Earnings Call: Q2 2020

Jul 14, 2020

The conference is now being recorded. Welcome to the conference call regarding the publication of Gary Heimer AG's Q2 Results 20 20. Now I hand over to Mr. Jens Philipprimne, Head of Investor Relations at Geofheimer AG. Welcome, ladies and gentlemen, and thank you for joining us to review our Q2 results 2020. With me today are Dietmar Simson, our CEO and Doctor. Ben Metzner, our CFO. As we did in the past, we are presenting a set of slides to accompany our remarks on this conference call. The interim report, the slide presentation and the press release are posted on the Investor Relations page. Please note that this call is being webcast live and will be archived on our website. Before we start, I would like to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read the disclaimer, but propose we take it as read into records for the purpose of this conference call. Our agenda today starts with a presentation by Dietmar Simson and Doctor. Bernd Metzner. After that, we will enter into Q and A session. Now it is my pleasure to turn the call over to Dietmar Simson. Yes. Thank you, Jens Filip, and good afternoon, ladies and gentlemen, also from my side. Good morning to those of you joining us from the U. S. Welcome to our Q2 results conference call. I hope everybody is healthy and doing well in those times. Today, I will give you insights in our Q2 as well as an update on our progress of implementation of our growth strategy. Bernd is sitting next to me and the smile on his face looks promising for his presentation on the financial results. Afterwards, we will talk about the following 6 months of our fiscal year 2020 and the growth perspectives after COVID-nineteen. So let's start. A key message right at the beginning, despite the COVID-nineteen challenges, the dynamic in our company is unchanged and the strategy implementation is well underway. Now in the Q2, the growth levers are bearing results. We are accomplishing growth mode. The first results are now visible. Non withstanding COVID-nineteen, we focused on our growth projects, invested in additional capacity and quality, excellence and digitalization, and we will continue to do so. Our business has proven robust. COVID-nineteen brings additional opportunities for us. Our Garasama is on a profitable and sustainable growth path. Reviewing the results of our Q2, we are on track and stick to our targets. Q2 was a growth quarter. The solid growth in our pharma segments clearly overcompensated the COVID-nineteen driven temporary headwinds we are clearly facing in certain parts of the cosmetic business. Beyond plan and delivered revenues of €363,000,000 and an adjusted EBITDA of €84,000,000 The strong cash flow, free cash flow of €45,000,000 reflects excellent earnings quality in the 2nd quarter. We feel rather comfortable with our liquidity position, strengthened by the fact that we already secured the refinancing of our promissory loan maturing in November 2020. Alongside pursuing our growth targets, we also intend to remain a reliable dividend partner. That's why it was important to us to stick to date of our Annual General Meeting, which took place on June 24. This timing and the still ongoing limitations due to the pandemic led to the fact that we decided to hold the Annual General Meeting virtually, a new experience to us, which worked out very well. It actually opens new opportunities to involve investors and shareholders in a digital way. More than 86% of the capital stock has been represented, voting in favor of all agenda items with high majority, including another year of dividend raise now up to 1 €0.20 per share. Leveraging on the chances and opportunities of the pandemic. We are clearly aware of our responsibility towards our customers and not to forget have a crucial role to ensure the pandemic successfully. All our plants are running with that, we are preparing our Gerasimer for the day after tomorrow. What starts as managing the pandemic meanwhile, also offers new opportunities despite or even because of COVID-nineteen. We see a primarily in the area of high value perfume packaging are compensated by growing pharmaceutical packaging and drug delivery devices. But we see these impacts on the cosmetic packaging as temporary, expecting recovery over the next quarters. Let me now elaborate on growth prospects we see in our vial business. It is important to underline that we support the COVID-nineteen vaccination or also medication campaigns of our customers in close cooperation. And of course, we are preparing for delivery of the needed volumes of vials, no question. The vial business is important for vaccinations. We believe a vaccine for COVID-nineteen will expand the global market by around 2,000,000,000 to 2,500,000,000 units in single or also multi dose vials over the next 2 years. We are expecting to serve at approximately 1 third of this volume. Thus, we see clear tailwind in sales for our wild business in both 2020 planned extension in 2021, we will be able to serve this worldwide demand. Beyond the short term opportunities in vials due to the COVID-nineteen, we are continuously working on solutions to further expand our product portfolio and the acceleration of the growth in our vial business. Midterm, we see significant opportunities from product vials. Our Elite Glass vials are highly break resistant, extremely durable and its high resistance to delamination offers a perfect solution for highly demanding formulations like many of the biological drugs or biosimilars. And important to mention, while improving quality. The filling line speed at our customers can be increased by up to 25%. Our Elite glass vials are available on the market and we are supplying several customers today or we are starting today. We will see meaningful sales effects in the second half of twenty twenty. With our ready to fill vials, we are expanding our value chain, taking over the washing, sterilization and packing of the vials for our customers, a portion of the value chain that fillers do not see as core. The fact that these process steps are now included into product offerings opens clear advantages to our customers, as for example, reduced investments into machinery, less manpower, safety stock or reduced process timing. Most of the biological drugs that are usually filled in smaller lot sizes are already today filled in ready to fill vials. Let's come to chart number 7, our 3 growth enablers. The 3 growth enablers, strong mindset for growth, the investment program and innovation are building the basis for accelerated growth and have of growth levers, we have implemented further initiatives and measures within our strategy progress in the Q2. The underlying target market in pharma performed very robust in the second quarter. We improved the utilization of our molded glass capacities by an optimized global production planning. We have seen further tailwind in plastic packaging due to higher demand for over the counter drugs as well as hygiene products. Looking at growth segments, I would like to point out that the focus as well as the rollout of our investment strategy is unchanged even in pandemic times. In Asia, we are ramping up 2 new facilities for plastic packaging. In India, we secured business continuity, which was intense work or still is intense work due to COVID-nineteen in the Q2. But India is becoming increasingly important for us. Our plastic packaging production currently near New Delhi is performing very well. Now we already or now we have a second plant for these products in the west of the country, where we already run 2 glass pharmaceutical packaging plants. This will enable us to better meet the large countries' growing demand for our products. Biotech is a highly promising and fast growing market. A large proportion of new drugs are biotechnology manufactured. Typically, these are parenteral medications, meaning that they must be administered by injection or infusion. The molecule structure is very sensitive and also aggressive, requiring highly specialized primary packaging and products to ensure simple, safe administration of these drugs. Our GX Biological Solution setup precisely meets the need of these special customer group. The unit brings together our know how, experts, services and product portfolio in a way that is individually tailored to biotech companies. Our products and services allow small and medium sized biotech companies to focus on their core competencies, developing new drugs. We offer consulting services on the respective product requirements during different clinical phases, support customers with regard to regulation and approval as well as provide laboratory services. We have brought all this together in a new team that is able to draw on Garrisama's resources worldwide. Our primary packaging glass looks strong, also guiding mid single digit growth. The tubular glass business is expected to show solid growth, and we estimate a recovery in our cosmetic business. Opportunities due to the COVID-nineteen are coming up, as mentioned, especially in supporting future vaccine campaigns with our products. But we have to see how much of this is really contributing already in 2020. I actually expect most of it more to be visible in 2021 or 2022. Worth mentioning in the positive development of our MicroPump project with SQ Innovation. The project is on schedule, and we hope that the clinical trials can be completed before year end. I would say it makes sense that I hand over to the Thank you, Dietmar, and welcome to everybody also from my side. As you will see on the next few slides and already mentioned by Dietmar, despite COVID-nineteen, we delivered the promised turnaround of our growth story. Now let's go into detail. Revenues in Q2 Q2 20 came in at EUR 363,000,000 from EUR357,000,000 in Q2 2019, resulting in a quarterly organic growth in our core business of +4.6%. This includes the mentioned COVID-nineteen onetime effect of about €8,000,000 in our cosmetic business. If we exclude this, the quarterly growth rate would have amounted to 7.1% and shows our real underlying performance. The numbers of our core business exclude Advanced Technologies, which is, as you know, our innovation driver and investment case with negligible sales today, but huge sales and earnings potential. Let us turn to EBITDA. Without considering €26,000,000 in connection with the derecognition of contingent purchase price components from the acquisition of Senzaile in Q2 2019, the adjusted EBITDA increased significantly from €74,000,000 to €84,000,000 organically. That means FX adjusted and without taking the approximately €2,000,000 positive effect from the first time application of EFS 16 into account, this represents an excellent growth of 6.9%. In our core business, we grew organically even 13.7%. Summarizing that, 2 aspects needs to be highlighted. 1st, we delivered on our promises and turned into COVID-nineteen. 2nd, our business is very robust and the impact of COVID-nineteen on parts of our cosmetic business, especially perfume flakants need to be seen as temporary events, we are convinced that we will get out stronger of the pandemic than as the cosmetic division has been before. Below EBITDA, two further aspects in the P and L statement are worth mentioning year over year. 1st, one off effects amount to around €5,000,000 and relate mainly to the COVID-nineteen pandemic to keep our business up and running as well as restructuring costs. 2nd, amortization declined due to the extension of useful life of Sensite's core technology. In the end, our adjusted EPS development summarizes our Q2 performance very well. 13.5% increase year over year, in other words, a strong second quarter. Let's now €47,000,000 to €56,000,000 Analyzing this, on the back of our Resurgent Centaur business, the very strong growth in Q2 has been driven by medical devices, plastic packaging and syringes. The Plastics and Devices division showed an organic revenue growth of 9% year over year, and the adjusted EBITDA margin improved to 27.9% on the back of an organic adjusted EBITDA growth of 16 0.3%. Primary Packaging Glass. Revenues remained flattish at €162,000,000 while the adjusted EBITDA increased from €32,000,000 in Q2, 2019 to 30 €8,000,000 in Q2 2020. Zooming into the analysis, the COVID-nineteen onetime hit in the cosmetic business of around €8,000,000 is masking our otherwise good performance in PPG. Without this COVID-nineteen related cosmetic kit, we would have demonstrated a good organic revenue growth of about 5%. In the end, the strength of our Mahfarma and Food and Beverage business could almost entirely compensate our temporary negative impact in our cosmetic franchise. Adjusted EBITDA growth of 8.8%. The expansion in the adjusted EBITDA margin in Primary Packaging Glass was driven by our ongoing efficiency improvements, lower energy costs and an insurance compensation of €2,000,000 in the 2nd quarter. This insurance compensation has a root cause in the furnace leakage in Chicago in Q3 2019. And worse to be highlighted, mainly compensates for lost revenues. Rule of thumb. €3,000,000 lost sales leads to €2,000,000 insurance compensation and constitutes technically other income instead of sales. A few additional words on Advanced Technologies' Sensile. 1st, Advanced Technology is an innovation driver by developing intelligent drug delivery systems in noticing, all the potential benefits of Sensile are not included in our midterm guidance or put different. Sensile is financially a very promising call option for us. 2nd, as you know, end of last year, we changed our revenue model. Instead of getting reimbursed for the development costs from PharmaCo, we prefer to get a higher portion of the revenues from our pharmaco partners instead. In other words, we evolved from a contract developer for pharmaco to a revenue sharing is on track and we enter into a new phase as explained by Dietmar. 4th, notwithstanding of the investment case, the negative adjusted EBITDA has slightly improved to minus €3,000,000 from minus €4,000,000 in Q2 2020. We expect around €5,000,000 revenues and between €10,000,000 to €15,000,000 negative adjusted EBITDA contribution for the full year 20. Let me now highlight the main points on the cash flow development on the next slide. Our free cash flow of €45,000,000 shows an excellent cash conversion and earnings quality for Gareseimer clearly outperforming Q2 twenty nineteen when the free cash flow amounted only to €3,000,000 This outperformance is mainly triggered by strong revenues and, as a consequence, a very good adjusted EBITDA number in our core business. The net working capital reduction of €23,000,000 is based on operational performance, but also got supported by additional factoring in the amount of €15,000,000 Factoring is is financially attractive for us, often requested by our customers and improves our net debt. Furthermore, we had tax refunds in Germany due to high prepayments in than 10 year old net operating losses from good old Gerasheimer times and turns them into a cash tax refund. With regards to CapEx, we have an investment program for 2020 in place, planning to invest around 12% of revenues. With about €31,000,000 CapEx spend in Q2 2020, we are implementing the CapEx projects almost according to plan. The big bulk of our investments in 2020 are yet to come and will include as well expansion CapEx to cope with the expected additional demand for vials. Let me now elaborate a bit more on the financial position of our company. We improved our leverage even in times of COVID-nineteen. As you can see, our net financial debt according to the credit agreement in force decreased by €41,000,000 to €976,000,000 The adjusted EBITDA The adjusted EBITDA leverage calculated as net debt to adjusted EBITDA decreased from 3.4 at the end of Q1 at the end of Q1 2020 to 3.2 as of end of May 2020 accordingly. Important to note, the financial covenant for our revolving credit facility stands at 3.75 financial headroom in the amount of about €175,000,000 As euros As shown in the maturity schedule on the left lower left, we will have to refinance about €190,000,000 promissory loan by November this year. The bridge loan agreement has been signed on April 22, 2020, securing repayment of the promissory loan of €190,000,000 The bridge loan agreement has a term of up to 2 years. So we are highly flexible in choosing the right refinancing window, and we have a comfortable financial headroom. The fact that we have been able to secure our repayment so easily and cost efficient in pandemic times is a clear sign of balance sheet strength, reflects our proven and resilient business model and trust in Gergenzheimer. Before I hand over now to Dietmar, we would like to thank Jens Filip for the year at the helm of our Investor Relations department. As most of you know, Jens Filip is leaving for personal reasons. Jens was doing a great job. The Board wish you all the best for your personal and professional future. Thank you, Jens, in the name of the Board of Management. Jens will be succeeded by Caroline Nadilo, who joined us a few months ago. We are very happy to have her on board, bringing in especially strong experience in banking and trading. So Carolyn, welcome in your new position. With this, I hand back to Deepak. Yes. Thank you, Bernd. I do a short summarizing of the progress made actually in the Q2. The implementation of our growth strategy is well on track. The dynamic in the company is actually very high and comprehensive projects and initiatives are executed along our journey. With this, let us take a look into the next months, especially the second half of twenty twenty. We expect our Plastics and Device division to continue its actual solid performance. We are running on schedule and expect mid single digit growth as announced. The Medical Devices as well as the syringes business are expected to contribute decisively to further growth. Our new plant in Skopje is on schedule and will start production this summer. Primary packaging glass looks strong, also guiding mid single digit growth. The tubular glass business is expected to show solid growth and we estimate a recovery in our cosmetic business as well. Opportunities due to COVID-nineteen are coming up, especially in supporting future vaccine campaigns with our products. But we have to see how much of this really contributes already in 20 20. As mentioned before, I expect most of it, Miramar, to be visible in 2021 or 2022. Worth mentioning is the positive development of our MicroPump project with end. We stick to our commitment and confirm our guidance for fiscal year 2020. We stick to our plan to deliver growth for Garisama in this year. We are 100% dedicated to deliver our story, bringing our Garisama EBITDA margin, we confirm the 21% goal for 2020 as well as the steady increase up to 23% midterm. Our investments into growth projects, capacities, new products and digitalization are essential for our growth plans and will be at some 12% of revenues in 2020. To sum it up, the fiscal year 2020 is the turning point in terms of growth, and we are on track to deliver according to our plan. We are prepared for the time after the COVID-nineteen. We take the opportunities and the learnings out of the pandemic in order to make our Gerasama even stronger and better than before. Our Gerasama long term profitable growth journey has Thank you, Dietmar and Bernd. I now hand over to the operator, and we can start with the Q and A session. Thank you. We will now begin our question and answer session. If someone is raising question, we actually can't hear anything. That's why we asked for questions. No, we're not there yet. We were just waiting for the question to be registered. So the first question is from Veronika Dubajova, Goldman Sachs. Your line is now open. Please go ahead. Good afternoon, Dietmar Bernd. Can you hear me okay? Excellent. Very good. Very good. Excellent. Thanks for taking my questions, please. I will keep it to 2. If I can start, my first question is with the kind of on the full year margin guidance. In particular, if I look at the first half performance and historically your second half margins tend to be quite much better than the first half. And of course, in the second quarter this year, you've also had the drag from the cosmetics. Just curious why you are not raising the margin guidance for the full year? Are there risks or concerns or headwinds that you see as you head into the second half? If you can help us understand your thinking on that, that would be very helpful. And then my second question is thinking about, Dietmar, your very helpful comments on the second half expectations, in particular when it comes to glass and the mid single digit growth rate. What's your degree of confidence in achieving that? And to what extent does that depend on the recovery in cosmetics versus the kind of underlying business? I guess if you can just help us understand what risks do you see to that mid single digit growth rate for glass in the second half of the year? That would be helpful. Thank you. Maybe just Veronika to take your first question regarding the margin. And in the end, it's indeed we delivered a very strong quarter in terms of EBITDA. And as you know, we beat the consensus massively on this end. And we are also positive for the margin development in the next couple of quarters. However, we never want to over premise and under deliver. And therefore, we look carefully on it again on Q3 if we see the numbers there, and then we'll make an update where we stand with our Q3 release. However, there's nothing in particular what keeps us worried as far as EBITDA is concerned. Yes. Thank you, Bernd. I'll take over the second question with the prognosis and the cosmetic, yes? Let me answer in the following way. I think take the cosmetic aside, the businesses are all very running very smoothly. That's fact. The cosmetic, will the recovery be very fast or is it a slow recovery? It's hard to predict. What we see at the moment is, 1st, positive impulses, but that does not absolutely guarantee that cosmetic will be in fully on track at the Q4 already. We believe that the guidance we gave to the market will be fulfilled. Yes, that's the point what we see, even though when we see it take some further hits in the cosmetic. Okay. That's very helpful. And if I can follow-up just on the margin comments, Bernd, that you made. Anything unusual that would have particularly flattered the margin in the Q2? I guess I'm just trying to understand if there is anything extraordinary that we should be looking at the Q2 performance with a bit of caution? Or is that just you're being cautious about the guidance, but fundamentally, the Q2 gives us a pretty good picture of where the business is headed? No, no. Basically, if you look at our second quarter, I mean, you definitely had in PPG somehow the part of €2,000,000 energy costs, maybe more or less, in this magnitude. And don't forget the insurance compensation, which we have had €2,000,000 And each quarter, we have basically a discussion with the insurance company get basically compensated from the insurance because of lost revenues. That's a little bit what you need to see in the numbers. Other than that, this is really our underlying performance in our business, and we think also that it will continue accordingly. You could expect that you will be basically, and this is what we are saying, going in line with the margin development of last year. And in this kind of magnitude, this is what we this is actually what we see as far as the EBITDA line is concerned for the next two quarters. Understood. Thanks very much. So Veronika, just want to come back to your second question regarding cosmetic, and we debated this intent, as you can imagine, the part, how we would see this. Obviously, if you look for the next 6 months, it's basically then also the back end loaded because it's clear we see that cosmetic gets better. We have the first indications, but it's the last into the Q4. And that's something what you need to see also if you see the pattern over the quarters and the performance pattern over the quarters. That's obvious. Okay. Any additional question, Veronika? No, I am all set. Thank you, guys. And the next question is from Feikel Friedrichs, Deutsche Bank. Your line is now open. Please go ahead, sir. Thank you. I would have three questions, please. Firstly, a question on the sales guidance for this year. The mid single digit sales growth, does it still relate to the whole company? Or is it excluding the Advanced Technologies segment now? Or putting it differently, is the sales guidance only achievable for the core business in your view? And then secondly, on the strong growth in your Plastics and Devices segment, was some of this growth driven by larger stocking effects that your pharma customers experienced ahead of the lockdowns? Or would you say this didn't really affect your growth very much? And then thirdly, on your CapEx needs in 2020 1, as you shift some of the investments into next year and are also ramping up capacity for glass vials, do you feel comfortable that you can stay in your 8% to 10% of revenue range that you communicated? Yes. Thank you for your questions. To the sales guidance very clearly, this is all in. If you only take the core business, that would be that would easily fulfill the guidance, but also the whole business we are planning to be within the guidance. The strong plastic and device, 2nd quarter stocking effects, yes, I was afraid actually that much more of this would be stocking. But meanwhile, we see that only a certain portion of it actually was stocking less than 30%. So actually, these businesses are running strong. Maybe 9% is really, really strong, but they are still running strong and we are positive with this. The CapEx guidance for 2021 is a bit more complicated because you have both effects. You have on the one side certain things that are delayed. So they are moving over from 2020 into 2021, which will increase the 2021 CapEx. But on the other side, we're also pulling certain things ahead. And the truth is I can't answer perfectly because we haven't finalized our plannings for the budget next year. Maybe if I could just step into what we do, and this is a normal process, we're collecting all the ideas for the next years, and we have a new strategic plan for the upcoming 4 years. And we will discuss and debate this in October, November and take a final decision where to invest into it. And before that, it's not possible to make a reasonable statement about this 8% to 10%, but this is the guidance out there and there's nothing to change because you have this totally under control because you are basically making the CapEx. And this decision will be taken then in November and communicated. And then in February, so it's our plan, in the next year or on our Capital Markets Day. Ideally, we have more positive stories for the long term guidance and that will positively impact the CapEx or in your view negatively. Okay, perfect. If I can briefly follow-up on this. Do you expect to receive certain amounts of funding from government authorities for those investments you're making for the production of vials for the vaccinations? We have actually started to stretch our fingers in that direction. But at the moment, I'm not overly positive. But maybe Bernd is so eager to get some money from this side. Maybe he can answer it better. No, if I go in need, as we have here we looked at it and we are trying now in a very structured way to look at all the areas where we could get funding from because what we see also in other competitors and so on, they get easily, it seems, easily the money. And this is something what we need also to look at definitely. But one you can be assured, we really look at it carefully and let's see what will be the outcome. But we didn't plan this. So by the way, we did not plan to get the funding from government now. Thank you. And the next question is from Scott Bardo, Berenberg. Your line is now open. Please go ahead, sir. Yes. Thanks very much for taking my questions and congratulations on the results. I'd like to focus on the COVID vial opportunity, which I think you've been describing more both in the media and with various press releases. You've been quite granular, Deepma, on an expectation for a couple of $1,000,000,000 to $2,500,000,000 additional vials surrounding any potential COVID vaccination. And I wonder if you can help us understand what is informing this decision? Is it or this view? Is it a best guess? Or are you now seeing concrete orders or expressions of will from customers? 2nd point on this, please. I just want to understand a little bit better to get a sense of perspective. I think you mentioned that you should uphold around the 30% share of this set opportunity. My understanding was that vials that you sell are only relatively cheap, a couple of euros cents or so. So that being said, if you're making say CHF 400,000,000 a year, are we talking the perspective of about a 1% incremental group growth, so 6% rather than 5%. I'm just trying to get an understanding of how meaningful this may be to the business. Last question please on this. Obviously, it's interesting that you're building out the higher value products, both ready to fill syringes and ready to fill vials. How quickly can one scale up those sorts of premium solutions such that you can confer more mix? Is there any opportunity to do that amid this COVID crisis? Thank you. Yes. Thank you, Scott for the questions. I probably just elaborate a little bit on this COVID vial potential. And if I leave some questions open, you just jump in again. The following situation is in the world this 2,200,000,000, 2,500,000,000 wires is actually a demand for the total world. Why is this actually because you might say that we need 4,500,000,000 to 5,000,000,000 vaccination shots in the end, but the most limiting factor is actually not the glass vials, it's actually the capacity of the fillers. So as the filling capacity is not so big, the customers or the potential producers of the vaccination have decided not into just single dose vials, but also multi dose vials. That resulted in this $2,000,000,000 to $2,500,000,000 additional vials. And the other aspect, you're also right, why are these Gerasimard guys coming up with a third? That is a very realistic figure because there are more or less 3 key players of that would be able to deliver these additional volumes. And according to their capacities, even with additional invest, they will serve roughly a third of these volumes. And it's not just a dream anymore because actually most of the orders are already in the books and negotiate with the customer, so it's done. Well, you're also right is that the price levels if you tell my customers they are cheap, I would appreciate this. The price level of the vials at the moment are it's up to the size, of course, in between 0.04 dollars 0.07 dollars and 0.07 dollars So you can build something in between. Leading, you are right, if it's €400,000,000 and we take a 0.04 for the while, it's 12,000,000, maybe €15,000,000 sales on top. And you can do your own math what this means to the company. That's why I say so often, it is important to take this, and I'm happy to take this business, but this is our growth story. The growth actually comes from the solid growth path we brought the company onto. The third question also is linked to this, because of course, the question how fast can you build up additional capacities for ready to fill, it's both the glass side and the investments that we've done in 2019, we're doing in 2020 and also 2021 will help us to serve this COVID-nineteen vials, but I would not invest a lot of money just for the COVID-nineteen and not use these machines anymore 2 years later. It's because we are really seeing this growth coming for both normal vials, but also for the ready to fill vials. On top of this glass forming, of course, I need the washing, sterilization and then other stuff. And here, we have started to invest. We built up capacities in would not be the capacity in this regard, but getting the sales in, which we are doing as we talk at the moment and as there's more sales, I will be able to invest more. That's very helpful, Andrew. And maybe just one quick follow-up, please. Can you communicate how many vials you're actually manufacturing today? Is that something you can share? And we noticed that the U. S. Government or the U. S. Bi Medical Advanced Research and Development Authority have awarded quite meaningful contracts, a couple of $100,000,000 to Corning for pharmaceutical grade valet glass and also $140,000,000 to another syringe manufacturer. So the underlying nature of this question is, could this crisis actually be giving fuel to nationalism and seeding potential future competitors to garage Reimer acting as some sort of negative? If you could shed some thoughts there, that would be helpful. Maybe to the first part because that's pretty easy. And we are actually producing roughly 3,000,000,000 vials a year. And the total market is, let me say, some 10 world market. And there are 2 others that are also producing roughly EUR 3,000,000,000 and then the others are smaller and minor. This increased nationalism is something we wanted to have very closely. In the end, I would not I'm not appreciating this at all, but I don't think that this will really risk the business of Garasama because we are really benefiting from our global footprint. We would today, serve Europe. We are today already producing in the region for the region, and we actually benefit from this. If you look in the last months in the COVID times, we absolutely benefited from the fact that we are producing in the region for the region. And by the way, also receive our supplies in the region for the region. We were never confronted with the fact that some airports were closed, so the airplanes were not going because we never using this kind of transport. That's very helpful. I'll jump back in the queue. Thank you. And the next question is from Alexander Harlitzen, P2A. Your line is now open. Please go ahead. Yes, thank you very much. I have 2 questions. First one on the gross margin, if you can explain the driver the main drivers behind the 4 percentage points increase. Is it more structural volume price? Or has there been any other moving parts to it? And the second one, maybe if you could add any color with regards to GX Solutions unit that tackles biotech in terms of you mentioned that you already collaborate there with companies. Any color on how many projects or on how many potential drug candidates are you collaborating on? If you could add any color around those topics would be appreciated. Just tackle your first question regarding the gross margin. In the end, you could say that it's a mixture, it's a growth between volume, price, but also product mix, especially if you compare this to Q1, for example. I mean, if Centur, especially if you look at Plastics and Devices, if Centaur had a strong quarter like you had now in Q2. You also see this in nicely in the margin development. So basically, it's a mixture. And my gut would tell me, okay, onethree is basically volume. Onethree should be basic volume as a, let's say, product mix and onethree should be priced something like this, maybe a little bit less price. But that could be that's one of the explanations for our good performance in the Q2. Yes. Then I take the next question. You have to see that the way we structured our GX Biological solution, we only do since a couple of months and the results are actually visible. It's not a total game changer immediately that you book €30,000,000 here €30,000,000 here. It's smaller amounts because most of the biological smaller companies actually are smaller lot sizes. But we are very successful. I'm very proud on this team because we have smaller contracts with completely new customers. There's 1,000,000 here and there's 2,000,000 here, which this each and every of the orders are not working as a game changer, but the total amount will, at the end, be very beneficial for the company. And we also have to see that some of these drugs might move in the direction of more blockbuster, and then we will benefit more from this. Okay, understood. Thank you very much. And then maybe just the last one on this insurance claims. You mentioned that the one in the U. S. Has U. For this question, Peter. This stems from this year, from April actually. What happens there, basically part of our inventory was basically burnt and we get a compensation for that. So from a pure brick and mortar point of view, you have to have depreciation, but being negatively impacting EBITDA by around €2,500,000 or so, and this was compensated 1 to 1 by our P and L line of the EBITDA. Thank you very much. And we have another question from Scott Bardo, Berenberg. Your line is now open again. Sorry guys. Can you hear me okay? Sorry I was on mute. Yes, thanks very much. Just a real quick one on financials for Bernd, please. Yes, so just with the one off effects that you booked in the quarter between adjusted EBITDA and EBITDA of this $4,500,000 I think you mentioned some of this was for heightened COVID related costs. I just wonder, in a sense, your methodologies for assuming whether this is operational or non operational, so to say, just a bit of more clarity there. Also on amortization, please, that's come down quite a bit, I think, sequentially. Is this €6,000,000 or so the new run rate, would you say? Perhaps some guidance there. And lastly, pleasing to see you've got your watchful eye on the tax rate. Any developments actually to structurally lower the question. Indeed, the exception were relatively high. It was €4,500,000 but it's very special in Q4. It was basically linked to the COVID-nineteen thing. We basically if you want to make sure that your plants are up and running, your 37 plants throughout the world, you give extra incentives. I mean, you know that it was also explained by Dietmar that we had business continuity first, and therefore, we also incentivized basically our workforce to work and continue working. And this kind of effect you see then also in exceptional expense for Q2. We will not repeat this going forward. We had certain restructuring elements as well included, therefore, this EUR 4,500,000,000 For the full year, I think that we will not have exceptional expenses. But in the end, you should have also finally exceptional income because there will be a lot of for example, we sold now Kristnacht side, where we got also some earnings now in Q3, which should really basically lead to a positive exceptional income for the full year 2020. If I look now in the next couple of quarters, this is as far as the exceptional items are concerned. Regarding the amortization, it's basically linked to the prolongation of our core technology at Centile as we have communicated this in our full year 2019 results, what happens there, if you look at the contract with SQNOVATION, the use of the technology is is longer than what we have anticipated by around 10 years or something like this. And this basically leads then also to a prolongation of the for the write down, if you want so, and see amortization. And indeed, this what you have seen now in Q3, should Q2 should be also the run rate for 2020 as in Q3 and Q4 as well? And then last question regarding tax rate. We think that we should come into the area of 29%, something like this for the full year. And this direction is what we're aiming for. And in the long run, Scott, so take your question, in the mid and long run, we also aspire to go to a normal tax rate of 25%, mid- to long term. Very good. Thanks so much, Ben. And there are no further questions at this point. Thank you, operator. As there are no further questions, we would like to thank you for joining us today. Please note that we are going to publish our Q3 results for 2020 on October 13. It was a great pleasure and privilege working and interacting with you in quite exciting times. Thank you for your trust, support and vital discussion we were having. All the best and speak soon. Thank you. Thank you. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.