Earnings Call: Q1 2020

Apr 9, 2020

Welcome, ladies and gentlemen, and thank you for joining us to review our Q1 results 2020. With me today virtually are Adit Mazimsen, our CEO and Doctor. Webb 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 of our website. Please note that this call is being webcast live and will be archived in 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 the records for the purpose of this conference call. Our agenda for today starts with the presentation by Dietmar Simmsen and Doctor. Bernd Metzner. After that, we will enter into a Q and A session. Now it is my pleasure to turn the call over to Dietmar Simson. Well, thank you, Jens, and good afternoon or good morning to those joining us from the U. S. And thank you for your interest in Garosama. Just in ahead of the Easter vacation. That is, for sure, a bit different this year and the other years. So welcome to our Q1 results conference call. I assume many of you are dialing in from the home offices in these exciting days and exciting times. Let's come to the Q1 2020. Quick summary upfront. Reviewing the results of our Q1, the financial results actually came in quite the at €51,000,000 We have actually seen minor impact of the COVID-nineteen on our operations in the Q1. Yes, also we had to accept extended Chinese New Year's holidays, but all our Chinese plants resumed operations 2 weeks after Chinese New Year and are since then running on schedule. Nevertheless, overall, the pandemic takes full management attention, and I really can't say that these times are boring. We manage these challenges at our 37 plants work very well. It is a great proof of the robustness of our business model, our operations and the markets we operate in. I'm very proud of how the global team is managing challenging times. Besides the fact that we keep the facilities running, we still are strongly working on the preparation of our long term course. In other words, we do not only manage the pandemic crisis. At the same times, we take care of the long term strategy and growth of our company. One example, we have taken care of the long term financing structure. We have secured a refinancing due in autumn already now, and I'm sure that Bernd, in a few minutes, will talk about this because he's pretty proud about it. Overall, we are fully on track and we confirm our growth guidance for 2020. If you look at Slide number 5, you see confirms its robustness in times of such challenges as the COVID-nineteen pandemic. We are a key supplier for pharma and health care. Our status of being part of the critical infrastructure is confirmed wherever needed. We do more than 80% of our revenues with Pharma and Healthcare plus packaging for essential products like food, hygiene and so on. Another factor that makes us resilient is our global production footprint. With 37 plants in 14 different countries, we can leverage the risk We face up to the special situation in view of the coronavirus, which is spreading worldwide. We are fully aware of our important role as a key supplier of medicines and supplies for everyday life. We at Carusama are doing everything in our power to maintain production. In our plants, we produce vital packaging for medicines, drug delivery and packaging for food, beverage and hygiene and personal care products. Millions of patients and consumers trust that they will be cared for, and we take responsibility for this. We are therefore, as a logic consequence, part of the critical infrastructure of the countries in which we operate. We face up to this responsibility and together with our dedicated employees, supply chain partners and customers, do everything in our power to ensure that our production and thus the care of patients and consumers worldwide is guaranteed. These days, we actually receive a lot of very encouraging feedback from our customers worldwide, thanking us for the perfect supply chain, the deliveries on time and in full, which they rely on. And at the end of the day, the patients out there also rely on. And I can tell you this is something, but thank you, that we see from the customers that very rarely happens under normal conditions. As mentioned, we are fully focused on 100% business continuity at all of our plans. The health of our employees is absolutely important. In recent weeks months, we have taken many precautions to ensure this. We have activated the worldwide pandemic plan at all of our sites since February already. This includes special hygiene regulations, travel and visiting restrictions, working and in contained and isolated groups that ensures that in and isolated groups that ensures that in case of some employee getting coronavirus. We do not have to close the half of the plant, but only a limited smaller group. And we work with various shift patterns and we work with various shift patterns to ensure this. All our plants are up and running. Where needed, all of them have the confirmation of the authorities that they are regarded as part of the critical infrastructure. This business continuity is not easy and takes a lot of effort, but it proves also that our operations are very well managed, that we are highly motivated and side, we take the suppliers. On the supply side, we work closely together with our supply chain chain partners. The supply chain is fully intact. There's no shortage of essential supplies such as raw material, tubing, resigns or gas and electricity. Just like us, our key suppliers are regarded as part of the critical infrastructure, and ensures also our supply. On the customer side, we see unchanged high demand for our our actually more than ever. We also see additional business opportunities coming up that are resulting from the actual situation, especially in pharma, where first customers start to prepare for higher demand, but also in other areas like food and beverage, where the the Bernd Metzner and his team have secured a refinancing that was due for end of this year already now, which is very positive. It is important that we manage the challenges and secure business continuity. Nevertheless, it is also essential to focus on our long term growth strategy at the same time. The activities around our growth story are unchanged ongoing. As described in our February meeting, we see 3 key enablers for that: the cultural mindset for growth and excellence, the investments our growth segments and, of course, new products. We confirm our guidance for 2020, and we aim for higher growth in the coming years. We are 100% dedicated to deliver our story, transforming our into the financials. Bernd, I hand over to you. Thank you, Dietmar, and welcome from my side as well. Please move with me to the next slide to discuss the financials for the Q1 2020. Despite the developing COVID-nineteen pandemic, our business showed a robust performance in Q1. Revenues in Q1 2020 came in almost on the level of Q1 2019 amounting to €304,000,000 The adjusted EBITDA declined quarter on quarter from €54,000,000 to €51,000,000 considered and already in Q4 2019 implemented and announced revenue model change of Senzai. As you know, we converted Senzai from a contract developer for Pharmaco to a revenue sharing partner of Pharmaco. With this change, we had, on the one side, a negative sales impact of €6,000,000 and a negative adjusted EBITDA impact of €5,000,000 year over year, but increased on the other side and very important the value potential of Skensyl considerably. I will come back later to this topic. Apart from this, 2 aspects need to be highlighted for Q1. 1st, operations were barely impacted by the developing COVID-nineteen pandemic. 2nd, the core business with P and D and PPG remains resilient and developed nicely. Below EBITDA, 2 further aspects in the P and L statement are worth mentioning year over year. 1st, we could reduce our net finance expenses in the amount of €2,000,000 year over year by refinancing our operations as far as possible in euro instead of U. S. Dollar. This will be a beneficial trend for next 6 months as well. 2nd, the income tax expense remained with 3,000,000 euros at the same level as previous year quarter. The tax rate in Q1 2020 is relatively high due to relatively low earnings contributions from subsidiaries in low tax jurisdictions. We anticipate that this will normalize again over the course of the financial year 2020, and we still expect a tax rate of 29% or 30% for the full year. As you can see from this slide, our core business performed robust year over year, both in terms of revenues as well as adjusted EBITDA. And our adjusted EBITDA from €34,000,000 to €31,000,000 To zoom into the analysis, the slight decline was due to a onetime phasing effect in our U. S. Business center. Background, given our established year end sales ready approach, we saw in Q1 some extraordinary customer destocking. This hurts us with a high single digit €1,000,000 number in sales and a mid single digit €1,000,000 number in EBITDA. On the other side, two good news. On the back of our strong Medical Device and Syringes business, the Plastics and Device division, excluding Centaur, grew 5% year over year organically with a slight improved adjusted EBITDA margin. 2nd, Centaur will be back on track in Q1 and Q3 and will surprise positively with a solid sales growth and higher adjusted EBITDA contribution than in Q2 twenty nineteen. Now let's move to Primary Packaging Glass. Primary Packaging Glass in Q1 continues to show another successful quarter by an organic revenue growth of 2 point 2 percent to €147,000,000 year over year. This development was driven by more or less stable and were not affected by the developing corona pandemic. The expansion in the adjusted EBITDA margin from 18% to 20% in Primary Packaging Glass was supported by our efficiency program. A few additional words on Advanced Technologies, Sensile. First, Advanced Technologies is an innovation driver by developing intelligent drug delivery in the upcoming years. Worth bearing in mind, all the potential benefits of Sensai are not included in our midterm guidance. 2nd, 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 partner of Pharmaco. 3rd, the development of our micro pump for chronic heart failure treatment with SQNOVATION is fully on track and we assume the results of our clinical trials end of Q3. Last but not least, 4th, the minus €4,000,000 adjusted EBITDA in Q1 are not representative for the rest of the year as these losses are front end loaded. We expect around minus €10,000,000 for the full year 2020. Let me now highlight the main points on the cash flow development on the next slide. Our free cash flow before M and A was with minus €78,000,000 almost €50,000,000 less than in Q1 twenty 19. The reason for this non representative but expected outlier are 2 fold. 1st, CapEx. 20, we are smoothing our phasing compared to the previous year and implementing the CapEx projects according to plan. We still plan to invest 12% of revenues in the financial year 2020. 2nd, change in working capital increased by €32,000,000 compared to Q1 2019. Some aspects. A, we are routinely building up our working capital significantly in the Q1 of a year, especially when we renew furnaces like in LoRa or in the U. S. So nothing new from this side. B, apart from this, however, we had working capital release in Q4 2019, where we reduced our working capital by almost €60,000,000 and accordingly around €24,000,000 more than with €33,000,000 in Q4 2018. This €24,000,000 carries forward into Q1 and hurt us now. See, good news. For the full year 2020, we expect to expand our working capital in line with our revenue growth. Or said differently, over the next three quarters, we will see a significant working capital release almost counterbalancing the buildup in Q1. Looking at the free cash flow before M and A in 2020, we expect to arrive at the same level of €34,000,000 as in 20 19. Let me now elaborate a bit more on the financial position of our company. As you can see, our net financial debt according to the credit agreement in force increased by €83,000,000 from 9 €32,000,000 to €1,000,000,015,000,000 The adjusted EBITDA leverage ratio calculated as net financial debt to adjusted EBITDA increased from 3.1 to 3.4 accordingly. Important note, our new revolving credit facility dated October 2019 considered our CapEx plan and increased our financial covenant from 3.5 to 3.75 financial leverage. This gives us financial flexibility in the amount of about €110,000,000 As you can see from the maturity schedule on this slide, we will have to refinance €190,000,000 promissory loan by November this year. We solved this matter already today. Please move to the next loan. 2nd, this bridge financing has a maturity of 24 months starting end of April 2020. Promissory loan to redeem our promissory loan, launch the promissory loan to redeem our promissory loan due in November 2020. The fact that we are able to agree on a bridge financing in these turbulent times is a clear sign of balance resilient business model for Capital Markets and our bank partners. With this, I'm now handing back to Dietmar. Yes. Thank you, Bernd. I know that you are very proud Chart number 17, which gives us an outlook to the 2nd quarter. So some remarks on Q2 and the businesses in detail. As you heard it from Bernd already, our plastic and device business performs very well. We expect good growth above 5%. The demand for prescription vials in the U. S. Is also very good, and we expect syringes as well to grow significantly. Primary Packaging Glass looks good, too. Pharma Glass Packaging is expected to grow well and show good growth. Cosmetic packaging is lower, especially in the are clearly visible. Especially in pharma, we see that several of our customers are preparing for an increase, especially in the areas of vaccination. This provides very interesting opportunities for us. Besides that, I think it's worth to mention the positive development of our MicroPump project with SQ Innovation. And the project is fully on track. We expect the clinical trials to start during the summer as scheduled. So the program is developing very, very promising. Switching over to Chart number 18, to the guidance. I am actually very happy that we, especially in these quite challenging times, are able to confirm our guidance and are able to stick to our plan to deliver growth for Gerassemble in 2020. We also confirm our midterm guidance. Also for the EBITDA margin, the in February already mentioned 21% goal for 20 20 and the 23% midterm. Our investment in growth projects, capacities, new products and the digitalization is essential for our growth plans, and we'll be at 12% of sales in 2020, setting the foundation for the strong growth in the coming years. Let me sum up. We have 3 clear priorities. No doubt, we have to ensure business continuity at the the for acceleration of our growth plans even further as soon as step by step the global and I'm looking forward to your questions. Thank you. I hand over to you, Mr. Primle. Thank you for your presentations. So let's enter in our Q and A session. Operator, please go ahead. And the first question is from Scott Bardo, Berenberg. Your line is now open. Please go ahead. Yes. Thanks very much for taking my questions and A few questions, please. So firstly, I'd like to explore a little bit further your dynamics and exposures within the cosmetics segment. You mentioned that you have certain exposures to perfume flacons, but other things within this portfolio. So can you please give us some sense as to the magnitude of the various components and what your order visibility is for the various different buckets within cosmetics? Just following on from this topic of cosmetics, I think we saw in the previous economic crisis 10 years ago, some quite sharp negative operational leverage in your previous multi glass business. Can you help us understand the differences in the cost flexibility that Geraschne have now to absorb any negative in cosmetics and whether you would anticipate divisional contraction in PP and G surrounding some volatility in cosmetics? Follow-up question then, I'm very pleased to see the bridge financing and also your discussion of liquidity being €110,000,000 or so. Question really relates to if things get worse than you think in some of the more volatile and unpredictable parts of your business, can you describe some of the tools you have to increase your liquidity? I think within your release, you mentioned there are various variable buckets and items that you have to potentially increase liquidity. I wonder if you could explore those in more detail for us. Thank you. Yes. Bernd, I think I'll take the first question and then leave the 3rd especially to you and the second, which I did not fully understand. So I'll leave it to you as well, Bernd. Maybe I'll pick up the first one, Scott, the cosmetic. Yes, the cosmetic business is not one business, yes? You have to differentiate a little bit in the different areas of the cosmetic. There are, of course, of the around €180,000,000, €190,000,000 in sales in cosmetic, you have €60,000,000 around €60,000,000 that are in the perfume sector. And this is the one where you see the biggest impact because you can imagine at the moment with all the shops closed, the airports closed, the sales goes down. So we expect here maybe a hit of around, let me say, some other areas, and there are other areas that are kind of only minor impacted for creams and so on within the cosmetics. We are partly compensating this by using capacities here for other products, which are more in the food and beverage areas, we can compensate certain things here. But there are also other opportunities to compensate. It's also partly compensated by the fact that we really enjoy some increased sales out of the and demands out of the pharma business. I think this through the cosmetic, I don't know whether need some more details on that. That's helpful. Thank you. Coming back to the last topic, Bernd, I hand over to you. I'm not fully it's not fully clear what the question is. I hope you understood it better than me. I tried, Scott. But it's clear. So far, we are organized that we don't think that we have a let's say, that we that all our lines are still active. And you actually asked what happens if one and the logic is, by the way, we are quite lucky one because in this time where our and perfumes are maybe under have some difficulties, we have also other opportunities. And one of them is that our competitors are actually stopping their production, and they are now in need that we're helping them out. And this is one aspect, 1 to other competitors, which I don't want to name here, which basically need also our support on this side. Having said, therefore, the likelihood that you have to shut down one line is quite limited. And also not in our base case scenario reflected. But even if this would be the case, now a little bit theoretically, if this would be the case, can you basically go a different from 10 years ago, you basically go to the government. These are, in the end, on European plants affected, if at all. And they will actually support us that you will get rid at least part of your fixed costs. And I think that we can manage this that we can that we could manage this for 2, 3 months in a way that our margin is not really affected. And we have also reserved certain buffer in our plan now, for example, energy and so on, which helps us as well to compensate for that. So we're calculating with a certain buffer in this respect, but we hope that we don't need this to make use of it because we don't want to shut down any lines and we have not yet we don't see that this is actually really needed and necessary. Things in the things in the facilities like short term work and so on. But at the moment, this does not seem to be necessary, honestly spoken. Regarding your 3rd topic, bridge financing, as indeed, we have a certain headroom now for under CHF 10,000,000. And what you should know, it's really we are talking now about scenarios which we don't see from a management because if I look now at our numbers also now in March, for example, and the forecast we are now in the middle actually of the Q2, We are really acting according to plan, and this is what we foresee and we have a positive outlook, as drama, then in the end of the day, you have a lot of bigger rooms CapEx. You have a lot of variable costs, which we have in our organization, which we simply can phase into other quarters to secure our liquidity here. And on the back of our headroom, what we have is €100 and €10,000,000 I think is really not it's from this perspective not an issue. But clearly, we are quite very close to our business operations these days, and we have a very tight financial management control in these days. That's crystal clear, Scott. That's very helpful. And maybe just the last very succinct point. So, Dietmar, how confident do you feel on paying the scheduled dividend this year? Is that very important to you? Or have you not made a you and the Board made a determination on that yet? It's better to unmute. Yes, I think we are there's no change in the plannings. Also to the AGM, it's I see a couple of companies moving them into the end of the year. We have no intention to move the AGM ahead away from the schedule, which is in June this year. And with this, we will also pay out the dividend according to plan. And the next question is from Falko Friedrichs, Deutsche Bank. Your line is now open. Please I would have three questions, please. Firstly, regarding the CapEx spend this year, do you still anticipate to spend a full 12% of sales? Or is it likely that certain investments could be pushed into next year given the current situation? And in that regard, do you still plan to have the furnace repairs this year? Then secondly, a follow-up on the cosmetics business. As these tend to be higher margin products, do you expect this to weigh on group margins temporarily? Or can you offset this by using the lines for food or pharma or other products? And then thirdly, what are you seeing in terms of business from Pfizer out of the U. S. Currently? And is that starting to meaningfully recover? Bernd, I think most of them are in my direction. Yes, coming to the CapEx, yes, we I will not guarantee that we spend all the 12%, and it's not our key target to spend as much as possible. And it might be that one or other of the CapEx is delayed. We have, for example, a machine producer in Malaysia that has some difficulties. If this comes, we will decide to postpone the CapEx into the next quarter or maybe into the next year, but we don't see absolute major deviations at present. But there's no doubt at the moment you're planning on-site, and you have to respond every week to the things that are coming up. The cosmetic business is as good margins. No doubt. I think we can compensate this. As Bernd said, yes, we are partly able to compensate the business because we are also filling our production sites here in Montmenier and also TETAW with products other products, food, for example, but also what was carefully switched off their productions. So I don't expect major impact here of on the margin in total. And the Pfizer topic is an important one. The local plants here in U. S. That were creating these problems are still causing difficulties, and the orders are not much higher. But step by step, you clearly see that we are able to compensate this with other alternative customers. And also Pfizer is increasing their demands in other areas, for example, preparation of potential vaccination periods. Okay, great. Thank you. Actually, this is yes, they are not back, but the business is not developing unfavorably. Understood. Thank you. And the next question is from Veronika Dubajova, Goldman Sachs. Your line is now open. Please go ahead. Good afternoon, gentlemen. Thank you for taking my questions. I will keep it to 3, please. My first question is just I wanted I was hoping you could elaborate a little bit on your comments around the growth acceleration as we move through the year. And I guess maybe a little bit of commentary on what you've seen in March and April so far. And then as you think about both the growth and EBITDA progression throughout the year, how should we be thinking about that cadence Q2, Q3 and Q4? If you can share some color around that, that would be very My second question is actually a follow-up to Falco's question. We are hearing anecdotally that there are some drug shortages and increased demand emerging for certain injectable drugs. Is this something that you are seeing on your end as well and that could potentially represent some positives from COVID, not just negative on the cosmetic side. And then my third the covenant at 3.75x. Any risks that you see in terms of breaching that level? Thank you. Bernd, the third one is very clearly for you, but I think we should also share the first one. I talked about the sales, you talked about the EBITDA. Yes, growth acceleration over the year, there's no revolutionary news information here. We will grow with existing customers where we are increasing our share of wallet, taking the glass, for example. We will increase partly with new products where also some of our innovation products really play now an increasing role. We are talking the Elite glass, where we've really been able to secure the first business, not in the books, but we will start delivery. Same is valid for the 1st ready to fill vials that we will ship over the loop of this year, which is good because these businesses are not are really helping us. The syringes, as we mentioned before, are really running very well, and we will probably see more of it with a higher, let me say, compliance for people that take a vaccination for flu, for example, in fall. So the demands will go up here. But also, we enter into new product into new markets and new customer groups, yes? We should not forget about the growth that we enjoy at the moment in India, for example, sample glass, where we clearly show double digit growth figures. We not forget about the plastic packaging business increases that we enjoy in both China and also in Brazil, South America. So it's a mix of everything. I think I told you in February, yes, the Q1 will not be a total surprise, but Geras Hammer will show growth from the Q2. And there's no doubt. We also look very clearly into the figures how will corona impact us, but we are now confident that the second quarter will already provide us with the necessary growth, and we are starting to grow story with the 2nd quarter. I cannot totally avoid the impacts coming from the cosmetic, and I will not talk it beautiful. There's for sure a certain €10,000,000 €15,000,000 risk in here, and I do not know how much of this we can compensate. But even if this comes, our story is still intact. And the EBITDA, do you want to say something to the EBITDA progression, Bernd? Practically, Veronika, regarding the EBITDA progression, I mean, from a margin point of view, we are more or less on the same level as previous year. But what we see is that we this is our base case. What we see is that we have also support of energy that's clear energy costs somehow. And also the West dollar helps us, at least in the reported EBITDA, if you compare this previous year. So in this sense, definitely, I'm also quite optimistic for the next couple of quarters. By the way, we have also some quite interesting products from a product mix portfolio. It looks also pretty good if you're going more into innovative products like we have specifically glass and so on. So I'm quite positive also for the rest of the year as far as our EBITDA growth acceleration is concerned. Your question regarding the debt covenants, because we increased because we increased our covenants from CHF 3.5 billion to CHF 3.75 billion, especially in light of the CapEx program what we have what we had in our mind. But apart from this, what we need to see is that we always look from a scenario point of view on our business. And if need may be, you can mobilize in our business around €50,000,000 to €75, or simply save. And therefore, if you see this, or simply safe. And therefore, if you see this package in total, we feel very confident that you will that we don't have any liquidity issue. I pick up the second question with the you had mentioned the drug shortages in injectables. The short answer is we do so far not see any short term impact of these drug shortages on the demands. Midterm, long term, you have to see that the discussion that are ongoing, for example, in the U. S. With also in Germany at the moment with a stronger localization of the production, this for sure gives us also opportunities as we if that comes if the localization is increased as a global player with our global footprint, of course, can serve our customers wherever they are in the countries where they need us, and that for sure gives us opportunities that are coming on top. And can I just ask as a sort of a quick follow-up, do you think you can already show mid single digit organic revenue growth in the second quarter? Is that your expectation right now? Absolutely. That's my clear goal. There's a small question mark with how big will the impact be in April, May for the cosmetic. Can I compensate all of this? But so far, we are on plan. Terrific. Thank you very much. The next question is from David Adlington, JPMorgan. Your line is now open. Please go ahead. Good afternoon. Thanks for taking the questions guys. Two questions from me. Firstly, just in terms of the margin benefit in PPG in the quarter, you obviously had some efficiency savings and also some energy cost savings. I don't think the latter will be sustainable given the pass through prices. I just wondered if you could give us the maybe the underlying benefit from efficiency savings of that 200 basis points or so improvements. And then secondly, just a question on stock levels at customers. During the financial crisis, we saw customers destock from about 6 months, I think, down to about 3 months from memory. I just wondered where the stock levels at customers were now and where you think stock levels might go either up or down from here in relation to the COVID outbreak? Thank you. I think I'd take both of the questions here. You can add Bernd if you it's a little bit different now. You have to understand. We usually are sitting next to each other. Now we're in home office. We don't see each other. Yes, the first point I understood you that goes in the sustainability of the margin improvements in glass. I think you saw in 2019, 12% of our sales were spent in CapEx. And we always told you some of this CapEx actually is not only spent into capacity increase but also in digitalization and efficiency improvement. And actually, these things are coming now, and we are seeing them, and they are sustainable. And I hope that they will further improve over the loop of the next months and also years because there are further investments that we will do. And the energy, of course, are also helpful at the moment. There's definitely an energy impact of some €6,000,000,000 beneficial for us at present. Yes, to the stock level, we have actually seen some customers destocking, and now we see customers upstocking again. If you look at in the plastic business, for example, it's very clear that our customers are filling their warehouses again. And you also see this in plastic in the U. S. I think you heard in the presentation the central impact where the warehouses were reduced. Now they are starting to fill them up again. So I think we are more in the level of normally filled warehouses at present, yes, to maybe a little bit in the direction of they are pretty full, yes? Just to maybe to add on the energy cost, I mean, for Q1, especially you had maybe looking at the margin here, you had maybe €1,000,000,000 in Q1 for PPG and the rest comes really from development, especially if you do have a nice track record now in PPG over the last couple of quarters, as you know. And therefore, we're very confident also for the upcoming quarters in this regard. And we have released some support here, as mentioned by Dietmar also in the next couple of quarters. Dietmar mentioned SEK 6,000,000, SEK 7,000,000. This was on a full year basis versus our original plan. But efficiency in the facilities are also obvious. Improvements are obvious. They are coming due to the investments we made into the processes. They are improving the automation, which, of course, is helpful for the cost, but also the process capabilities, which is leading to the fact that the quality first produce quality is much better and the nonconformity costs are lower, and this is definitely sustainable. Allow me one topic, David, on the destocking. In practice, in our industry, I mean, you have our customers are quite, let's say, conscious about that they have sufficient at the inventory level that they have a sufficient high inventory level. And what we experienced, as mentioned before by Dietmar, is that we are our customers are better prepared to be on the safe side and to have in a tendency because you asked about the tendency, better more than less on the inventory and increase the inventory levels. That's at least my gut feel telling me. Agreed. Thank you very The next question is from Daniel Vandolf, Commerzbank. Air France. 3, if I may. The first question is on something you said in the call. You mentioned the opportunities for your business coming from vaccination strategies against COVID-nineteen. Can you talk a bit more how exactly you plan to benefit there? And my second question would be on your vials business. How big is that overall in terms of volume working capital again. What makes you so confident that the working capital development will turn during the course of this year when everything runs according to your plan? Can you provide us a bit more color? Yes. Thank you very much. I'll start maybe, Bernd. The vaccination, it's not only COVID, yes, you have to see, but there's no doubt. We're here to see that some of our customers are preparing also for a COVID vaccination. If this comes up, it will be too less time to do it in syringes. So we have to expect clearly that this goes into vials. And we have several customers to talk very briefly about demands that are asking for several 100 of 1,000,000 of additional vials and are preparing for these capacities. You cannot just squeeze out 100 of 1,000,000 additional vials out of the market, not at Garasama and none of our competitors, but we still have solid amount of free capacity for these needs. On the midterm or long term, you have to clearly see that this will also lead to what I mentioned to a higher compliance for the normal flu vaccination in certain countries. And this will definitely also increase the demands of syringes. And we have, of course, customers preparing for this. On the long, long run, yes, for not only in the next 12 months but longer out, it might be that we have to clearly have to see the potential of countries that are deciding that they will increase the base protection of their people by demanding a certain vaccination. And this for sure will increase the need of worldwide capacity for syringes, and that is for sure interesting do not exactly provide you with a number of 1,000,000 units. But over the thumb, we have more than €100,000,000 sales in more than 100,000,000 120,000,000 sales at Vials. And it's an important part of our business, no doubt. It's both converted and molded. We have also certain amount of molded wires as well, yes? And question to the working capital. Bernd, I think I hand it over to you, yes? Yes, definitely. Daniel, in practice it's as follows. You have we built up CHF 80,000,000 in Q1. And if you want to build up your working capital according to your sales growth, you actually could assume you build up your working capital by €10,000,000 to 15 €1,000,000 And therefore, you have a data of around €70,000,000 €65,000,000 And this is something you can manage. It simply comes back to simple good working capital management. And a good testimonial is our Q4 2019, where we actually reduced our working capital by €60,000,000 So actually then you have still a stretch of €10,000,000 €15,000,000 and our organization will swallow it. Somehow we have to have a tight working capital management in the next couple of months. But based on this logic and based on this track record, should be really doable. And we a follow-up from Scott Bardo, Berenberg. Your line is now open again. Thanks very much for taking the follow asthma inhalation devices in Europe, your Kautoskutum, Czechoslovakia manufacturing facility was contingent on you having that facility up and running towards the end of this year. And I appreciate there's some disruptions to construction amid this COVID situation. But can you confirm that that facility will be up and running or that there's no need to be concerned about you fulfilling your sort of contractual obligations towards that expansionary effort? So that's first question, please. 2nd question, more of a sort of a high level topic. I think surrounding this COVID crisis, a lot of countries have been acting in a very sort of focused and potentially protectionist way. And we're hearing that in North America, for example, there will be methods and processes adopted to make sure manufacturer of certain drugs takes place in America, such that it's less reliant upon supply chains from Asia and so forth. Do you envisage a scenario where this could be a positive or negative for Gerashrama? If there is change in the supply chain of pharmaceuticals in the future? And last question, please. I understand that you have some relatively major partnerships with the in vitro diagnostics industry for your plastics business. And some in vitro diagnostic companies are seeing some sharply negative routine testing volumes for their products. But at the same side, some of those companies coming up with new serology solutions for COVID. So the question really being relates to, are you seeing any signals of any potential negative to your plastics components business for the in vitro diagnostics industry? Thank you. Yes. The first one I can answer very fast. Both the planning is for Horsovsgotun but also Skok here, where we also have a plant where we want to start production this summer, are super minor delayed, if at all. So we are more talking weeks instead of months. So in principle, we are more or less on plan, yes. No relevant deviation in this. The COVID countries have been acting in this way. I don't say that I love this, but on a political actually, this is something we love. Because as I mentioned before, with our global footprint, we can really serve our customers in the region where they want to have the products out of the region, and that gives us a competitive advantage to many of our competitor, if not all of them, yes? So this is very helpful, and this is more positive to us than negative. The diagnostic business is a good business for us. It's not very big. And if it would be bigger, I wouldn't complain. We have no negative impact so far, but no doubt diagnostics, for example, for testing in corona. But that's a bit too early to talk about. Very clear. Thanks so much indeed. And the next question is from Alexander Oppenheimer. Your line is now open. Please go ahead. Yes. Hi. Thanks a lot for taking the question. I just wanted to ask on I hear that there was a shortage of certain glass tubes in some countries, which is basically creates bottleneck for COVID testing. I was just wondering whether that's something you observe and if you have anything to do with that? As I mentioned in the presentation, the supply chain is secured. We don't see problems even though we have one of our suppliers that is in the North of Italy, but the supply chain is secured. What I meant is basically that there is a need for I know how they precisely called for certain glass tubes, which one uses in way that something that you have exposure to with your business in a way that you would then benefit or help to really alleviate this supply shortage? I think we are neutral here. For us, the supply chain is secured. And for the aspects other aspects, I think it's I can't answer, yes. Okay, understood. There are currently no further questions. And we've received a follow-up from Daniel Vandor, Konradzbank. Your line is now open. Please go ahead. Yes. Thanks a lot for taking my follow-up question. It is just a financial question on the refinancing. And can you already comment on how this will change your financial result? I know it's still a few months away, I guess. But maybe if you could give us some kind of guidance there also within in the next for the next fiscal year, that would be appreciated. Thank you. Antti, I think you have a bit of pointed if I would take this question. Thanks a lot, Deepa. Daniel, thanks for giving me this question. So in practice, what we have done here and now with this bridge is in the end of the day, should not have an impact for 2021 actually, yes, because we are planning to issue a debenture notice this year and refinancing our debenture notices due in the financing or refinancing more towards euro than to U. S. And therefore, this should give us really support. You have seen this now with $2,000,000 in Q1, where we were better than previous year. Having said, actually, this is protection what we have done now with the bridge financing, what we hope not to make use of, yes, in practice, cost us €1,000,000 or something like that. So it's really negligible if you compare this to your overall financing expenses, which are around €20,000,000 for a year like 2020. Okay. Thank you. And we have a follow-up from Feike Friedes, Deutsche Bank. Your line is now open. Please ahead. Feikel Friedrichs, your line Just one quick question. Was there any factoring of receivables in the Q1? And if yes, how much? Yes. Just to take it up, you have no we had €10,000,000 factoring in Q4 last year, and we kept this level. So you don't have any impact in the working capital on the working capital management for this effect. So we stand and still stand at the level of €10,000,000 which is And the next question is from Christoph Grete, Credit Suisse. Your line is now open. Please go ahead. Thank you, operator. Hi, good afternoon. Dietmar Bernd. So I still have actually now 3 questions left. The first is on you mentioned a few working in some plants whereby your competition is actually apparently not. Could you explain to me that? Basically, are you more or less risk averse and or basically better managed? Because, for example, I heard one of your competitors now saying that kind of, for example, in India, you can only work at 50% of capacities because of social distancing requirements? That will be my first question. I can probably do it on a sequential basis. Yes. I don't know whether it's risk at worst. Maybe we have a better setup with the opportunity to balance a little bit better the production. This means if some products fall out, we can really compensate this some others. And with footprint also in Europe with Momineer, for example, in this there's only 2 plants that are really affected, which is TETRA and Momineer, where we can balance a little bit the business back and forth, which helps us for sure to work here. To pick up the India topic, it's near definitely. It was also for us challenging to keep the production up, and there were also 2 days where we couldn't run properly. The advantage we have here in India is that we have actually the areas where the employees can live, we have them on-site or very, very close to our production plant. So we offer them living opportunities. And that, of course, gives us the opportunity that we have the workers available in the facility because the biggest problem in the India is at the moment that the people can't go to work because they are not allowed to travel even though they have permission papers with them. But there's sometimes chaotic and crazy situation in India, and that gives us, at the moment, the opportunity that we can still use. But you should not get the impact that everything is just easier. It is, at the moment, challenging to keep all keeping them up, and that is good. Yes, definitely. I mean, it's very impressive. The second question now relates to actually the transportation of your end product. I mean, we've seen kind of some of these some of the freight costs now going through the roof at the moment. I mean, first of all, are you kind of paying for freight to your end customer? Or is that already kind of taken up by your end customer? And if you're basically kind of now paying for it, is there any kind of extra cost we should expect? Or is there a certain risk there, either getting capacities or not because I guess it's going to get more costly? Yes. Also here, we benefit from our global footprint. We are actually producing in the region for the region. So there's not a lot of transport back and forth in between different countries. As such, airfreight is something that we, in principle, do not have. And I have to take this, I raised this in principle, actually do not have air freight. So that's it's mainly trucks. Trucks, we were challenged also here in India, for example, because also we had difficulties to get the trucks because the drivers couldn't drive. But this was only for a few days and it's solved now. And to your question, are we paying or is the customer paying? We have various systems in place, we do not expect any impact or relevant impact on extra cost for freight at the moment, yes. Okay. That's encouraging. And then my last question would be on new business development. Could you speak about the funnel of new projects? And basically, does this come to a stop in this environment? Or do you still have discussion with kind of now customers for new projects kind of now I guess now it's a bit more forward looking question, medium term kind of so that you can deliver on the medium term growth plans. I guess, it's important to have the discussions now. So how does this work these days? Yes. The question is interesting and I do not have a clear yes or good or bad answer. There's no doubt. Some of the customers, you have difficulties to reach them. And as such, it's difficult to discuss about new business. On the other side, we also have a lot of customers that are now better accessible than ever because they are now at the home office and if you call them, they pick up the phone. So it's I would call it more neutral, but there's no thoughts. Some of the discussions are delayed for a couple of weeks. But when we talk new business, we are talking 2022, 2023, 2024 and whether the amount back and forth will not impact us much. The success we have actually, and I've carefully mentioned this in the presentation that you will see out in the later quarter this year and also in the beginning of 2021 are obvious though. There are business wins we do with Elite Glass and ready to fill areas that are definitely what I call new innovative products, and they will help us. And it is, yes, for me, motivating and inspiring and great to see that we are able to convince our customers with new products. And if you have your new innovative product, you have to get the first customers that are really convinced, then the others will go along. And take the example of litho glass, this is really an opportunity where our customers are paying more for the product, but they also get more and they can run their production lines faster and on higher quality. So the total cost of ownership for them is lower, but it takes some time to convince. And it's great to see that we now, in end of Q3, Q4, will see the 1st customer that is switching his production to a lithograph. That's good. I'll buy it. Okay. I appreciate your comment and wish you both a nice Easter break. Thank you. Thank you. There are no further questions at this point. If there are no further questions, we would like to thank you for joining us today. Please note that we are going to publish our Q2 results for 2020 on July 14, 2020. Thank you so much, Enjoy the Easter break. Yes. Thank you for your strong interest just ahead of the Easter break.