Earnings Call: Q1 2019

Apr 11, 2019

Dear, ladies and gentlemen, welcome to the Q1 2019 Conference Call of Gerasimer AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Severin Comte, Investor Relations, who will start the meeting today. Please go ahead. Hi, everyone. Thank you very much, operator. Thank you for joining us to review our Q1 results of 2019. With me today are Dietmar Simpson, our CEO and Rainer Beaujean, 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 gelsheimer.com/investorrelations. Please note that this call is being webcast live and will also 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 for today starts with a presentation by Dietmar Simpson and Rainer Beaujon. And after that, we will enter into a Q and A session. It's now my pleasure to turn the call over to Dietmar. I start again, and it's getting better. Thank you, Severine. Good afternoon, ladies and gentlemen, and good morning to those joining us from the U. S. Welcome to our Q1 2019 conference call. With me today and actually for the last time as CFO of Geraslamer is Rainer Beaujon, who will cover the financials in a few seconds or more minutes, let it be minutes. If you look into our Q1, the short version of the message is the year has started well and we are delivering along expectations and we are executing our CapEx plan and are on track. Please move to Slide 4 for some more detailed informations because the short version is probably a bit short. So Slide 4, regarding our top line and profitability in Q1. Revenues grew by 6.3% to €308,500,000 This includes close to €7,000,000 for SENSAR, which comes on top of the Q1 2018 revenues. The adjusted EBITDA stood for €145,900,000 This is the sum of €53,600,000 from the operation plus €92,300,000 of additional income. These €92,300,000 are linked to the contingent purchase price for Sensile after the project stopped with ST Pharma. We already discussed in our year end conference that the purchasing price of SenCell Medical is reduced by this amount due to this effect. As a consequence and further positive side effect, the adjusted EBITDA leverage decreased to 2.4 times as of February 28 this year. Looking into the rest of the year 2019 and also the following years 2020 to 2022, we confirm our guidance and expectations. The 2019 adjusted EBITDA is updated with the before mentioned €92,300,000 If we bring our attention to the external environment of our business, there's not much change. It remains pretty stable at the beginning of the year. Worth to mention is probably the FX impact as we in contrary to the last year present enjoy a slight tailwind. Let's have a look at the operations. We have to switch to charts. Let's have a look into the operations. We had a very good start into the year in Primary Packaging Glass division across all businesses. We see growth in syringes even better than expected, which confirms that it's right to further focus on this business and extend our capacities. Primary plastic packaging also delivered a good quarter, especially in Brazil and Europe. 2018 since the flu season in Q1 2018 was stronger and created high demand. Nothing that worries me much as they will catch up over the year. Business with Medical Plastic Systems was slightly above prior year. Within the Advanced Technology division, this quarter we have added a new start up technology in electronic and connectivity area and are here with able to scale up our product competencies. I will talk more about this in a few minutes. All of our growth in CapEx projects are on schedule and are laying the base for our growth and profitability improvements for the coming years. More details in the following charts. During our last conference call, I said that I absolutely saw the rationale for spending 12% of sales of CapEx in year 2019 and also in 2020. Why? Because most of these investments are directly linked to growth projects and to customer demand or will drive productivity improvements in the short term. On this slide, we are providing you with an overview of main CapEx projects. And do not worry, I will not go into each and every detail of every sentence, but it shows that a lot of things are ongoing in the company at the moment. And let me pick some examples. Increasing the capacity for new business wins, especially in inhalation and syringes. Relevant projects on the slide, for example, is the extension of Horosketten, our Czech Republic facility to host the new inhaler project. As well as the new plant we are setting up in North Macedonia, I have the next chart showing more details on this specific topic. Another new facility is set up in Brazil to cover the increased capacity needs of South America. And we invest and extend our capacities with new furnace in Essen, line upgrades in various facilities as well as our decoration line capacities. Improving product mix by moving up the value chain is an important point for us. For example, you see the invest in Innosafe, safety device for syringes or sterile ready to fill products. Relevant projects on the slide you see, for example, is the 2nd ready to fill line in Mexico. Other investments we have in focus are to increase the productivity, where we've invested in further automation, standardization, also digitalization. Very relevant projects on the slide, for example, is all the automation that we are driving in the glass business. If you look at the next slide, I have more details on actually new plant facility in Skopje in North Macedonia. We very clearly need more space and capacity at competitive price and cost levels for medical plastic systems and also syringes. The new facility in Skopje will address these needs. The construction work actually begins in June. The start of production is planned for the second half of twenty twenty. We will start at the beginning with the production of medical plastic systems and later also use the plan for pre fillable syringes. Why did we choose Skopje in North Macedonia? Here we could find a good fulfillment of our requirements as good infrastructure, good cost structure, availability of well trained personnel and good support we get from the authorities. Out of the different locations we have screened for the new facility, North Macedonia offers the best opportunity. All in all, we will invest an amount of mid double digit €1,000,000 and plan to have up to 400 employees in the facility in the midterm. Another important aspect was for us, the location offers enough opportunity for further growth in the following years as we need it. With the next chart, we go over to the new technology chart. You might remember during our last conference call, we talked about our new division, Advanced Technology, and how future trends will shape our industry in the future. Digitalization and electronics will pave the way for more efficient health care systems and user convenience and compliance. The whole health ecosystem, you might call this like this, that is the patient, the pharma companies, the doctors or health care systems will require a high degree of convenience when it comes to drug delivery and most of all how to use the data and getting value out of it. With the acquisition of Sensa, we started a new division, Advanced Technology, and it was always planned to add more technology into this division step by step. When it comes to more add on, the question you have to raise is always when do you actually invest? If you start to look at the technology or company that already has contracted customers or where devices are already sold, the valuation will become very high and the price as a consequence also very high. An alternative approach is to invest at a very early stage. Here your exposure is reduced, but of course there's no guarantee that the concept transfers into real sales at the end. You might or we might need to buy a few of those assets to get your next SenCell Medical. But we should not forget that these acquisitions are bringing what these acquisitions are bringing beside the pure business opportunity. And this is an immediate effect. It brings young, fresh, open minded thinking into our organization. It brings the dynamic of a startup, a can do mentality that we so urgently need in our culture in order to win in the field of smart devices, but only spoken also in all other segments of our business. During the quarter, we have added another entity called Respir Matrix to advanced technology. It is definitely in an early stage, but highly interesting from the technology and very complementary to advanced technologies. What it does, I will describe on the next slide, but essentially we are partially funding the development on a demonstrator and the cost of clinical studies. Let's look at the next chart and I go a little bit more in detail what we just acquired. Back in February, during our earnings call, we spoke about the megatrends in the industry. Digitalization, connectivity and electronics are of increasingly relevance in the healthcare systems. Supporting user friendliness, self medication or also the correct use of the drug. The patient doctors, the pharma industry, the whole healthcare systems have a very high interest that the treatment is done correctly and also that the expected effect of the medication is reached. That requires intelligent drugs or better devices because it's significantly easier to bring the intelligence into the device, able to feel and to feedback useful information on usage. What do I talk about? Let's assume we are able to develop an intelligent mouthpiece that attached to an inhaler is able to measure the flow of the breathing. What it then allows is 2 fold. 1st, it can measure if the patient has really inhaled the medication and in the correct way. 2nd, it can also measure if there are changes in the respiratory status of the patient. In other words, an indication that the medication is working. Then of course, digitalization comes into play. The data collected has to be measured, but also transferred somewhere. The solution is digitalized via patient centric app. And then it will be of valuable input for the patients, the doctors, the insurance companies and so on to make something out of this data. This project is, as I said, in a very early stage, but we regard this as a very, very interesting field and a very strong complement for Garazima for the future. This actually includes the operational review of the quarter. I'm now handing over to Rainer for the financial details. Thank you so much. Many thanks Dietmar and good afternoon or good morning everybody from my end as well. Let's start with the top line revenue on Slide number 11. This slide shows the revenue bridge from Q1 2018 to Q1 2019 on a currency neutral basis. This is why Q1 2018 reported revenues are first adjusted to the 2019 currency assumptions to compare apples with apples. To allow a more relevant comparison, as communicated in our year end presentation, we also adjust Q1 2018 for the inhalation contract loss. In the Q1 of 2018, we still recorded €3,100,000 of revenues from this contract, which was terminated later in the year. The relevant base for our revenue commentary and our 2019 guidance on this slide is therefore €289,100,000 Year on year revenues grew accordingly by 6.3% on a currency neutral basis to €307,400,000 In Plastics and Devices, in the bottom left corner, we are giving you the revenue growth on a constant currency basis, both including and excluding the impact from the loss inhalation contract in 2018. The main revenue drivers for the growth in plastics and devices were the syringe business where we saw a good start of the year among others due to the production take off for the contract won last year. And also we saw a good performance on the plastic packaging business during the quarter. In the U. S. Prescription business, the comparison was unfavorable year on year because Centa saw a strong flu season in Q1 2018. 18. This is only temporary and our current forecast shows an uptick, especially in Q4 2019, which should compensate the negative Q1 effects. And within devices, the business grew very moderately on a like for like basis if one excludes the revenues generated with the lost inhalation contract in Q1 2018. Tooling revenues were slightly up year on year. The division Primary Packaging Glass saw a strong growth over the first quarter of this year across all its business units. Whereas injectables, cosmetics, European Pharma Glass and Emerging Markets displayed growth year on year. And finally, Q1 2019 includes revenues from the Advanced Technology division, which were nil last year as Sendai Medical was not yet part of the group. Sendai posted revenues in the amount of €6,600,000 during the quarter. These were almost exclusively development revenues. Please move with me to the next slide to review our adjusted EBITDA average. So here we apply in the same logic as in the precedent slides and look at the profitability drivers on a currency neutral basis and excluding the impact from the lost inhalation contract in Q1 2018. What we will also adjust in the 2018 base for in the next quarters of 2019 will be the one offs recorded in the course of last year with regards to the impact of the evaluation of the Tuveen E put option and the network charges. In Q1, there were no there was no impact, a zero impact. When looking at the adjusted EBITDA average, it is important to have in mind that it includes the €92,300,000 for the derecognition of liabilities. This is why as a whole, our adjusted EBITDA on a currency neutral basis amounted to €145,500,000 in Q1 2019. And on top, we already know that the dividend for the year 2019 based on our current definition of 20% to 30% of adjusted net income after non controlling interest will increase again with a reasonable amount per share. Within Plastics and Devices, the revenues mix, namely the lower contribution from center year on year was one of the main reasons for the decrease in profitability. Same for tooling, the revenues were higher year on year, but which is a lower margin business. Syringes and Primary Packaging delivered in line with expectations. If it's in devices, the profitability was stable to slightly up year on year if one excludes the EBITDA generated with the lost inhalation contract in Q1 2018. Within Primary Packaging Glass, the increase in profitability is directly linked to the higher volumes, higher capacity utilization and hence operating leverage. Within advanced technology, the adjusted EBITDA development was in line with expectation given the nature of the revenues, namely development revenues in Q1 2019 at Sensa Medical. Let's look at currency impacts on Slide number 12. With small currency tailwinds in Q1 2019, €1,100,000 at revenue levels, €400,000 at the adjusted EBITDA level. The impact on a divisional level is detailed on the slide and the figures are here as reported for both periods. As a reminder, the table on Page 105 of our annual report outlines how we have budgeted currencies for our 2019 currency neutral guidance and more generally our midterm planning. Moving on to our net income bridge. We are presenting here a net income bridge starting with Q1 2018 and showing the year on year variation of all main items that lead to the Q1 2019 adjusted net income. Starting with the adjusted EBITDA delta of €93,300,000 which is, as said before, including the recognition of liabilities linked to Senza Medical. As just said on the precedent slide, the currency tailwind here was minimal. Moving on to the other blocks in the bridge. In Q1 2019, we had limited one off items. The delta of €4,500,000 is linked to the higher amount of 1 off items in Q1 2018. The increase in amortization of a value adjustment as a result from the acquisition of Stenzyme Medical. The positive delta on the finance expenses is linked to lower interest expenses in Q1 2019 compared with the same period last year due to the redemption of our bonds in May 2018. And then lastly, in Q1 2018, we recorded a positive one off in the amount of €43,600,000 as a consequence of the U. S. Tax reform of late 2017. By the way, and to be clear, the €92,300,000 recorded in other operating income are not taxable too. These are the main items that lead to a net income of €99,300,000 for Q1 2019. On an adjusted basis, the adjusted net income after non controlling interest was higher by €51,100,000 in Q1 2019 compared with the same period last year and per share it translates into €3.48 after €1.85 last year. Moving on to net debt and the free cash flow review. On this net debt bridge, we show the contribution from operating cash flow and free cash flow. In essence, the increase in net debt since November 30, 2018 is essentially a function of a further payment related to Sendal Medical and temporarily higher net working capital during the Q1 of this year. A technical remark, the de recognition of liabilities in the amount of €93,300,000 is a non cash item. But for sure, we are paying lots less than we originally planned for Sensa. So overall, it is very cash relevant. However, it is included in our operating cash flow, as you can see on the chart according to our definition of operating cash flow. It is deducted later to calculate free cash flow. A few comments on the various items you can see on this slide. On the cash outflow resulting from the change in net working capital since November 30, 2018, it is primarily driven by an increase in inventory, which is quite typical in our Q1. 1st, to anticipate customer demand in the next quarters and second, to prepare the necessary stock ahead of a major furnace repair in Essen later this year. I think CapEx is pretty self explanatory. Out of the total of €70,000,000 of cash outflow included in other on the bridge, the main positions are taxes, pensions and interest expense. Regarding Sensile, as confirmed during our last conference call, we have now paid a further €25,000,000 in December of 2018 and therefore during our Q1. As a whole, net debt increased by €53,000,000 since November 28, 2018. Moving on to the next slide on our capital structure. Most relevant commentary on the slide is a decrease of the adjusted EBITDA leverage as a function of the high adjusted EBITDA in Q1 2019. We expect leverage to remain low this year due to the €92,300,000 which will be part of our covenant calculation for the next 12 months means including Q1 2020. This helps on the revolving credit facility related interest payments. A final remark from my end, as Dietmar pointed out, it is my last conference call in Gerasimer, and I would like to take the opportunity to thank all our investors and analysts for the regular and open dialogue for these more than 6 years. Some of you might know, I'm moving to Prouzim Zatt 1 as CFO in a couple of months. I'm looking forward to meeting some of you again in the future and wish Dietmar and the rest of the Gerassemble team lots of success for the future. I'm now handing back to Dietmar for the conclusion and outlook. Yes. Thank you, Rainer. And back to me. As said at the outset of the call, our focus is to deliver on 2019 on the plan we outlined in the February. We are fully committed and confirm our guidance for 2019. The revenue range has not changed. We have updated the adjusted EBITDA guidance for the year and take into account the many time mentioned €92,300,000 from the recognition of liabilities recorded in the Q1. The indication we have given for the year 2022 remain unchanged and are outlined on this slide. Actually, I'm confident into 2019 and also into the guidance for the following years. With that in mind, I'm handing back to Severin for the Q and A sessions. Thank you so much. Thank you very much. So we're going to now enter in our Q and A session and the line are now open for any questions you might have. And in case you want to cancel your questions, we're going to press you have to press 2. So we're going to just pause for a few seconds, and we're going to go back to the line for Q and A. So we're going to take the first question from Falko Friedrich from Deutsche Bank. 3, please. Firstly, can you provide an update on the Sensi Medical pipeline projects and especially how the project with Sanofi is progressing? Secondly, on the recipe metrics investment, could you tell us more about the development timelines, meaning when could the product be ready for a market launch? And then thirdly, the primary packaging glass business has posted very strong growth now for a few quarters, certainly above the levels we used to for this business. Can you tell us how much of this growth in Q1 was still related to a market rebound or if this is actually an organic growth level that could be sustainable? Sorry, it took me a second to push the button. I think these questions are all to me, Rainer. Yes, the first one, Sensaol, I think it's a quite relevant one. I think and it's a good one because one of the key projects that we're working on at the moment is, of course, Sanofi. And this project looks very good. I think Sanofi confirmed the relevance of the project in 6 weeks ago at 1 of the was it Diabetis, not sure, maybe not the right thing, but a big meeting with all key players. And they made a press release where they spoke about this pump, the future on the cooperation of Sanofi, Gerasheimer and also Google that was involved there. I think the project is now fully on plan. I cannot say too much about the start of the production because this is something that has to come from Sanofi. But I think all this project looks very nice and good. And I think I'm very optimistic about this one. Further projects within Sensile are in strong discussion at the moment. I think it's too early to disclose to talk about them, especially the ones that were not in the pipeline when we acquired Sensa. But there are a couple of very interesting projects we are actually discussing at the moment. Yes, Respir Matrix, I think as I mentioned, it's an early stage. The technology is really, really cool. We really see a lot of opportunity in there. I think it's too early to really talk about when we can expect the product launch because I think we have to transfer this technology into a product first. And I think we have to wait for the next 12, 18 months to be able to talk about this next step. Yes, glass, strong growth. I think I spoke about this in the during the roadshows. Very clearly, we will bring glass back on a growth track. A lot of work has been done during 2018 already by Doctor. Burkhard, the Board member for responsible for this area. And I think it's the clear plan to further keep the momentum into glass and grow further into the next years. And I don't see any reason why we wouldn't be able to do so. A lot of the CapEx you see is going into the glass facilities. It's not only all increase of capacity. It's very clearly also the transfer of the capabilities of the lines to be competitive also for the next years. We're talking improvement of the capabilities of the lines, which in the end is also quality, but we are talking automation that leads to higher productivity, better cost structure and better competitiveness. I hope this answers your questions. Yes. Thanks a lot. Okay. So as far I can see, in the next we're going to take the next question from Scott Bardo from Berenberg. So just like to follow on, please, on the Glass division. Yes, we've seen some nicer growth off of a relatively weak base. And you're calling out North America as being strong. That seems a little bit contrary to some of the commentary from Pfizer, which I think is still somewhat capacity constrained at the McPherson sites, which I know you'd have called out as being, if you like, an impact in the past. So I wonder actually, are you expecting are we now at a more normalized level? Are you expecting some potential volatility from big customer demand in the North American market? Perhaps if you can just share some thoughts there. And following on, I think you mentioned in your Q1 report that one of the factors driving increased profitability in the Glass business was not just capacity utilization, but an improvement of product quality. I think, Dima, you just touched upon it there. But this wasn't something I had in my memory for a reason for poor margins in the past. So can you just talk about some of these quality issues and perhaps where we are now in resolving some of those? That would be helpful. Lastly, just with respect to the plastics business, I appreciate lots of moving parts this quarter, but the strong business at Geraschheimer has been your asthma inhalation business. I wonder if you can give us some feeling and sense given the moving parts of that business, when you expect that to return to some sort of growth dynamic? Thank you. Long questions, yes. So I take them step by step. They're all very good questions because I think we have good answers. I take them step by step. So I pick the first one. I don't think that I wanted to say that North America is so strong in growth for glass. I think the strongest growth we see in glass is not only is not America, actually it's Europe. I agree. We all know that there's one Pfizer facility that is in trouble, and that is clearly has certain impact on our sales also in the U. S, but it's clearly overcompensated by other areas. Why is this the case? I think a lot of work has been done last year already in 2018, increasing our competitiveness. And what you clearly see is that we are winning business, new business and winning market shares, especially in the areas where we have shared customers. Our share of wallets are increasing and that's what we benefit from. What you also should see, some of the growth will also come and it may be linked to the second question with a stepwise increase of our value chain, with investments that we do at the moment into ready to fill, not only syringes, but also vials. We are upgrading our products and we are generating more value to the customers by delivering of sterile, washed, ready to fill, that's the name what it says, products. And that's something where we clearly see also the opportunity to increase both sales, but also the margins. The quality issues you have to see in the following way. There's always 2 sentences I see in the qualities. The one thing is what you deliver to the customer. And here, Gerasimo is extremely strong. How can we reach this if the capability of the process is not delivering the necessary quality, we do a sorting, which has an impact on the margin. But what we need to do and that's the investments you see in the CapEx, we're improving the processes to make them better, higher feasibility and as such in the consequence improving the quality as a whole. It's not necessarily quality towards the customer, which is very good, but it's our quality cost that will go down and will improve our profitability as a whole. I hope that this concludes the second question. And the third one goes towards the asthma inhalation. And I think when does it return to growth? I think it's ongoing as we talk. We have to see that one of the big inhalers that we have in the U. S, PEACHTREE, is now transferred into real business in Europe. The big investments we do in Heroskutin in Czech Republic is exactly for this project. No doubt the lost contract here that you're talking about the TIVA contract, which was in the end the reason for closing of Kuznag, I think this is from my point of view history. We hear this a lot, but I think we overcome this very clearly. The inhalation is for us in Garasama a very, very important business segment. We are very strong in this regard and you will clearly see the growth, a significant growth in the near future in this regard. Very good. Thank you very much. I obviously like to wish Rainer all the best of success in his new role for CBN. But before I let him go, I'd just like to ask him a specific financial question, please. We've seen a lot of companies now addressing their accounts for the new IFRS 16. It doesn't seem to be something that Garo Schimer is highlighting. Can you perhaps just indicate whether you're immune to this effect or whether this is something to follow? Thank you. Yes, for sure. Leasing will have an impact on net financial debt going down. And yes, but it won't be big for us. This is not something I would be worried about. Have you got any sense or proportion of leasing business within the company to help us make some estimates? Yes, I think million impact is that what we had on based on the 30th November 2018. Okay. Thank you very much. So that means the EBITDA goes up on a certain amount, but that's the situation. So it's approximately €40,000,000 we are talking about. And when will you encapsulate these accounting changes actually? Are we waiting for the CFO to have that pleasure or when will we have that? No, it will happen from the 1st December 2019. So we're going to take the next question from Oliver Heinberg from Kepler Cheuvreux. Thank you for taking my questions. Three quick questions and one request, if I may. Firstly, in the 5th slide that you had in your presentation, you talked about this kind of major expansion projects. Can you just help me to reconcile that with the development of depreciation, which was €23,200,000,000 was actually bang in line with the Q1 'eighteen number despite this massive investments and it was even down sequentially. So was there any kind of special effect involved or how should we think about the development of the mutations going forward? Secondly, in terms of phasing of earnings growth for the full year, obviously, you just talked about the kind of termination of the TEVA contract. I think the base effect from the earnings that you still generate last year, the toughest comps will be the 2nd and the 3rd quarter. So can you just talk about how we should think about the earnings growth developing over the course of the year? And then the third question, you talked about one of the effects on the margin in Q1 was due to the kind of center business in the U. S. Was it already anticipated when you provided guidance? And you said you have good visibility for Q4 recover here. I'm a bit surprised I thought this is more kind of spontaneous or spot business. Do you already have the orders in your book for the Q4? Any color around the visibility you have here would be appreciated. And the last point, if I just may, kind of request, I find it really helpful that you give us this kind of adjustments between adjusted EBITDA and reported EBITDA, which are partly adjusting for numbers less than €1,000,000 but the bigger €93,000,000 number is actually not adjusted for. It's obviously distorting some factors like the leverage. So if you could reconsider to also adjust for these at some stage in the future would be appreciated. Thanks so much. I think lots of these questions are for me. I appreciate that you don't make his life easy. But I do appreciate the earnings per share you're actually providing. These are what I call. No, no, no. Let me start with the sales and EBITDA for the next quarters, which you have to adjust for in the different quarters for the loss inhalation. As you could see, sales in Q1 was approximately €3,000,000 adjusted EBITDA €1,000,000 for Q2. It will be another €1,000,000 of sales, approximately €5,200,000 adjusted EBITDA as a positive effect. As a negative effect. That's one of the compensations which we had in Q3. It's approximately minus €3,700,000 and the adjusted EBITDA effect in Q3 was minus €5,600,000 So and then you have a small amount in Q4. So at the end of the year, we have shown there sales of approximately €8,000,000 less and for the adjusted EBITDA overall minus €12,000,000 that would be the comparable figures for the different quarters in these lines. So center, how sure are we that we are able that what we have lost in the Q1 will come back in the last quarter. And we expected this weakness already in the Q1 when we made our planning because last year the flu season was really, really big. And that was anticipated and we know that the demand of our customers in these kind of businesses pretty stable during the year. So we feel pretty confident that this will come back and that's the reason why overall it will be a different split in the different quarters and especially Q4 will take it up like it then did. In years where we had a similar situation, it will be there because the stocks are down of our customers and that's reason why it will happen again in Q4 and that's normal. The pattern which we have seen in the past and that's the reason why we also forecast that and why we have also planned it like that. So the expansion projects, depreciation, here it's the normal situation. These are projects which are coming in the next years. CapEx infrastructure has depreciation of approximately 20 plus years. So you shouldn't expect big effects coming out of that. Yes, and for sure the depreciation starts when the assets are in place. And for sure, also old assets will run out of service. So therefore, the numbers which we have given here in percentage of sales for the model, which were approximately between 6.8% to 7% during the next years is in line with that what we have as a long term guidance also for our CapEx, which is approximately 8% as a realistic figure. We have these 2 outstanding years, 2019 2020 with up to 12%. But thereafter, after we have done this huge CapEx investments, it should come back to a normal situation. And yes, and that's how we would like to work. So the adjustment for reported EBITDA and especially then this effect of €92,300,000 is in our adjusted EBITDA included due to the clear definition, which we have defined since 2013. I give you the other reason for that. Last year, similar situation for the tax change in the U. S. We also put in the €44,000,000 also as a normal. So in adjusting our adjusted net income after taxes, if you would change that every quarter, every year, you would ask me why are we changing it all the time. We keep that stable. It's in our definition, so everybody can work with that. And that's the reason why I also said in our speech that you already know then that our dividend will increase next year due to the fact that it also will be €92,300,000 more for the theoretical dividend payout on the adjusted EBITDA and also on the net income due to the fact that there is no tax related with it. Great. Last follow-up, if I may. If I put together the first two ones you made in terms of the TPA compensation payments and Centov being Q4 loaded, is it fair to assume that a significant part of the full year earnings growth will be geared towards Q4? Sorry, perhaps you can repeat the first part of your question because we couldn't hear it perhaps due to technical problem. I don't know. Sorry, can you hear me now? Yes. Now I can hear you. Okay. I mean, if I put together the comps effects from Teva are the toughest one in Q1 to Q3, plus you expect the kind of catch up center in Q4. Is it fair to assume that the earnings growth in the full year is significantly geared towards Q4 this year? Honestly, that's not the case. So I would assume when we look on all these kind of numbers that we have a good start. We already can see also that the next months are totally in line with our expectations. So I wouldn't assume that everything comes in Q4. For sure, you have this effect that you have this high compensation payments in Q2, Q3. And for sure that has an effect because that's what you have to adjust for. But I would assume that the normal way of which we normally have on a seasonality is also that what will happen in 2019. So no special pattern, everything is end loaded in Q4. I wouldn't assume that. Great. Thanks so much and all the best for your next assignment. Thank you very much. So in the interest of time, I think we have time maybe for 1 or 2 questions more. And we have somebody we couldn't read the name. So somebody from Credit Suisse. Apologies for that. Chris? Hi, Salvator. Thank you. I know so I assume you say no, you mean it on 2 analysts instead of 2 questions because I have 3 questions. So the first is actually at least I can try. The first relates to Northern Macedonia. I was slightly surprised by kind of the choice, to be honest, because I'm not aware of any other kind of health care medical device company actually with manufacturing there. So maybe could you elaborate on particularly the labor cost levels you have there, for example, compared to Czech Republic or even to Switzerland? I think that will be interesting. Then secondly, on the resin prices, could you maybe update us on how that has been going on with these increased resin prices on to customers? And the third question relates to the new technologies. I think the slide you had, what was it, number 7, maybe could you define the boundaries for these new technologies? It's basically kind of only for existing products, so inhaled injection? Or can we assume that we would go way beyond into other I'll Yes, I'll take the Macedonia one. Yes, Skopje. And I'll tell you when I I'm now 5 months with the company. When I started, it was one of the locations that were investigated and I built in my former assignments a lot of facility also in East Europe and I didn't consider Macedonia either. But looking at the details of the analysis actually convinced me a lot. We should not forget, it's not only the labor costs we are looking for. It's a mix of different requirements that you really have to fulfill. One of the aspects that was really important to me is the availability of trained people long term. This mean I'm not only looking for a great facility for the next 3, 4 years. We need to have a site, a low cost site in Europe, where we in 10 years might be able to make another decision. And what you clearly see in a lot of locations, Europe, East Europe, which is including Romania as well, is increasingly competition with other facilities and you don't get the people in the right amount anymore. And here, Macedonia, especially this area around Skopje gives us great opportunity. Skopje is really extremely supportive. We will go into, let me say, specific industry zone very close to the airport that is offering us opportunities that are absolutely comparable to normal European standards to a cost level that I would rather go into, yes, what is it, compared with Germany, maybe a tenth. You can say a tenth and a third of what we see in Czech Republic, for example. Swiss, I'm not expert now at the moment. It should be similar to Germany probably. Is there also a tax incentive actually scheme? We enjoy certain support coming from the government and the industry zone that is helpful, especially in the starting period. And that is supportive. That, of course, completed the total package. But one more time, I was not only looking for pure cost optimization. We need the additional space, the additional capacities, Okay. Understood. Maybe coming to the next question, do you want to take the resin pressure? The Aker questions I always push over to Rainer. And I think I could do the same, but I think you can do this as well. Yes, let me start. Let me answer the resin prices. We can see currently stable to declining resin prices. We have pass through clauses in place, which do have delays of up to 3 months. And for sure, we also work with the selling price and especially last year in some areas. And don't forget the energy cost too, because last year we had also the energy costs, which were increasing in the second half of last year. Here we have hedged approximately more than or approximately 65%. So we believe that we are pretty well positioned for this year on resin price and energy costs. There shouldn't be a surprise coming out of that because we have done here a good job in saving that pretty well and also asking our customers, you can say for help. And that's a situation that we renegotiated several contracts and also had the opportunity certainly increase sometimes increase also our prices. I take the third one. Newtek, it's of course one of my favorite questions. Yes, what are we looking at? And I think what we see is the megatrends we spoke about is the increase of necessity of having intelligent drugs. Now all of us, we know it is extremely difficult to bring the intelligence into the drug. We have to bring it into the device. And if we talk device, we talk Gerascience. So that's the area where we see potential future technologies and also the further add ons to our advanced technology. As you spoke about blisters, that's maybe not really intelligent. And I'm also not so sure whether the margins are interesting for us and accretive. So I think that's actually not the areas we are at the moment looking into. Okay. Thank you. And my next question is if you really want to have that, you have a look on our annual report and you clearly can find what is what we are strategically interested in on Page number 1 and then 1. And as Dietmar said, list us out who is there as one of the areas where we are interested in. Okay. And all the best to you, Rainer, as well in your new challenge. Thank you very much. So we're going to take the last question from JPMorgan. This is Craig Mittal from JPMorgan. Just two questions, please. On Plastics and Devices, you pulled out the new plant in Czech Republic as a drag on margin. Are you able to quantify that impact? I'm just trying to understand the underlying margin dynamics. Secondly, on Sensile, on the last quarterly call, you stated that the Parkinson's pump had received CE approval. Can you confirm whether the regulatory approval on the pump for use with the accompanying drug has now been given and whether that project is now commercialized? Thank you. I think the most easy is the second one because it's a yes, yes. I think project is ongoing and we've got the CE approval. It's done. I'm not fully sure I understood fully the first question. Horosketin is not a new facility. What we are doing at the moment is we are extending the facility for this inhaler project I spoke about coming from Peachtree. So I've got some support here, but you can dig in, Rainer, if you can help. Yes. We have some temporary higher costs in hososkeitin for inhalation, especially for training and all the other stuff. And that's fully included also in our mid term guidance. And that's what we have originally said. So but we don't want to quantify how much it is, due to the fact that it's all included in our guidance. And we normally don't give segment guidance is going down further to different units and different products because here this information is sensitive due to also competing to others again in other projects. And therefore, we don't want to open our cost base here. Thank you. And just to be clear on the Parkinson's pump point, approval, regulatory approval has not been given for the combination of the drug with the pump and that It's out in the market. It's commercialized. The product is sold in the market. Everything is there. So this is like it's fully done. So there's nothing which is missing. Customers selling this product in the market. And I'm sure after the small sizes, which is given out in the market to test the product, he's very happy with the product that he will make a bigger announcement later during this year. And then you also will know the name, but as you can imagine, we are not allowed to say the name after the problem that the customer is communicating that to the market. But it will happen during the course of the year. Thank you. Yes, I can just confirm this. The Parkinson pump, you can buy in the market. I don't hope I hope you don't need it, but you could buy it in the market. Okay. Well, this will conclude our quarter well, our Q1 call. The next call will take place on the 11 July. And if in the meantime, you have any questions, you can address these to Investor Relations. Thank you.