are not talking some demand of one customer that comes up. We are talking about a demand of our customers that are our regular customers in the daily business, and they are our customers long-term, not only for COVID. It's not a game where you mess up and you play the rules. One of your colleagues asked me, "Can you now squeeze out a lot of high prices for these vials?" It's nothing you would do, because it's not the behavior that Gerresheimer shows in a long-term partnership.
Yeah. I didn't mean to imply that, for sure. It's a very challenging situation for the whole industry, given that these various variables and uncertainties. You basically have to commit capital all upfront. Thank you for taking the questions.
Are there any further questions? We have a follow-up from Scott Bardo. Please go ahead, Scott. We actually can't hear you.
Beg your pardon. Sorry, I was on mute. Thanks. Just a couple of technical questions, please. Bernd, can you help us understand how much revenue you have lost in your glass business this year as a result of the fires and the damages and the warehouse issues, and what have you? Whether all of those issues are resolved and present a similar magnitude tailwind in 2021. If you could quantify that would be helpful. Of course, on a similar topic, you have this Argentinian disposal in your plastics business. Could you give us some sense of what that is in terms of absolute magnitude? Are you planning any further disposals which could act as a sort of a drag to revenues in the near term? Thank you.
Thanks, Scott. Just for clarification, the insurance compensation which we get, we talk about insurance compensation for the U.S. furnace leakage, which we had in Q3 2019. Actually, you can say that each month, that is really remarkable because we don't make a big fuss out of it. Each month because of this leakage from 2019, we are losing $1 million, we get compensated by $700,000. That's basically the ballpark. This you can multiply with 12, you have the yearly number, this will last also in December and January. We should also get this kind of compensation for the lost business. This is as far as the furnace leakage is concerned. On top, you have one part is the business leakage. The other part is that we have to repair our furnace as well.
For the repair of the furnace, the permanent repair I have to say, it is also now in the Q3 , we have around, let's say, EUR 2 million, which we got for the permanent repair and a part of this is linked to damages. It is all damages. It is expenses like demolition, which is basically recovered. The other part is the CapEx for the permanent repair of the furnace, actually. If you look how this will develop, also in Q4, we expect that for the U.S., we should get for the business interruption some compensation and also for the damages caused by the permanent repair. Again, for the Q1 2021, we should also get $1 million to $2 million in addition in US dollar for the compensation for that.
How this will develop, this business, we have to look at it. In the end, this is the coverage for our insurance compensation. It can only get better, the business over there, and we expect to get back to normal during the course of the next year, as far as the consequences of this furnace leakage are concerned. That's the perspective of the insurance compensation and our furnace leakage. The other question was linked to the question, as we sold Argentina last year. It was basically in Q4 last year. This is the year to date, you can expect EUR 2 million. It's basically EUR 2 million revenues for the full year. It's really not so significant. It's EUR 2 million revenues. Basically, the reason for selling it, you see it in the EBITDA number, is basically zero.
What we lost in terms of EBITDA, it's EUR 100,000 or something. Now talking about what we could expect to sell also in 2021, we have nothing on the radar screen to sell. What we do is we look at assets which have no revenues. For example, real estate, which are not used, heritage from the past of Gerresheimer, but it's really minor in nature, which have generated no revenues and are not relevant for our business, which we will be just making clean up. Apart from this, there will be no asset sales in our company for 2021, at least not in our plan.
Okay. Very good. Thanks so much, guys.
As there are no further questions, we would like to thank you for joining us today. We already talked about our CMD taking place on December 8th, but please also note that we are going to publish our annual results on February 18, 2021. All the best and stay safe.
Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.