Earnings Call: Q2 2019

Jul 11, 2019

The conference is now being recorded. Welcome to the conference call regarding the publication of Gerasimer AG's Q2 Results 2019. At the moment, all participants have been placed Now I hand over to Mr. Severine Compe, Corporate Senior Director, Investor Relations at Gammatheim AG. Good afternoon, everyone. Thank you very much for joining us to review our Q2 2019. With me today are Dietmar Simpson, our CEO and Doctor. Bernd 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 at girdersheimer.com/investor relations. 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 the records for the purpose of this conference call. Our agenda today starts with the presentation from Dietmar. So I'm now handing over to Dietmar. Yes. Thank you, Severin, and good afternoon, ladies and gentlemen, or good morning to those joining us from the U. S. Yes, welcome again also from my side to our Q2 2019 conference call. With me today and for the first time as CFO of Gerassemble is Bernd Metzner, who sits on my left side here, which you can't see, who will cover the financials in a moment. I'm very pleased that Bernd could join us mid May, actually earlier than planned. With Bernd joining the management board. The board is now complete, and this is good. I'm very confident that the 3 of us, Lucas, Bernd and myself, we've built a very committed team to contribute to Gerasama long term growth strategy and also our success, which is hand in hand. Regarding the past quarter in a nutshell. In a nutshell, we delivered another good performance in the second quarter and overall also good first half of twenty nineteen. The dynamic in the company remains very high. We are executing our CapEx plan as planned, setting the pace for our future growth. Regarding our top line and profitability, we are, by the way, now on Page number 4. The revenues, they grew by 7.2% to EUR 356,000,000 The adjusted EBITDA stood operationally at €74,200,000 on top come €26,200,000 for additional income, which adds in the end to EUR 100,400,000 overall for the 2nd quarter. The EUR 26,000,000 are related to milestone payments. As you might remember, the Sensile acquisition deal foresees payments to the former owners in several tranches, so called milestone payments. These milestones are linked to specific criteria, which are strictly defined project by project in the purchase agreement. In case of deviation from these achievements, we are not paying parts of the tranches or not paying them in full. And this is quite helpful at present. This also helps this year on the adjusted EBITDA leverage, which decreases to 2.3x as of May 31 this year. Interesting is the point if I bring your focus to the adjusted net income performance. We generated a significant earning improvement coming from the operations, 43% from €23,100,000 to €33,100,000 which demonstrates the real earning potential of Gerasheimer. Bernd will detail later how we derive this figure. Looking to the rest of the year 2019 and also looking into the following years, we confirm our guidance and expectations. Let's look at the external environment. We continue to see a good market environment overall with some regional differences. As mentioned to some of you during the past roadshows, we have a high dynamic in Europe. As a matter of fact, in European businesses like glass or syringes, we could sell. We could even sell more if we were not constrained by the capacity at the moment. We also saw good demands from the emerging markets like Brazil in plastic packaging or also in India for both glass and plastics. In the U. S, the overall business trend is good. We experienced actually softer demand in the glass business, which is not a market trend, but essentially due to specific operational issues at 1 of our top customers where we, interesting wise, have a very high market share. This happens at a point in time where we are really strong in our quality performance and have a fantastic reputation. We expect that this customer will need several more months to go back to normal production volumes. As a consequence, we expect this impact to last throughout the whole year and expect this to impact the next month as well. As in the Q1, we have some minor impact from translation tailwinds, which is also helpful, and I take it as it comes. As mentioned, the dynamic in the company is very high. Operational business performance in 2nd quarter was good. Looking at revenues in plastic and devices, they were up by 4.4%. Due to the strong growth in plastic packaging, especially in the emerging markets or in tooling sales and a strong growth also in syringes. In Primary Package and Glass, revenues were up by 6% here, especially led by Europe, both pharma and cosmetics as well as in the emerging markets. As mentioned, we continue to execute our CapEx plan. I will elaborate on more details, but we are on track. A few examples. The planned furnace overhaul in Essen in the 3rd Q4, where we not rebuild furnace, but also increase the capacity and bring the production process to the next level of automation. The ramp up of our plant in Annapolis, Brazil, which we are expecting we're extending significantly or the facility, the production flow, we are extending significantly. It's even ahead of plan, which is very helpful. Extension of Forosketum for the future inhaler project, I think we spoke several times about this. And in Bunde for the 2 new ready to fill lines as well as installation of syringe forming machines from the next state of the art generations. If you now move over to Page number 5, The title is Strong Dynamic at Senxile Medical, and it's absolutely the case. As the title of the slide points out, there's a lot of things going on at present at Sensile, in particular, when we look at the news flow in the last 10 days. Ever Pharma, our customer for the Parkinson project, has now, I must say, finally officially launched. I quote from their press release dated July 1, an innovative patient friendly subcontinuous pump for Parkinson disease. Ever Pharma branded the pump D MIND pump. We are very happy that Ever has now officially announced the successful market launch. The pump has already been commercialized in several countries, and I am happy that I can now officially talk about this interesting project. As you see from the picture on the slide, it is a belt worn solution, comes in a package with all necessary equipment like refilling station and so on. The ease of handling, safety and intuitive use were the primarily goals for the D MINE pump development. The device is conveniently compact and easy to use. It leverages Sensile high precisely or highly precise micro rotary pump technology, minimal buttons, which is only 1 and the bespoke menu screen interface. It also features automatic dragfilling, multiple languages, data storages and does not require complex flow rate calculations. We are very proud of this project as it really helps the patient in their daily lives. This is the 1st pump that is officially in the field and an important proof of concept for the various therapeutic areas our MicroPump technology is suitable for. We are equally thrilled to announce a new partnership with SQ Innovation for the development and combination of new drug device combination for treatment of patients with heart failures. You might remember from the roadshows when I several times spoke about that we are in deep negotiations with a project that might be able to replace the loss of the SJ Farmer project. Heart failure treatment might sound familiar to you. Here I can redirect you to the press release issued by SQ Innovation a couple of days ago, whose CEO, Peter Muttendam, one of a group of experts having led major developments on heart failure treatment for the last 10 years. On July 8, Legant Pharmaceuticals and SQ Innovations have announced the 2 companies have entered into a long term exclusive commercial license and supply agreement for high concentration furosemide formulations. Gerasimer SenCell Medical has been selected as partner for the drug delivery platform, which will be a 3 milliliter SenCell pump. We've actually been approached by the company a few days after it became public that ST Pharma has canceled their exclusive negotiations for their solutions with Garesheimer. This opened the opportunity for them to work with us. The great innovation and unique selling point we see in this project is that the solution of SQ Innovation enables a high concentration of furosemide to be delivered in a 3 milliliter standard cartridge. It fits into a widely developed 3 milliliter standard sensor pump that we are using for other projects. The device significantly facilitates the handling and creates cost effective treatment options in numerous therapeutic areas, among them treatment of heart failure. This is so to speak a successful outcome of our modular toolbox application approach. We are very confident that this project will become significant and profitable once it reaches the commercial phase after regulatory approvals. According to our plan, we are continuing to prepare for operational readiness in our medical system plant in Freund, Germany. According to the purchase agreement, we have paid the milestone related to the Parkinson project on the 1st July. As said earlier, we have also we are also reducing the purchase price for Sensal by €26,200,000 For the Sanofi project, we expect to pay or the payment to become due before end of the year 2019. Let's move on to the core business, so to speak, and the CapEx projects. So this is Slide 6. The execution of our planned investment is fully ongoing, generates a high dynamic and prepares for our future. Most of our investments are directly linked to growth projects and to customer demand or will drive productivity improvements in the short term. We have decided to expand our capacity in a number of sales worldwide for a number of reasons. First, to meet of course, to meet the increasing demand. For example, in refillable syringes or cosmetic glass decoration capabilities. In order to further deploy our global footprint as it is key for increasing share of wallet at existing customers and expand customer footprint, for example, in the emerging markets or simply because we will need to host new businesses secured by booked orders in the near future. The example is always this new inhalation process, for example, inhalation business in Horske Kun. At the same time, we see the rationale for driving upgrades in our production equipment to drive process optimization and productivity improvements through automation and standardization, but also to set the foundation of our long term competitiveness. For example, with the new low cost location North Macedonia, this generates both additional capacity and production space as well as the necessary competitive cost structure. During the call for the Q1, I talked about our plant in North Macedonia. The topic we have chosen to highlight this time is the syringe business. So if you turn over to Page number 7. A lot of things are actually going on in the business segment of syringes. Very dynamic in this business unit and also in our plant in Boendale, and this is quite exciting. The ready to fill syringes, corresponding to the picture on the top left side, we will expand our facility with 2 more lines for ready to fill 5 and also the ready to fill 6 line. The RTF or ready to fill 5 and 6 will significantly boost our competitiveness in terms of quality and efficiency. The capacity for prefilled syringes will increase by around 35 until 2022. And this will help us to clearly serve the strong demands we see in Europe. The business potential for syringes are not just about large ready to fill volumes. We also see a clear and strong potential for biotech and biosimilar drugs, smaller volumes but stronger margins. It's good business. Alzheimer is able to offer innovative solutions with a broad product range, such as our Innosave safety devices, but also in terms of materials such as clear jet syringe made of COP or cyclic olefin polymer. Additionally, we have the right production set up for these products as the batch sizes are lower than traditional ready to fill syringes. Our small batch production for syringes in Wackerstorf gives us the necessary flexibility in that regard. What I also what is also relevant, especially for smaller biotech customers, which are relatively new in the business and do not always have a lot of experience in drug filing and packaging. We and Gerasemma have all the know how in house to help them and support them through application for regulatory approvals. Process Now how is another core competence in Gerasama. The in house core competence for these processes translate into absolute state of the art production lines and makes us very, very competitive. The next generation of syringe forming lines enables us to produce with lower tuck times and at highest quality standards. For example, through a laser cut technology as opposed to a traditional flame cut, more efficient and more suited to particle free syringe bodies. And of course, we are driving automation in a 4.0 industry environment, which enables us to increase the output quantity and be highly efficient. So all in all, across all syringe end markets, from heparin to biotech, we are preparing ourselves for growth and efficiencies. With this deep dive syringe topic, I would like to conclude my review part for the Q2 and now handing over to Bernd for more details on the financials. Thank you. Yes. Many thanks, Dietmar, and welcome from my side as well. Before I start digging into the financials, allow me a personal remark. As Dietmar mentioned, I joined a couple of weeks ago. What do I bring to the table? Since almost 15 years, I'm active as CFO in various industries and ownership structures. Lately, I was CFO at the listed Gross Storey Sturer and before that, CFO of the pharmaceutical division of the aspirin company Bayer. So this feels like coming home here at Gareseimer. Entrepreneurial environment close to pharma and active on a worldwide basis. I'm really glad to bring my financial expertise and industry experience to the management team and the company. I'm only a few weeks on board, but I took also time prior to joining to prepare a smooth transition with Dietmar and Rainer Bouchon, my predecessor. My initial expectations got exceeded. We have a strong existing positioning based on high quality products, customer relationship and talent. And I see still with a fresh mind from the outside nice and significant growth opportunities in all our business segments. 1 of our focus areas will be to grasp this business opportunities and provide sustainable cash flow as well as earnings growth for the next couple of years. And yes, I'm really looking forward to meet you and start a fresh new chapter in our financial communication. With that in mind, let's look at the financial performance of the group this quarter. Let's turn to Page 9. This slide shows the aggregate P and L of the group in Q2 twenty nineteen versus Q2 twenty eighteen. It depicts, amongst others, the revenues and adjusted EBITDA performance on a currency neutral base as per guidance, and you will find the detailed bridges as we have shown them in precedent quarters in the appendix of this presentation. So as per guidance, that is excluding currency effects and excluding the revenues derived from the loss of the inhaler customer in Q2 2018, revenues grew by 5.8% in Q2 2019. The growth was broad based across all business units. I will detail the revenues by division in a couple of slides. And it was essentially driven by volume growth. As mentioned before by Dietmar, we had a slight currency tailwind, and overall, as reported, revenues grew by 7.2%. If we look at the adjusted EBITDA performance as per guidance, which means that we exclude currency effects as well, as for Q2 2019, the €26,200,000 linked to the de recognition of contingent purchase price liabilities related to the acquisition of Sensai Medical. And for Q2 2018, and like in previous quarters, the positive effect relating to the contribution from the loss of the inhaler customer of €5,200,000 as well as a negative effect associated to the fair value measurement of the Trivini put option of €1,100,000 so a total of €4,100,000 Then we see an improvement of this metric by close to 8% year on year from €67,900,000 in Q2 twenty eighteen to €73,200,000 in Q2 twenty nineteen. This improvement is essentially On a reported basis, including currency effects and the items described above, the adjusted EBITDA amounted to 100 €400,000 Let's look at the main items in the P and L below the adjusted EBITDA line. In Q2 2019, we had limited one off items, and they mainly relate to the closure of our costnag plant. The increase in depreciation and amortization is essentially driven by an increase in fair value amortization as a result from the acquisition of Senza Medical, which was acquired in Q3 2018. By way of comparison, Q1 stood at €37,000,000 in this line. So quarter on quarter, we did not see an increase. This positive delta on the net finance expense is linked to lower interest expenses in Q2 twenty nineteen compared with the same period last year due to the redemption of our bonds in May 2018. And then lastly, our income taxes were lower by €400,000 year on year. This is basically a result of more tax free income generated within the group during the quarter. By the way, also the derecognition of contingent purchase price liabilities in the amount of €26,200,000 recorded in other operating income are not taxable. This leads us to a reported net income of €47,100,000 in Q2 2019. As mentioned by Dietmar earlier in the presentation, if you look at the adjusted net income derived by the operational performance of the business only, then we see a very substantial increase of the adjusted net income performance. We are stripping out in our calculation simply the net income effects of the non recurring items of the measurement of the Triveni put option and the contribution from the loss inhaler contract in Q2 2018 as well as the de recognition of the contingent purchase price liabilities in Q2 twenty nineteen. This calculation shows clearly that we are able to grow earnings before non controlling interests, which are minor anyway, by €10,000,000 or 43%. The supporting FX effect is, for simplification reason, not considered, but with an amount of less than €1,000,000 negligible. This leap underpins the true earnings potential of the company. Please move with me to Slide 10 for a we are looking at the performance of the divisions during the quarter, both on a currency neutral basis as well as reported. So starting for plastic and devices. In the top left corner, we have given you the revenue growth on a constant currency basis as per guidance excluding the impact from the loss of the inhaler customer in 2018. On that base, we see a growth in Q2 twenty nineteen of 3.8% compared with Q2 2018. From a reported standpoint, that is the first graph on the left, we saw revenues increasing from €179,700,000 in Q2 2018 to €187,600,000 in Q2 twenty nineteen. The main revenue drivers for the growth in plastics and devices are as follows: 1st, the syringes business, where the growth momentum seen in Q1 continues, among others, due to the production takeoff for the Heparin contract won last year. 2nd, we also saw a good performance of the plastic packaging business during the quarter, in particular in South America. 3rd, in the U. S. Prescription business, we saw a much better performance than in Q1 with the center revenues being more or less stable to slightly up in Q2 2019 compared to Q2 2018. Overall, the revenues in our medical plastic systems, that means part sales as well as tooling revenues, were stable year on year. Tooling revenues were definitely up in the first half of twenty nineteen compared to the same period last year. But I had to learn this in my 1st weeks. Due to their nature, tooling revenues can be lumpy throughout the year, and we would expect these to be lower year on year in the second half of twenty nineteen compared to H2 twenty eighteen. On a reported basis, I have the following observations to the adjusted EBITDA of P and D. Adjusted EBITDA margin was 24.9%, basically identical to last year. In absolute terms, the adjusted EBITDA grew by over €2,000,000 Obviously, on a year on year comparison, the adjusted EBITDA of our contract manufacturing business was impacted by the loss of the inhaler customer in the amount of €5,200,000 included in Q2 2018 adjusted EBITDA. If you exclude this, the adjusted EBITDA grew by more than €5,000,000 compared to Q2 2018. The revenue mix described above leads to this improvement as we saw a greater contribution coming from syringes and plastic packaging as a whole. Additionally, we had a higher fixed cost basis in Q2 2018 compared to Q2 2019, especially as we had not started to implement the closure of the Cusnak plant. We started to execute on the closure from Q3 last year onwards and expect this to be completed in the next months. Moving on to the next box in the middle and commenting on primary packaging glass and in the same logic. On a currency neutral basis, the division continued to see a good growth in the quarter, with revenues up 3.8%. We saw reported revenues increasing from €153,000,000 in Q2 twenty eighteen to €162,000,000 in Q2 twenty nineteen. The main revenue drivers for the growth in PPG were, among others, A, a strong growth in Europe across all end markets, meaning pharma and cosmetics B, we also saw a good performance in emerging markets. As said already by Dietmar, in the U. S, there are internal operational issues within 2 plants of 1 of our customers. We expect that this customer will need a couple of months to go back to normal production volumes. On a reported basis, I have the following observations to the adjusted EBITDA of PPG. Adjusted EBITDA margin was 20% and in absolute terms decreased slightly from €36,000,000 to €32,300,000 There are 3 drivers behind the EBITDA margin development. 1st, declaration. As you remember from Dietmar's chart, in Q1, we are investing some CapEx in decoration this year because we see a lot of customer demand and in source decoration is more profitable. But we are not completely done yet. So of Q2, we had to externalize part of the work to 3rd parties with lower margin, unfortunately. 2nd, lower operating leverage in U. S. On the back of the softer demand by the before mentioned customer. 3rd, as said already, in European glass, we are at the limit of capacity utilization. This creates excess costs in the short run to try and meet this demand by encouraging over time, introducing extra shifts and so on. Q2 2019 includes revenues from the Advanced Technologies division, which are which were nil last year as Sensai Medical was not yet part of the group. Sensai posted revenues in the amount of €7,200,000 during the quarter. These were almost exclusively development revenues. Within GAT, the adjusted EBITDA development was in line with expectation given the nature of the revenues, namely development revenues in Q2 2019 at Sensai Medical. Let's move to the free cash flow review on the next slide 11. We are outlining here the free cash flow calculation as per our definition, starting with adjusted EBITDA. What you can see is that the decrease in net interest paid and taxes paid can more or less compensate the higher CapEx spend in the quarter. A few additional comments on the year on year variations. Adjusted EBITDA, I don't need to comment as I have done it 2 slides earlier. Overall, the change in networking capital development was in line with previous year. The increase in CapEx spend reflects the 2019 guidance and the step up is needed for the growth and efficiency projects. A significant improvement comes from the net interest paid. It is lower year on year on the back of the refinancing subsequent to the bond redemption in May 2018. The last bond interest payment took place in May 2018. We also see an improvement on the taxes paid year on year. In the other position, we mainly strip out the non cash effect coming from the derecognition of contingent purchase price liabilities in the amount of €26,200,000 So all in all, a free cash flow before acquisition and divestment of €3,600,000 in the quarter, which was almost €10,000,000 better than in Q2 last year. Moving on to the next slide on net debt and adjusted EBITDA leverage, slide 12. Net debt has remained broadly stable since the end of Q1, as you can see from the bridge on the top left corner. The adjusted EBITDA leverage was also lower year on year at 2.3 times. If you look at the leverage ex fee recognition, the figure is closer to 3.2 times. We expect leverage to remain low this year due to the €118,500,000 derecognition of contingent purchase price liabilities. FIBs helps, obviously, on the RCF related interest payments. Speaking of the RCF, as you can see from the maturities chart, it will expire next year and we want to refinance it this year already. We have started to explore refining strategies with our lenders and are not yet final. However, good news so far. The overall environment seems to be supportive for an agreement with better terms and conditions. On this positive note, I'm now handing back to Dietmar for the outlook. Yes. Thank you, Bernd, for these details. As mentioned several times since the beginning of the year, our clear focus is to deliver our goals for 2019 and the plan we outlined in February. We are clearly committed to our guidance for 2019. The revenue range has not changed. Our adjusted EBITDA guidance remains €295,000,000 plusminus €5,000,000 excluding the day recognition of liabilities recorded in the first half, which comes, of course, on top. The indications we have given for the years 2020 until 2022 remain unchanged and we are and are outlined on this slide. With that in mind, I am actually handing back to Severin for the Q and A session. Thank you very much so far. Thank you. Thank you very much. So the lines are now open for any questions you may have. So I see first question is from Berenberg from Scott. Please. So first question, please for Dietmar. Encouraging you mentioned a new project for Sensil Medical and that it could bridge the gap somewhat to SC Pharma, which I think you had some relatively ambitious growth expectations for. So maybe can you elaborate a little bit as to where we are in the recruitment of new business for this technology? And perhaps also qualify your comments on Sanofi, please. I wasn't sure I quite understood where we were with that program. Second question for Bernd. Just really if you could share some thoughts and feelings for cash flow optimization. I know free cash flow has improved year over year, but still is pretty low. So I wonder is there anything that you have identified outside of your scheduled CapEx reductions to optimize the cash position of the company? So they're the first two, please. And then I have one follow-up. Thank you. Sorry, Scott. It took a bit to get the questions down, but I come to the answers immediately. Let's come to the topic of Sensal first. Yes, maybe I take the most easy one. Sanofi, it's on plan. I think we are on plan. The project is running on plan. And we are still waiting for Sanofi to finally officially announce the cooperation, but we expect this. And that is also the reason why we expect these milestone payments, as I mentioned in the report, to be paid out, I would say, in fall or latest by end of the year. Quite interesting is actually the SQ Innovation project, yes? You might remember in the roadshows where I indicated we are talking about a quite relevant project that is able to clearly replace the Estee Pharma business. And the SQ innovation is very well going in this direction. No doubt, we will we are losing some time because the start of this project is not as we initially planned for SG and A Pharma in 'nineteen, 'twenty in 2020. 2019, 2020 would be that, yes, in 2020. But it's a little bit later out. But the potential of the project is at least as interesting. And as likely spoke about this, the profitability is very attractive. So it's a very, very attractive project, and we are at the moment in the finalization process. It's a bit earlier to talk about ramp ups because it's too early, but it's fully ongoing. I expect to see sales in and I have to be fuzzy here in the next 2 or 3 years. What I would like to mention is that far above the project that we once acquired with SenCell in the time of the acquisition, we, of course, are now talking several additional to several additional customers and projects, which clearly confirms that we acquired technology with the pump. And there are various treatment methods possible that are clearly possible with the pump. What you see now is that certain treatment methods where you have a drug will only be reasonable possible with a pump because you can't, for example, put patient into the hospital and put in there for 5 years on an infusion or giving an injection a couple of every couple of hours. So the pump is really supportive for certain treatment methods, and that's great. What was the last one? I'm no, I think we have this. Very good. I hope I covered your questions with this. Thank you, Lin Manuel. Scott, thanks for your question about the cash optimization ideas. Indeed, yes, I was looking my first couple of days, I was really looking simply at the cash flow statement, and I looked what we can do there with my team. And I mean looking at interest, working capital and tax is a main area of interest. And I believe that in all of these areas, we have some opportunities where we can really improve on a sustainable basis. I think working capital is a little bit more focused and disciplined as well. Basically, as you know it, yes, getting it's all about getting money earlier and paying later. And we need to have this consistently and also discuss this on the procurement side together with the suppliers and also with the customers, it's clear. But it's very much a focus driven thing, and it's really our priority also in the upcoming quarters, but also in the upcoming years because somehow you need to fund also the CapEx. That's clear. Other area where we think we have an improvement potential is also the interest. On the interest side, I just mentioned one is we have to make use of the beneficial environment where we are in. And then we have to think about also to restructure and recapitalize in the group and not have so much funding in U. S. Dollar. This is something what we want to consider, and this should help also very operationally the cash flow going forward. And then for tax, I mean, we have to look at it. We have to make use of here and there net operating losses. And I hope that we will have also that we are also getting a better PEX position going forward. But it's not as far as tax is concerned, it's not a quick win, yes? You need really a little bit more time to really have on a sustainable basis a lower tax level. So there are some opportunities, and we are really eager to tackle them. Scott? Very good. Thank you very much. I'll jump back in the queue for my follow-up. Thank you. Okay. Well, so far, it seems that we only have another person queuing for questions, which is Veronika for Goldman Sachs. So go ahead, Veronika. Yes. Good afternoon, gentlemen and Severin. Thank you for taking my questions. I also have 2, please. My first one is just on the strength that you saw in the syringes business in the Q2. It would be great to understand to what extent you feel some of that demand might have been timing related and catch up or stock building versus an underlying momentum? And sort of how we should be thinking about the opportunity for syringes for the remainder of the year? And I guess related to that, what that means for the P and D profitability for the remainder of the year? That's my first question. And then my second question is actually on the increase in the non cash item in the guidance. So the cancellation of the future liabilities related to Sensile. Apologies because I helped in a little late for the call. But can you give us a little bit of insight as to what's going on here? And to what extent this should be a source of concern for us in terms of you running into technological problems with the patch pump? Or is there something else that's going on that explains why you won't have to pay that milestone anymore? Yes. I'm happy to take the first one, then I moved the difficult one to Bernd. It's difficult. Yes, the syringes in the second quarter, no, I can calm you down here. The demand for syringes is not quarter rated. It's really strong. Honestly, Spok, I think I could sell 15% more syringes this year if I would have the capacity. And as I mentioned in the call, we are clearly setting up and increasing the capacity quite significantly. We will increase the capacity for syringes by onethree or 35%, but this will still take time until I have this capacity available. The increase will come 'twenty one and 'twenty two. So no, I don't expect that there is a drop in the demand. We clearly see a lot of potential in the syringes in general, both in these high volume syringes but also in these special syringes. Here, the technical center here, Wackerstorf, where we are building up these capabilities will clearly help us. But it will not save us this year because that will not have this capacity available in 2019, if this answers your question. And with this, I hand over to the Sensile topic. You want to take all of it? Or Or I think you can cover all of it. Thanks for the question regarding Sensile. Just to start with, as also mentioned by Dietmar before, there's no technological problems with the patch pump and the things are really moving in the right direction. You have a lot of new projects here and there and our team is really working together with the customers to bring our pump to the market. Having said, however, regarding the derecognition of liabilities and the contingent liabilities, it's, in the end of the day, the milestone definition in the contract, which was agreed in July 2018. And here, it was also part of the negotiations to simply to link milestone payments to certain conditions. And finally, if the conditions are not met, you don't need to pay. But if these are milestones, not necessarily depending on the fact when you have your commercialization of the product. If you look at our profile now, our cash profile and how much we have basically spent for Zenzai, If you look at it, so far, we have spent now €220,000,000 in cash for Zenzai. And there are still continued liabilities of only around €11,000,000 which is basically left. And we're expecting perhaps this kind of milestone payment in this Q4 2019. That is our expectation. So in this regard, from a pure cash profile, you can be quite happy. We made an evaluation in Q2 and about the projects and so on as we do it on a regular basis. And it's by far or is exceeding actually the book value which we have in our balance sheet. I hope it answers your question. I don't know, Deepa, whether you would like to add something on it. There's no I heard some I get the feeling that there's some technology doubts of the pump. And this, I can clearly wipe off the table, which is not the case, yes? I think you have to separate the milestone criteria to the projects where we are, in principle, on track, yes. Okay. And so we should not be seeing this as there is any change to your medium term expectation to the Sensile. Those are still as they had been? That is clear. With this special effect of ST Pharma as we discussed many times. That's of course has a certain impact and that's not all happiness. But the rest, I think it's clear. And the whole discussion about milestone stuff and so on will be, from my point of view, finished with the end of the year with the last payment because then it's done. And we can focus on the real business, yes. Understood. Thank you. So we have now we're going to now take the question, sorry, from Falco from Deutsche Bank. Yes, good afternoon. Thanks for taking my questions. I would have 2, please. Firstly, when do you expect the additional capacity for your cosmetics business to be up and running so that you don't have to use these 3rd parties anymore? And then secondly, as the FENSO pump for the Parkinson's drug is now on the market, could you share how the ramp up progressing and maybe even what we can expect in terms of sales this year? Yes. That was thank you, Fagre, for the questions. I can answer them relatively fast. The cosmetic business, we are fully in the ramp up of the additional capacity for decoration actually, and they are planned for being ready. And we hope to have the or we will have the capacity available in 2020, which is first half of twenty twenty. And the Parkinson small project, the Parkinson's project is a small project. It's progressing, but the sales will not save us. So we are not talking huge sales numbers. We're probably talking more or less €1,000,000 or something like this for the rest of the year. I think here, you should not focus on the sales. It's, I think, important that we have the 1st pump really in the market. And the potential of the also this pump, which is not one of our modular pumps, is still very interesting. We are discussing other projects with very interesting potential in similar solutions, but this has to come in the near future. Okay, great. Thank you. Okay. So we're going to take, I guess, the last question is from Scott, as I see no further questions yet in the system. Go ahead, Scott. Thanks very much. Yes, just firstly on the plastics and device business, pretty healthy margins this quarter considering the impact from the Kuznick plant business as well as a relatively favorable growth in tooling, which is somewhat margin dilutive. So can you talk a little bit, please, as to how margins came about to be so successful and whether that's a reasonable barometer for the full year or if there was any one off effects or so that we should be aware of? Just a little bit more discussion around that, please. Same is true on the glass business. It seems that PPG had 2 dynamic. 1, you were capacity constrained somewhat in Europe. But in the U. S, you had relatively weak capacity utilization. So can you talk a little bit about the differences in the 2 end markets, Europe and the U. S, anything you can do to alleviate some of those problems to deliver more acceptable margin in that business? Thank you. Maybe just to start with your question regarding P and D, the healthy margin. It's in the end of the day really the closing of the project of Cusnast, which basically started in Q3 2018. So you had very comparable high fixed cost in Q2 2018. And definitely, it's not an indicator for, in my view, for H2 from this perspective. It was a little bit supported also by internal restructuring project that we have ongoing, but it's really not sustainable and not an indicator for the second half of the year. We should be careful. Yes. I take the second question. Yes. Scott, you can start in our operations because, of course, with capacity constraints in Europe and some capacity free in the U. S. With the weakness of this specific customer. Of course, we also had the idea to transfer some business from Europe into the U. S. The pity is that we are working in a regulated market. And to get the release takes very long, and very, very little of the business actually could be transferred over. What helps us here, though, is that in principle, the business also in the U. S. Is running very well. So we have a lot of customers with high demands. And what hits us here is that this specific customer with the 2 plants with having operational problems that are, by the way, not related to us, they've reached some operational topics, is a customer where we have an extremely high share of wallet. And that, of course, hits us 1 on 1. There is some business out there in the market where other end customers are using this, but our share of wallet at these customers are not exactly as high. That is, of course, having a certain impact. So what we have to do here in the U. S. Is very clearly, we have to hope that they fix the operational topics soon. My hope, though, I'm not overoptimistic for the rest of the year 2019, that they will be back on full operational trend or operational performance. Understood. And last question, please, just relates to some of the expansionary investments and even perhaps some of the plant optimization that you're doing. I think you previously highlighted that given the contracts that you have secured, there is somewhat of a rush to employ staff capable of manufacturing products and also to invest quite rapidly in this expansion initiatives to deliver the contracts. Can you talk a little bit about where you are with executing this expansion ready for these new drivers? And also perhaps talk to us a little bit about the Cusnoy consolidation, how seamless that integration was with your business? How far along are we with that initiative? Thank you. Yes. That's relatively easy to answer because I stressed it, I think, during my presentation already, we are very well under plan with our expansion in general. Horoscope tune is fully on plan. If you look into Brazil, we are ahead of plan, which is very helpful. I will not go into detail, but it's very helpful. It helps us with 2, 3 months. And that would also help us in 2020. The process improvements that we are mainly doing in the glass side is also on plan. And some of the big projects which are under preparation, which is, for example, the furnace in Essen, is also well prepared. It's anyhow planned for quarter 3 and 4 and will be executed according to the plan, I think. So we are fully on plan. I'm not worried in this side. That's what I tried to say when I said the dynamic, of course, is high in the company, which does not mean that it's bad. I actually enjoyed this. The topic was Krishna closure, I think it's more or less closed. The relocation is done. We have started with the yes, with our shovels in Skopje. The Royal Sketune plant has also started. Actually, it's a little bit more. I saw videos where they're even working in the night on the floor. It's if you come from operations, of course, something you really like to see if a plant is ramped up. So all these projects are running very well, and I'm pretty satisfied. Very good. Thanks very much, Hendrik. So as there are no further questions, we would like to thank you for joining us today. The next conference call for the Q3 results will take place on 10th October. And in the meantime, if there are any questions, you can address them to Investor Relations. Thank you. Thank you.