Earnings Call: Q1 2018

Apr 12, 2018

Welcome to the conference call regarding the publication of Gersheimer AG's Q1 Results 2018. At the moment, all participants have been placed on a listen only mode. The floor will be open for questions following the presentation. Now I hand over to Ms. Severin Compe, Corporate Senior Director, Investor Relations at Gareseimer AG. Hello, everyone. Thank you very much for joining us to review our Q1 results 2018. With me today is Raimo Baujean, our speaker of the management board and CFO. And as usual, as we did in the past, we are presenting a second slide 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 geelsheimer.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 the 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 Heine. And after that, we will enter into a Q and A session. So I'm now turning the call over to Heine. Thank you, Severin. Good morning and good afternoon to all of you joining us on this Q1 2018 earnings call. We are starting with Slide number 4 to provide you with an update of what we have delivered in the Q1 of the year. To most of you, none of the facts outlined on the slide should come as a surprise as I echo what we have said on February 22. When we commented upon our expectation for Q1 and which we have subsequently reiterated on our roadshows in the past weeks as well as in several investor and analyst calls. Regarding the financials for the quarter, our revenues and profitability numbers have come in as planned. In essence, on a currency neutral basis, revenues were flat at a +0.4 percent. Adjusted EBITDA was down by a bit more than €4,000,000 Comparing Q1 2017, where the euro to U. S. Dollar conversion rate was 1.06, whereas the Q1 2018, where it stood at 1.21, led to a significantly currency headwind. Reflect this consistently, it is important to remember that these are a majority translation impact only. We have recorded a one off tax income gain linked to the revaluation. To wait until Q2 is behind us to see how these trends will ultimately unfold. You can call us more conservative than some of our customers and our competitors, but the health care industry as a whole had in 2017, a year, which came for all of us as a surprise. So from this perspective, we think it is appropriate to remain cautious and on the conservative side of things at the beginning of the year. In the meantime, we are conducting systematic reviews of opportunities and challenges linked to the deployment of our growth levers. On April 9, we have decided to exercise our call option on the remaining 25% of our stake in Slovenia, India is a view to further strengthen and expand our presence in India, in this case for plastic packaging. Additionally, we are beefing up our Geek Solutions sales and marketing teams with a view to continue hitting the ground towards the biotech and biosimilar ventures, in particular in the U. S. So let us review the revenues development in the Q1 turning to Slide number 5. So here we are comparing the revenues in Q1 2018 versus Q1 2017 on a currency neutral basis. We are also detailing the drivers behind the revenues development and comparing these against the trends that we have flagged a couple of weeks ago when we outlined our trading expectations for Q1 2018. We are also doing this on the next slide, by the way, this time comparing the adjusted EBITDA on a currency neutral basis year on year. Let me start with plastics and devices. As a whole, revenues increased by €800,000 or 0.5 percent year on year. As anticipated, we recorded in this division tooling revenues this quarter. As you know, temporary fluctuations throughout the year are normal in the tooling business and essentially reflect the invoicing of large scale projects. So we do expect the same level of tooling revenues on a whole year basis compared to full year 2017, but lumpiness in the quarterly phasing of these revenues. On the plus side, however, PEACHTREE continues to perform well and could help compensate lower demand stemming from a selected number of device customers where we are single source suppliers. Revenues increase in primary plastics packaging was spread across all geographies. In particular, in Brazil and India, we could see a nice pickup in revenues year on year, which further support our decision to have exercised our call option in Slovenia. Additionally, our U. S. Prescription business that is centered did also perform satisfactory during the quarter on the back of a strong widespread flu season. Moving on to Primark Packaging Glass. Here again, reviewing revenues on a currency neutral basis. Revenues here remain flat on a currency neutral basis as we continue to record a decrease in revenues coming from our U. S. Primary packaging glass business in Q1. For the U. S, we see that improving on the back of current order methods. However, this decrease could be compensated by positive revenues development elsewhere. In particular, we recorded a strong growth in China as well as in the cosmetics business in Europe. This group was mean On a currency neutral basis, the adjusted EBITDA decreased as anticipated by €4,100,000 year on year. Let us start with the profitability review of Plastics and Devices on a currency neutral basis. In the quarter, the adjusted EBITDA remained more or less flat at 39 €600,000 compared to €39,500,000 in Q1 2017. In absolute terms, almost no change. Several drivers to be in mind here, although it is important to realize that we are really talking about several effects. None of them are substantial, but in sum, they can explain the positive or negative developments we are commenting here. So it is important to keep a sense of proportion here. So with regards to plastics and devices on the negative side, weighting to the adjusted EBITDA, we have the negative temporary impact due to the higher resin prices. We've also to take into account that in devices, the capacity utilization in some of our plants was also negatively impacted by the lower demand stemming from a few of these customers where we are single source suppliers. At the same time, the margin in the plant like Pinch Tree is not at its optimum as we are still in the ramp up phase. To balance things out, we have the positive contribution stemming from the Primary Packaging Plastic business, in particular from Center. With regards to Primary Packaging Glass, the adjusted EBITDA amounted to €20,600,000 in Q1 2018 compared to EUR 24,200,000 in Q1 2017 on a currency neutral basis. The reduced revenues in the U. S. Operations and hence the lower utilization rate of the installed capacity are the main drivers for this negative development. It should be noted that contrary to the same period last year, we have not optimized our people and workforce by, for example, extending plant closures around the holiday period as we want to be ready to deliver on an expected increase in orders later in the year. So overall, the utilization of our plans in this segment was not optimal. Additionally, we also have a further share with similar impacts on earnings in this quarter as we had last year. As mentioned previously, we are investing in our sales and marketing operations in the first half of the year, in particular within Gig Solutions. We are not talking about a lot of hires in operation expenses, but these are additional costs compared to last year in both divisions. By the way, this is true for OpEx in general as well. We are also continuously investing and training people, ramping up operations in Peachtree, Brazil, Poland, India, you name it, which is, of course, affecting our margin, but it's necessary to prepare for future expansion and growth. So to make the revenue complete, please move with me to the next slide where we can see the currency effects and margin developments. In terms of revenues between reported Q1 2017 and reported Q1 2018, we have loaned a total of €13,600,000 of currency effects, which explains the reported revenues decreased by 4.1% as revenues remained more or less stable year on year on a currency neutral basis. We have, by the way, provided a revenue bridge in the appendix section of this presentation. So on a reported basis, only based on currency headwinds from the U. S. Dollar as the main driver, revenues in plastics and devices decreased by 4.5%. Revenues in private packaging glass decreased by 3.9%, again here due to our strong U. S. Exposure in molded as well as tubular glass. With regards to adjusted EBITDA, we can calculate that in total we had €3,200,000 of currency effect between the adjusted EBITDA as reported in Q1 2017 and as reported in Q1 2018. As mentioned in my introduction, we are indeed comparing 2 periods where for Q1 2017, the average euro to U. S. Dollar rate was 1.06. Against the Q1 2018, the rate was 1.21. This falls, by the way, more or less into the rule of thumb we have provided. For example, that is, the U. S. Sand variation translate into €4,000,000 variation on the revenue side €1,000,000 on the adjusted EBITDA side. This is why we have chosen the average of last year in terms of currency assumptions for our budget and hence guidance for the full year 2018. Curious on the margins here. Overall, the reported adjusted EBITDA margin decreased from 19.8% in Q1 2017 to 18.1% in Q1 2018. On a reported basis, the adjusted EBITDA on plastics and devices amounted to €37,600,000 in Q1 2018 compared to €40,300,000 in Q1 2017. The margin decreased correspondingly to 23.9% compared to 24.5%. This is more or less essentially attributable to currencies, given what we have revalued early on, where we had stable revenues and adjusted EBITDA on a currency neutral basis. Within Primary Packaging Glass, on a reported basis, the adjusted EBITDA amounted to EUR 20,300,000 in Q1 2018 compared to EUR 24,300,000 in Q1 2017. The margin decreased correspondingly to 15.3% compared to 17.5%. Here, this is basically due to the factors I outlined earlier. For example, the lower utilization in the U. S. Primary packaging glass business and once again currency. Turning on to slide number 8 to review the operational progress during the quarter. Opportunities identified with the groundwork we have done in identifying the 4 growth levers to drive the business forward. Some of them might not materialize because of financial operational hurdles. Many others are still being reviewed, both organically and inorganically. Regarding cross renovation, the construction relating to the extension of the technical competence center in Wackersdorf to include glass products has begun recently and the project should be completed by the end of the year. We are creating there 3,000 square meters of additional space to improve our capabilities in the development of injectable glass products and in engineering. Similar as for plastics devices, we are establishing small batch production for innovative glass products, thus reducing time to market for biotech products like pre fillable syringes. In addition to providing more space to cope with the expected growth in the construction of assembly lines for our system and device customers, We are also building up glass competence for the development of innovative technology for glass forming and automation for syringes and cartridges. Regarding moving up the value proposition too with our customers, I've already mentioned that we ordered our RC F5 line in Blunden. Whilst we are expecting around 5% market growth on average for the RTF syringes, the higher value RTF syringes for ophthalmic as well as Biotech and biosimilar solutions are expected to grow above average. The line will start operations The line will start operations in 2020 and will be an enhanced version of the RPA4 line where capacity continues to stack up nicely with high value products. Not on the chart, but worth mentioning again is commercialization of EVP glassware for a few customers with first deliveries expected in the second half of twenty eighteen. Last example from the quarter here regarding regional expansion. After a rather sluggish year in 2017, we are now seeing a rapid comeback of the markets in India, which going forward would make the acquisition of Tweeny more expensive quite rapidly. Therefore, we have exercised our call option regarding the remaining 25 percent outstanding shares in Sveiny Polymer Private Limited on April 9 this year. We expect the price consideration to be in the low single digit €1,000,000 category. Continue to see Trivaney as a valuable asset geared to enhance our footprint in the emerging markets. This is indeed one of the avenues of regional expansion we follow in emerging markets, where it is important to retain regional expansion can be organic development, where regional expansion can be organic development, where we follow our clients and partners partnerships with trade M and As. Let's now move to the next section to review the financials in more detail. A quick technical update on the deferred tax benefits recorded this quarter in conjunction with the U. S. Tax reform passed in December last year We've outlined our expectations in our annual report and slide deck from February, and they are also repeated on this slide for your reference. So all in all, in Q1, we have recorded USD 52,900,000 as a onetime deferred tax benefit. As previously mentioned, this is a non cash item and this included in our adjusted earnings per share after non controlling interest. And this will thus be taken into account for the calculation of our proposed dividend in 2019 for the financial year 2018. To help you reconcile the tax income numbers, you will see on the next slide. Including this onetime effect, the income tax expense item for the reporting period shows tax income of €41,300,000 Excluding this onetime effect, the total income tax expenses for the quarter would have amounted to €2,300,000 implying a tax rate of 28.7 percent versus the 32.6% in Q1 2017. With that in mind, let's move to a review of the P and L items on the next slide, Slide number 11. Adjusted EBITA was down by €7,300,000 year on year as a consequence of a decrease in adjusted EBITDA and a higher level of depreciation, reflecting the nature of CapEx investments we have made in the past. The one off item in the amount of €4,400,000 has to be seen for a large part in conjunction with the unplanned departure in February 2018 of Christian Fischer. Regarding the amount of €7,700,000 in amortization of fair value adjustment, The bulk of it comes from the acquisition of Center, lower than the last year only due to the change of the U. S. Dollar year on year because the amount in U. S. Dollars in both years the same with U. S. Dollars of approximately $7,800,000 Net finance expense were approximately €1,000,000 higher year on year at €9,400,000 mainly due to the currency effect on the intercompany loan from Germany to our U. S. Holding. I've just explained the tax related items. As a whole, the adjusted net income after non controlling interest amounted to €58,100,000 which per share amounted to €1.85 after 0.60 in Q1 2017. Moving on to the balance sheet and cash flow items for the quarter on the next slide. The decrease in total assets since November 30, 2017 is for part driven by a decrease of the intangible assets on the back of currency changes and the amortization of the value adjustments. In the same logic, tangible assets have decreased due to currency effect as well as planned depreciations. As a whole, total equity increased from €789,500,000 as of November 7, 2017 to €823,900,000 as of February 2018. The main driver is a positive net income in the reporting period, which more than compensated currency variations. Regarding the increase in net working capital, it might look noticeable to some of you, but as I have mentioned earlier, this is quite a normal seasonal pattern at the beginning of the year. And in absolute numbers, it is more or less comparable to where it stood in Q1 2017. There are two effects to be in mind for the increase year. Q1 is typically characterized by an increase in inventories and a reduction of trade payables. This quarter, we have also decided to build some more inventories despite the modest customer demand to be able to deliver more in the subsequent quarters. Additionally, with Q1 being the weakest quarter after a strong one in Q4, we are less trade payable as a consequence of reduced demand. As mentioned before, we expect these effects to unwind later in the year. And if you compare the change in net working capital on average, you see a slight increase year on year from the 16.1% to 16.7%, but nothing too dramatic. The decrease in adjusted EBITDA as well as the increase in working capital are the main drivers for the operating cash flow development in the quarter. Both divisions posted a positive operating cash flow. As a whole, capital expenditures were lower in percentage of sales during the quarter compared to the same period last year. But as we will see on the next slide, our 8% guidance is unchanged on a currency neutral basis. We continue to invest further in growth opportunities as well in initiatives to improve quality and productivity. As a whole, CapEx amounted to €10,800,000 and a large chunk of it was deployed in plastics and devices, in particular, the aim to further expand our inhalation capabilities in PEACHTREE and more generally, our product portfolio. In Primary Packaging Glass, we underwent the 1st wave of the planned furnace repair with, by the way, the 2nd wave being expected in Q3. We also invested as in precedent years in molds, tools and modernization measures. Cash and cash equivalents decreased in the quarter as a consequence of the decrease in trade payables. This was the main driver behind the increase in net debt as seen on the chart. Overall, the adjusted EBITDA leverage remains under 2.5x at 2.4x. This would conclude my review of the financials for the quarter, and I would like to move towards the outlook in a few words of conclusion from my end. The guidance elements for 2018, all on a currency neutral basis that we have provided you with a couple of weeks ago on the occasion of our full year 2017 earnings release remain unchanged. I'm not going to repeat them, but these are outlined on the chart accordingly. With that in mind, let me recap on where we stand today. As Joc mentioned, Q1 2018 came in as expected, both on an organic and reported basis, and we have not observed any material deviations to our internal budget at this stage. We still expect the phasing of growth to be more skewed towards the second half of the year. Why is that? 1st, because of comparables. If you remember the magnitude of the decrease we had in Q3 last year, which was the basis for our risk scenario. 2nd, expected contribution from improved product mix with regards to PEACHTREE and, for example, the 1st commercialization of ELITA virus. But all of that has to be seen in the overall market context. We see some encouraging signs for the second half of the year, but we want to wait until Q2 is behind us to see how these trends will ultimately unfold. We are systematically reviewing the growth opportunities identified within our growth levers, but organically and inorganically along the operational and financial framework that I have detailed in our last presentation and the executive board as well as the entire operational teams remain fully committed to drive the business further. We are not lacking any decision making and our processes are very well oiled, so there is no standstill. We have the full control on the strategic direction we want to pursue. Many thanks for your attention. I will be happy now to take some questions and hand over to Severin. Thank you. So the lines are now open for any questions. So the first question comes from Veronika from Goldman Sachs. Good afternoon and thank you for taking my questions. I have 2, please. The first one is on the second half year outlook. I think you said you are cautiously optimistic for an improvement in market conditions. And I was hopeful, Rainer, that you can characterize how maybe your optimism is different today versus when we last heard from you a few months ago? Do you have any indicators that you're watching which give you a little bit more confidence that the growth improves in the second half of the year? It would just be great to get a little bit more color into that on that. And related to that, your large competitor has also been flagging some softness in the market. So maybe put that into context with their commentary. And my second question is on the Truvaney exercise. Congratulations on completing that asset. Help us understand kind of growth outlook as you look at Trevaney from here. What do you think it could contribute to the group? And how does the growth outlook change now that you own the assets? Thank you. So let's start with the first one. I already said in our on our year end call the same. We always said the second half of the year should be better for us than the first half of the year because the especially the first quarter was still influenced by a good order pattern before the election of Mr. Trump. Everybody in the we are very, very relevant on all our customers. And my optimism for the second half of the year comes out of our customer discussions. And we clearly can see that our customers do have a totally different perception for the rest of the year than it had than they had last year at the same time. Remember, when we had the Q1 call or even the year end call 2017, we started the year at the lower end of the range. That's clearly not what I'm telling you this year. This year, we have to be a little bit more conservative because last year, we lost 2% of revenues compared to 2016. And we only had such a situation twice during the last 10 years. The second one when we lost revenues was after the financial crisis in 2,008. So if and that's at least the numbers which we see, what we hear, if IQYIA statistics, which is the basis for us as serving the top 20 customers or even the top 50 customers where we have contacts to. If this market is growing again in 2018, which is forecasted, then we at least should grow with the market. And then we do have the outperformance plans based on our products, which we are ramping up in PEACH3 with the product portfolio, which we have in syringes, where we outlined in our February 22 call that we are very successful in the syringes with Biotech Biosimilar. So we do have a lot of things which are running pretty well, Elita, Vias, for example, in the second half of the year. I'm only repeating what I already said. So we have a lot of good things. But again, when you start a year after a loss of 2%, you should start conservative because the first quarter is not really relevant. It is the weakest quarter in our portfolio, and the second quarter will prove a little bit, but not a lot. But we then have orders in for the rest of the year. And if our customers are right, then we should grow, especially in the Q2 of this year. So it's more on competitors it's more on customers based my assumption for the second half year of discussions with our customers as well as that I also see look in the statistics of the markets, which are also more optimistic with 2018 than they were in 2017. So second question, Treveni. Treveni is already fully consolidated in our group. That means the only thing which disappears are the minority interests. And therefore, from a revenue point of view, you can't assume that there comes something on top because we already owned before 75%. We only take in the minorities of 25%. For us, the question is more or less what will disappear out of our balance sheet for sure is the put option because we will take that out. The market for us in India and especially in Slovenia was pretty strong. In the Q1, we have seen good uptake here, and we hope it stays on that level. So for sure, it is higher than 4% as you can assume when I say a good uptake. Okay. Thank you for that color. My question was more, does anything change with regards to Trevenion growth there now that you own the asset 100%? Or do you think it's more of the same in terms of It can't change because from a bookkeeping point of view, you have the revenues already in. And what has changed, we are already leading this company with our 75% stake in the company. But what for sure will change, we also will look what we can do in the region. We're investing. Also, even if we have some difficulties or our customers out of the U. S. Have some difficulties in NutriGlass, which is the molded glass manufacturing there, and we also have the converting business in there for sure. When we own 100%, we also can look what we can do on the profitability side, how we can take advantages of working together better than we have done perhaps in the past. So therefore, this company, when we own it 100%, can address the market different than you have when you have a minority shareholder. But it hasn't happened. We are we still have to perform it because when we call, it means now we have to finish the negotiation and we need some time before we fully own it. Excellent. Thank you very much for that. Thank you. We're going to take the next question from Scott Bardo from Berenberg. Yes. Thanks very much for taking my questions. So the first question relates to the Plastics and Device business, please. You mentioned that Peachtree was compensating for continued weakness from some of your other inhaler business, I think, based in Europe. So I just wonder if you could provide a little bit more context as to what's going on with those customers. They seem to have been a pressure to your business for some time. When do you expect that balance to tip to the positive? And can you extend those comments to talk about upcoming plastic contracts? I understand there are several contracts to be had over the coming months. And what that means for Geraschheimer's business should you win or not win those? So that's the first question set, please. The second just relates to a clarification of your one off. €4,400,000 is quite a high one off when it specifically relates to the severance of the CEO that served only for 4 months and left for personal reasons. Can you give a little bit of detail as to why that is so high and what that encapsulates, please, that one off? So they're the first two and I have a follow-up. So I'll start with the second one. The one off is not fully for the for Christian Fischer. The amount which is paid out is approximately €4,100,000 Why is it as high? Beside a small severance payment, there are other financial entitlements that were due to him anyway under his service agreement. So for instance, a competitive clause or something like that. And these are in the contract. And therefore, when you take out or when someone resigns or doesn't work anymore, then you have to get it. What happened? And I already said that during several discussions in the past. We do have the situation when the year ends, especially in January, beginning of February, that especially the whole management board has to have you approve and also sign the financial statements for Gerasimer. And when you can reach one of the people and he is not available to conduct these products, you have the risk. And for sure, you also we also postponed this or that because we're not talking about something which is on a strategic discussion or on business performance, it is really on personal reasons what I'm talking about, then you are getting to the risk that you are not meeting the deadlines from the German Corporate Governance Codex for the publication of the financial statements and so on and so on. So there are certain risks to that also from a legal side in Germany. So in that situation, the supervisory board had them to make a decision how they want to handle the situation. And then the supervisory board for sure decided that it would be best to find a solution. And again, the severance payment, which is part of the €4,100,000 is really below the requirement, which is normally the maximum requirement by the German Corporate Governance Code. It is more you also have a lot of payment, as I already said, due to the service agreement, which is which were in like, for instance, the big amount is the competitive clause, which is not for sure prepared for a situation like that. So hopefully, that explains it. Peach Cree. Peachtree, the question was yes, sure. P3 is a success story. In that case, that we are ramping up, still ramping up the manufacturing. This is not fully utilized. I also said in my speech before that we also use further CapEx to increase the capacity further. So this product, where we are the contractor manufacturer of a big pharma company, we are just doing very well, very it's very strong. On the other side, as I also said, we have 2 customers who do have products in the which are going down. So they are going out of the market. So the situation here is that and you know that we always have volume price clauses. For sure, our costs are settled. In that case, that we are not making losses here. But on the other side, products in our production needs are high utilization. And as I said last year, there is a point during this year where PEACHTREE will clearly outperform the other areas so that also growth comes out of PEACHTREE, and that will be in the second half of the year. Then you also asked, are there some contracts and should Gerasimer win or not win? For sure, Gerasimer is one of the major players in this market. And if you do contracts, and there are big ones, and there is at least one big one coming. If we there are also which are running for it and we're pretty optimistic by them with the and with the performance which we have as a contractor manufacturer, that we have a good chance to win it. And for sure, this will be relevant then not for the next year, not for today, but for the outer years, somewhere which also will underpin, 1st of our business model and second, so it will underpin that the growth for the next years will come further on. Okay. Very good. And sorry, just to clarify on that point. If you don't win it, for example, would that put a growth profile that you aspire to this 4%, 5% at risk? Or is it arguably sort of would it allow you to outperform that expectation? Just trying to understand how relevant that contract or those series of contracts may be for your midterm growth prospects? So Scott, as you all know, first of all, let us win something and then we discuss how this will influence our numbers for the future. But for sure, our aim is to go on with that what we have said. We're investing further on with the 4 percent for growth, as we always said. And this, when you look on the cycles we are in, and we are in cycles like 5, 7 10 years, and we are not in cycles quarter by quarter. And this is exactly our industry. Our industry is 5, 7, 10 years when you make this exercise and look on the But when you make this exercise, you would figure out that we were always growing. But when you make this exercise, you would figure out that we were always growing this 4%. And I hope that 2018, the market comes back volume wise, and that statistic is right with IQYIA, so that perhaps at the end of the year, we then can discuss substance again instead of a deviation on the EBITDA of €1,000,000 up and down. Understood. Last one for me, please. I know that you've had a relatively cautious communication and outlook, which think is the right approach. But just to understand, do you still see prospects to reach the upper end of your guidance this year given the flat start? And can you please at least confirm that Q1 is likely to be your worst quarter with respect to growth and margin? Thank you. Q1 is always our worst quarter and it will be this year, too. 2nd, for sure, my target is and my target is or our target as a board is to be at the higher end of the range, yes, and like it should be. The upper range of the guidance wouldn't be good and would mean that the whole market would see a development again like we have seen last year, which is not in our assumption. Great. Thanks for taking the questions. Thank you very much. We're going to take the next question from Christophe Gazzicrete from Credit Suisse. Yes. Hi, good afternoon, Werner and Salarim. I have actually a few questions. First of all, could you actually quantify the element on the margin decline in plastic and devices? I mean, you separated them out, but maybe if you could give a clarification on the resin price increase. And then secondly, on your dividend comment in your press release, I mean, I was not to some degree a bit surprised given operational trends. And then basically, I mean, the $50,000,000 is basically a non cash effect. And your effective tax rate stripping out is maybe 29% or so. I mean, it's not that much different. So could you elaborate on the thinking behind that? The second one is easy because we have this definition what we adjust since I'm here 2013 and the definition doesn't allow us to take out tax changes. So therefore, it's only fair also to put that in. And I think it's also a good signal because we believe, as I said, in our company and we also believe that we are able to grow. And therefore, we also should increase our adjusted earnings per share. So I'm not afraid that this money is something from a cash flow perspective, which will hurt us on the other things which we want to do. Quantification of the elements, which we have for our in plastics and devices. I'll give you one. And I also said in my speech, it's all minor, up and down. So we have this resin price effect, which is a quarterly effect. Take center as an example. This is approximately €800,000 on the Q1. But again, when I say price escalation clauses, this is a temporary effect. So when the resin price goes up, customers up to the Q2, if it's not growing further on, then they'll pay the new price. And for sure, it will also help on the revenues because it gets through. So the effect is 0.8 for the Q1. But in the Q2, you won't have this effect again. If the resin price is not further increasing also in the Q2 because the first effect then will be the new price will be set then on the Q1, And that's how it works on and on and on and vice versa. And we had the negative effect out of that in the last year. When for sure, the resin price came down, we also have that effect, too. So this is like that's the business model intent. It's very transparent to customers too, and that's the reason why this is how it works. And the other effect, as I said, the underutilization in the manufacturing left and right is something. And to have the people on board to produce for the second half of the year, This is really something which is a calculation point of view. Don't overestimate it. Again, the Q1 is always the weakest quarter in a year. So I'm not a single second afraid that we are able to reach our guidance for the full year on the adjusted EBITDA. And that's our target for the year, between €305,000,000 €315,000,000 euros Currency neutral. I'm always commenting for sure currency neutral. Yes. We understand that. Thanks. One last question. I mean, it looks like, to some degree, you were quite optimistic on the second half, given that you left kind of capacities in place, you kind of stocked up in inventories, etcetera. So I mean, yet I don't think there is that great signal or signs of such an improvement at least on our side. I mean, the question essentially is, I mean, if that does not come through as expected, we need to prepare for restructuring here? Or what would you say about that? As I said, my assumption is that it will happen in the second half. Please have in mind, when you look in the Q3 last year, when we build up our risk scenario with the €30,000,000 which came as a surprise for everybody in the industry. And then as in mind, in Q4, we had a growth of 6.7% compared to the year before. And perhaps some of you also look in our presentations from the full year or the investor presentations in Q3 20 17 as well as in Q4, we had the situation that several crazy statements were out. I give you one. The FDA approved some injectable drugs to be used beyond the manufacturer's labeled expiration date. So that's for sure is hopefully nothing, which everybody will assume also for 2018. So if everything gets back to a normal pattern, we should have in the second half a good growth based again on the situation that the market will come back. And that's the signal which we have got in our discussions from our customers. Okay. Okay. Thank you. Good afternoon. Thank you. So we're going to take the next question from Falko Friedrich from Deutsche Bank. Hello. Thanks for taking my questions. I would have 2 left. Firstly, what is driving the strong growth in China in your glass business? Maybe you can provide a bit more color here. And then secondly, has anything changed in terms of potential M and A intentions since we last heard from you? So China is mostly ampoules and vials. So this is the classical business, primary packaging glass business, which is always the basis in the future for the Novus devices business. Again, this is a 10 year approach, which is in front of us. We are a big company in China. We are very successful in that area. So the overall market is stronger again, and that's what you can see there. That's the only reason, nothing else. So M and A, no changes. I already outlined that in our February 22 call. First of all, we look on first of all, we look on several things. We look on regional expansion as well as we could show last year that we are also interested in owning some IP for which will be helpful for the biotech biosimilar market. There, we bought last year 2 patents. First of all, the Innosafe patent from Vest, which will help us to create a market standard there. And second, the EasyFill solution from OMPI for ready to fill vials. So because we also believe that vials will go the same day like syringes, from bulk syringes to ready to fill syringes. If vials go the same way, then we are very well prepared also for these kind of businesses for the future, again, a long term shot. On the other side, we believe that beside our Contractor Manufacturing business, Scott was asking before about, when we were talking about big contracts getting to the market, I was talking about contractor manufacturing contracts. For the Biotech Biosimilar business, for sure, you will need some solutions where you perhaps also have own IP. And also, a long shot again, when you look on electronic solutions to measure or to count also is the medicine really in the body of someone who has taken it? That's something which we also look in and that hopefully explains the directions which we want to go. Great. Thank you very much. We're going to take the last question from David Adlington from JPMorgan. Thanks guys for taking the questions. The questions have been asked. But maybe just a bit more color around you sort of talk towards refining trading expectations at Q2. Is your expectation to narrow the current range at that point? Or maybe do you sort of give some sort of color by what you mean by refined expectations for the Q2 results? Yes. At the end of the second quarter, I should have a better view how the rest of the year will run. For sure, our range is pretty wide currently. But again, Q1, as I said, is not the basis for the full year. We need Q2 to get a better feeling. Again, yes, perhaps it is a little bit conservative what I'm doing here. But at the end of the day after last year, I hopefully have all rights to be conservative up to the point that I know exactly how it will run out for the rest of the year. So we are now going to take maybe one last question, and then we're going to close the call. So and it comes from Alexander from Hockenhaus Weisel. Yes. Hello. Thank you very much. I have more of a general question. It looks like Gerasimer has the offering to tackle biotech market, but for some reason, it is not very successful in it. Maybe you could spend a little bit of time sharing your thoughts as to why do you think Gerdheimer hasn't been able to establish adequate presence in this market? And maybe how do you think it is evolving going forward? So first of all, I think we are doing pretty well in the last years. The spotterspots in the biotech biosimilar markets are long. I'll give you one example. When you remember when we talked first about the ATF4 line in syringes, this was somewhere around 2013, 2014. And now we have approximately onethree of our revenues in the Syringe business in Biotech Biosimilar and that situation. And this is exactly why we invested the RTF-four ninety four. And this is already then €30,000,000 and we also have Biotech Biosimilar also in other parts of our business, but this is the most obvious one. So why do we order and why do we order now the RTF5 line? Because we do have the questioning of several customers to go further down that road because we offer an outstanding quality and an outstanding performance and a very good product in that area. And dealing together with that, we invested, for instance, in the InnovSafe patent around that. We increased our situation with the accessories and so on. And also for when I announced before, which is also in the press and we also have a press statement around that with the 3,000 square meters, which we where we increase our capacity in Wacker Storff, where we will do glass as well as EUP syringes. We totally hopefully saw you this is then for the smaller batch productions also for the higher value products in that area that we clearly step up the value chain, which is that what we want to do? And nothing else? And is that when we talk about ready to use tiles and the easy fill solution, this is then a similar path. And that's the reason why we also will install this kind of product in Bimbo, in Germany, where we have the ready to fill capacity also for syringes. So we're all are watching now for the high value in gyrocyma to teco, this kind of business. On top of that, we already talk about Geek Solutions since 2 years. This is a joint approach and a very important approach between 2 all our divisions and all our business unit heads because here we have to put in all kind of products in this solution to our biotech biosimilar customers, which have instead of the big pharma or generica customers, which we have low experience in packaging. And in this overall size of our company, perhaps you don't see it as a one step solution and a huge increase in next month and next quarter. But long term, you will see that. And especially, we can see the mix and we can see the, hopefully, outperformance through the next years. But again, it always takes time. Again, you have to run all the processes, stabilization tests in health care industry and so on. So that means even if a customer says, I want to have I want to go this path with Gary Sanner, before you see the product on the market, it's 3 to 5 years. And that's how the business is. I can't do something against that. Okay. Fair enough. Maybe just one follow-up. Could you maybe confirm whether you are on or many products do you actually serve from the last, let's say, 3 years that have been approved? And I'm talking about new molecular entities. We are not providing this information due to One Visa. The customers which we have, talk about the really big customers which are also very relevant for the biotech biosimilars market, don't share with us which kind of product they use here and there, the advantage which we have against other competitors in that situation You know that we have the right portfolio that a customer, for instance, would order several syringes, high value syringes and also will put some of this product open stabilization test. That's how it works. So therefore, sometimes the level of this number is interesting. There is a lot of marketing around that. I know that also in the industry, in the other opinion, sometimes a little bit misleading because not everything which is in the pipeline or whatever comes to a success. And I'm sure if you look on all the developments, which we are seeing rapidly, you will totally get the wrong impression about the future. So in our opinion, when it comes to the point that we will find sales, when it comes to the point that we generate revenues and communicate it, and that's how we handle it and how we take to the market. Okay, fair enough. And just lastly, briefly, if you could break down the exposure you have to pharma, generics and biologics would be possible for you? No. We are not looking at that because exactly for us, all these kind of customers are for us customers that we serve, for instance, the plant customers in all kind of areas. So you have big customers who have their biologics area as well as a generica area as well as their biotech area. So you have everything. There's lots of customers. If you would split this to different way, it also wouldn't help. Okay. But having that, we are a very important player in that business. You can see that from the product, due to the factoring year in the last presentation, February 22, I put down the markets and I explained in which markets we are in and which kind of products we are serving. And for sure, when we go into the slides and you will figure out that we are in the full relevant space and that we have lots of products which are in that situation. Again, but there won't be a product which sinks the needle in the next quarter within the next year. It's a long term shot, which we are running on. Okay. Thank you. This would conclude our conference call. Two things. Next set of results will be published on the July 12. And obviously, if there is any or there are any follow-up questions, you can reach the Investor Relations department. Thank you.