Welcome to the conference call regarding the publication of Gerresheimer AG's Q2 results 2017. At the moment, all participants have been placed on listen-only mode. The floor will be open for questions following the presentation. Now I hand over to Ms. Severine Camp, Corporate Senior Director, Investor Relations at Gerresheimer AG.
Good afternoon or good morning, everybody, and thank you very much for joining our Q2 earnings conference call. With me today are Uwe Röhrhoff, our CEO, and Rainer Beaujean, our CFO. As we usually do, we are presenting a set of slides to accompany our remarks on this conference call. The interim report, the slide presentation, as well as the press release, are posted on the investor relations website at gerresheimer.com/investorrelations. Please note that this call is being webcast 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 for today starts first with the presentation and the prepared remarks. After that, we will also have time for Q&As. With that in mind, I am handing over to Uwe.
Thank you, Severine. Good afternoon or good morning to all of those attending our Q2 2017 earnings conference call. Let me start with slide four of the presentation deck with a couple of observations. First, as anticipated, the customer demand trends observed at the beginning of the year have continued to affect our performance in Q2 2017. However, their financial impact is less pronounced than in Q1. Reported revenues amounted to EUR 339.5 million in Q2, compared to EUR 347.3 million in Q2 2016. On a reported basis, revenues decreased by 2.2% in Q2, an improving sequential trend after a decrease of 5.4% in Q1. Looking at this on a half-year basis, reported revenues decreased overall by 3.8%. Revenues were 3.7% lower on an organic basis in the second quarter.
The currency tailwinds stemmed essentially from the Brazilian real, the US dollar, and to a lesser extent, the Indian rupee. Adverse currency movements were quite limited across the board. With regards to adjusted EBITDA, which amounted to EUR 75.8 million in Q2 '17, compared to EUR 80.7 million in Q2 '16. The corresponding margin was 22.3% in Q2 '17 against 23.2% in Q2 '16. I will comment on the divisional performance in greater detail on the next slide, the decrease in margin year-on-year is essentially linked to the lower margins in the Primary Packaging Glass, whilst margins in Plastics & Devices remained stable during that period. Cash and earning financials will be developed later on in the financials by Rainer, most of the trends are all essentially derived from the top-line development.
What I want to spend more time on in this section of the presentation is to review and analyze the main reasons behind the revenue decrease we have experienced in the first half of the year. Based on the increased visibility with regards to our customers' commercial and operational plans over the next six to eight months, I also want to walk you through the main identified revenue drivers for the second part of this year. We are indeed expecting to return to growth, both in terms of revenue as well as earnings during the second half of the year. We currently foresee an important improvement from Q3 into Q4, with Q4, other than last year, when Q4 was only a little better than the previous quarters, is expected to be far the strongest quarter. Q3 growth being about flat year-on-year.
With that in mind, we can also confirm the initial assumptions we outlined earlier in the year, with revenues expected now to come on at the bottom end of our forecasted revenue range and the corresponding adjusted EBITDA to land around the midpoint of the targeted range. More precise indications at the end of the presentation. Moving on to slide five. Overall, group revenues decreased by EUR 7.4 million in Q2 '17 versus the same period last year. Within that, the majority of the decrease stemmed from our Plastics & Devices. Here, we continue to see lower demand in Q2, as well as postponements of orders into the second half of the year. When it comes to analyzing the reasons for these declines in demand, there is not just a single one prevailing. A number of customers within our device and system solutions ordered less than anticipated.
This is also, to some extent, impacting us more directly as we tend to have a reasonable number of customers in these businesses where we are single-source supplier. This might be linked to competitive dynamics within the pharma market for products being prescribed for similar treatments, or, for example, in the case of our larger inhaler project at Peachtree, just timing and postponement of a higher ramp-up in the second half of the year. Nothing to worry about regarding the latter, only a change in timing. It's also worth noting that tooling revenues were still lower year-on-year. Here, as in Q1, we had some residual timing effect. On the flip side, we could see organic growth for primary plastic packaging in line with our expectations.
Overall, a revenue decrease of 3.8% for Plastics & Devices in Q2 2017 year-over-year, or -5.7% on an organic basis. Profitability-wise, lower volumes in the device business triggered contractually agreed price escalation clauses. Such higher prices, in combination with a decrease in the lower margin tooling revenues, translating in a favorable sales mix, have enabled us to maintain the adjusted EBITDA margin at 27%, despite lower revenues. By the way, if you compare first half 2017 margin year-over-year, we posted a slight increase of 40 basis points. With regards to our Primary Packaging Glass divisions, revenues were pretty stable year-over-year at EUR 153.7 million, versus EUR 154.3 million. That is actually 1.1% down organically. However, we note greater discrepancies observed in the various geographies.
In the U.S., despite encouraging trends towards the normalization of demand during Q2, we encountered lower sales and postponements into the second half of the year, both for our Molded Glass and our converting businesses. For some selected projects, we also encountered negative price mix during the quarter, which also had an impact on profitability given the absence of significant volume growth. We have fostered growth outside the U.S. and within that, particularly in our cosmetics and in our Chinese operations. The decrease in profitability was more pronounced than the decrease in revenues, that is essentially linked to our decision to reduce the production output and therefore accept underutilization. We need to remain highly flexible to ramp up capacity quickly and serve our customers on short notice into the second half of the year.
Overall, adjusted EBITDA margin was 20.4% for the second quarter, 230 basis points lower than in Q2 2016, but 300 basis points better than in Q1 2017. It is worth noting that the Q2 2016 margin of 22.7% represented the highest quarterly margin of last year. A margin of 20.4% would have presented the second-best quarterly margin during the same year. Actually, I think the margin development is nothing to worry about. These trends underpin the situation that we have flagged earlier in the year, which is that we observed a relatively cautious behavior from our clients overall. Moving on to slide six to address what we see for the second part of the year. In terms of key drivers for the second half, we essentially expect in Plastics & Devices, a catch-up in devices and systems both in Europe as well as in the U.S.
We are definitely expecting a much higher production run rate in our Peachtree facility by the end of the year. Injectable products should also add to the top line in the second half of the year. Tooling revenues are expected to come back strongly in Q3 and Q4, as we basically expect the annual revenues in tooling to be at about last year's level. On a side note, we have a high amount of very diverse and promising projects we are working on. Of course, as always, not all of them might come to the fore, but the pipeline looks very good to support future growth. In plastic packaging, we expect growth in line with our expectations in all regions. In terms of timing, it is important to mention that the phasing of revenues will be very significantly geared towards Q4.
As for example, in tooling, we expect most of the revenue uplift to come towards year-end, when equipment and tooling revenues are expected to be high. So far, we had a higher share of engineering revenues than usual. The identical timing effect towards Q4 is expected for our inhaler in the U.S. In Primary Packaging Glass, in the U.S., we now have secured more than 80% of our orders for the second half of the year. Which is in line with the order book coverage for the past years. Additionally, we have renewed contracts with our main U.S. customers, we definitely expect a catch-up here as well. For the rest of the business, including Europe and cosmetics, we also expect that that business will continue to deliver as planned. Based on our order book and sales forecast of our customers, we see growth in the second half.
Phasing-wise, top-line growth should also be stronger in the fourth quarter. I also want to outline that we are starting the commercial production of our WELA and Elite glass products in the second half of 2017, and that we are sampling our ready-to-use vials and encountering encouraging customer feedback. This will not affect revenues in 2017, however. On the margin side with PPG, it is also worth noting that here we will be cycling favorable comparables versus last year, given the furnace repair at Tettau that impacted profitability during the second half of last year. I had already mentioned that last year Q2 was by far the best margin quarter, the comps are a bit easier in the second half of the year. At a group level, we definitely have more visibility, but also know that the upside on our current estimate is pretty limited.
Us and our customers first need to catch up on the volumes missed in the first half of the year. I hope I've shared with you more insights of what to expect in the short term. I am now handing over to Rainer for a more detailed review of the Q2 financials.
Many thanks, Uwe, and good afternoon or good morning from my side as well. I am not going to comment the usual slide on revenues and profitability for the quarter, as this just has been done by Uwe. For comparison purposes, however, you will find this slide in the appendix section of the presentation. On this slide number eight, along what we have presented in Q1 already, we are comparing the reported Q2 2017 results with those of Q2 2016 for continued operations only, as both exclude the results from Life Science Research, which have been treated as discontinued operations for full year 2016 and subsequently for each quarter of 2016.
With that in mind, we can see that the reduction in adjusted EBITDA, coupled with some depreciation increase and partially mitigated by a decrease in taxes, which overall leads to a EUR 3.8 million decrease in the net income from continued operations. Let me describe the main positions here. The EUR 1.4 million increase in depreciation is in line with scheduled depreciation, so nothing out of the extraordinary here, as it also reflects the level of CapEx spent in the past. The one-off effects of EUR 0.5 million to include, among others, non-recurring costs occurred in conjunction with an M&A opportunity we evaluated in the first half of the year, but for which another buyer was ultimately selected for price reasons. The amortization of the fair value adjustment is, as in the precedent quarters, for a large part driven by the Centor acquisition.
As a whole, we thus achieved an EBIT of EUR 43.9 million in Q2, compared to EUR 50.3 million in Q2 2016. Below the EBIT line, the net finance expenses is essentially in line with last year. Less taxable income overall in the group accounts for the decrease in taxes year-on-year. On a half-year basis, the tax rate at group level remains stable at 30.3%. This led to a net income of EUR 25.1 million in Q2 2017, compared with our net income from continuing operations of EUR 28.9 million last year. After adding back the one-offs and subtracting the non-controlling interest and on the basis of a stable share count year-on-year, the adjusted earnings per share after non-controlling interests amounted to EUR 0.97 compared to EUR 1.08 in Q1 2017. Please move with me to slide number nine to review selected balance sheet and cash items.
Looking first at the equity portion of our balance sheet, we know the decrease of 1.5% compared to total equity from EUR 763.3 million at the end of full year 2016 compared to EUR 752 million as of May 31st, 2017. This decrease results on the one hand from the payment of the dividends recorded for the period under review and negative currency effects. As a whole, the equity ratio increased slightly from 32.1% at the end of full year 2016 to 32.9% at the end of Q2 2017. The EUR 30.1 million increase in the net working capital is slightly higher than what we have recorded over first half year 2016, and is essentially linked to a decrease in trade payables in a greater magnitude as we experienced during the same period last year.
This is essentially a function of the specific payment terms we have with different suppliers, and this can vary from one quarter to another. Measured in average, the average net working capital and percentage of the last 12 months, revenues were 16.4% compared to 15.8% at the end of last year and is in line with the expectations set out for 2018. Operating cash flow decreased from EUR 87 million to EUR 68.6 million year-on-year, a trend that is explained by the lower adjusted EBITDA contribution on the one hand, and the increase in net working capital I just mentioned. In absolute terms, and excluding Life Science Research for the first half 2017, CapEx remained practically unchanged year-on-year at EUR 35.4 million, and so was CapEx as well in relation to sales for the first part of the year, at a bit more than 5% for the first half.
This also means that the bulk of CapEx spend will come into the second half, with overall target remaining on a foreign exchange neutral and full year basis at approximately 8% of sales. Net debt amounted to EUR 812.6 million, which corresponds to an increase of EUR 24.2 million and is essentially driven by the dividend payment and the interest payments on our corporate bond. Based on the last 12 months adjusted EBITDA, calculated as of May 31, 2017, leverage therefore slightly increased to 2.7 times compared to 2.6 times at the end of last year. One additional comment on the debt, as you might have seen, this is in our quarterly report, the existing EUR 300 million senior notes maturing on May 19, 2018, have now been classified as short-term debt as required by the IFRS regulations and as mentioned as well in latest Moody's report published in June.
We are planning to refinance this bond in advance of the current financial year ending November 30, 2017. However, to be clear, we will not repay the current existing bond ahead of time. This would conclude my first review on the financials for the quarter, and I am handing back over to Uwe for the conclusions.
Thanks, Rainer. Moving on to slide 11, where we present you, in a compact way, all our ambitions for the short term and mid term. Our current assumptions led us to more precise expectations for the end of the year. For our revenue target, based on the trends that we have just outlined to you, we can confirm that we expect to land at approximately EUR 1.4 billion. We are cognizant of the fact that this supposes a strong second half of the year, and within that, a very strong Q4. In the light of the phasing of the revenues we are currently anticipating. Having said that, Q4 has always been our strongest quarter, as it is the ideal one, given that there are no holidays apart from Thanksgiving.
This is a trend we are currently preparing ourselves for from an operational standpoint on the basis of the orders we have and the numerous discussions we conducted with our customers. Regarding the other metrics, which are more within our control, such as profitability, earnings, and cash generation, our assumptions for 2017 are as follows. We continue to be more optimistic with regards to adjusted EBITDA, and we can adapt our cost structure to the temporary changes in order patterns and continue to work on efficiency improvements. Our expectations remain along the lines of what we communicated earlier this year. That is the midpoint of the range or approximately EUR 320 million. For the adjusted EPS after non-controlling interest, we are aiming for approximately EUR 4.25 this year. All the other objectives for this year, as well as goals for the mid and longer term, are unchanged as communicated before.
What I would like to do on the next page is also to recap a number of important milestones we have achieved this half year and that pave the way for future growth, in particular in specialty pharma. Three main initiatives I would like to cover on this slide. First, over the past years, we have been systematically upgrading our glass and plastics product portfolio. COP syringes and multilayer COP vials have been added before. During our last conference call, we talked about the license agreement we signed with the Stevanato Group to offer ready-to-fill packaging solutions for vial and cartridges based on the Ompi EZ-fill packaging design. Here, as I mentioned before, we are currently sampling these vials to our customers and we are encountering encouraging feedback. We will also offering RTU cartridges shortly.
As I have already mentioned before, we are starting to offer commercial quantities of Elite and WELA glass products starting Q4 2017. This completes a comprehensive and unique product line offering to address the high-quality needs of the injectable pharma market and especially for biotech drug market for both ready-to-fill and vial processing products. Second, there are clear opportunities arising from the specialty market, and I already touched on this earlier in the year during the full year 2016 earnings call. This is further evidenced by the large amount of biological and biosimilars currently in development and the current investments by CDMOs in smaller sized biopharma reactors. Here, we expect that the supply chain will have different characteristics As neither biotech companies nor CDMOs have a lot of packaging expertise, and this is why we have launched Gerresheimer Solutions at the beginning of the year.
As mentioned before, this is a business and product development outlet targeted for the specialty pharma market to offer multi-material platform system solutions all the way from conventional vials, cartridges, and syringes, to ready-to-fill customized solutions for packaging and safe application of complex biological drugs. I can report that we have made progress in structuring the organization, both with external hires on the commercial side, as well as allocating dedicated resources from our technical competence centers and the relevant businesses on the product bundling and developing side. The main three prerequisites are to master small batch production process, which we can, to have a very good insight into the regulatory and filing requirements, which we also have, and of course, last but not least, to display the widest range of injectable packaging and delivery solutions in the market.
Here we have made further progress during this year, and I wanted to show some examples for drug delivery solutions. Our product offering has been really bolstered in the past 12-18 months, as we can offer now baked-on, ready-to-fill syringes with a drastically reduced amount of silicone oil particles, ensuring the stability of drug formula during the period of medication storage. Metal-free and low tungsten syringes that exclude or reduce potential residues with tungsten. COP syringes, particularly suitable for high viscous formulations. Here we have been offering a product that we purchased from our Japanese partner, Taisei Kako. Starting next year, we will commence commercial production of our own produced staked-in needle syringes with a broad product range and a faster reaction time to customer demands.
Additionally, some of our own proprietary accessories, such as the Gx TELC, a tamper evident Luer lock safety seal, are also starting to encounter encouraging demand, and we now need to produce it in different sizes on the back of customer requests. One missing piece, if you want, in the specialty pharma syringe systems assortment are the safety devices for needle protection. Hopefully, this is a gap we will manage to close in the very near future. As I have mentioned earlier, we have a very diverse and promising pipeline for new product developments that is expected to contribute to future growth starting in 2018. We now need to execute on the business development and commercial front of this exciting, fast-growing, and high-value market segment before this starts to impact the top line in a meaningful way.
I'm personally glad to see the progress achieved by the teams here. Before we open the floor for your questions, some word of conclusion from my side. Clearly, the trend of the first half do show some improvements quarter-on-quarter, and we are very clear about the challenges we face ahead of Q3, and most importantly, Q4. Underlying markets are intact, contracts are in place, and the visibility is not changed compared to prior years. From an operational standpoint, I mentioned client centricity during the last conference call, and it remains paramount. We need to strictly monitor our customer schedules and the resulting demands, as it is a basis for our production forecast, and we have taken all the necessary measures in order to meet this demand throughout the second half of the year.
At all times, we control strictly all the drivers of margin performance as we are committed to our profitability target framework. Personally, I would hope that the performance of the first half of the year does not entirely obscure the steps we have taken in the course of the year to enhance our volume proposition by a more value-driven approach. I know there are still a few missing pieces in the puzzle, but I'm confident that we will close those gaps shortly. We have continued to lay important groundwork to support the growth strategy in the long term, and while this might take some time to be visible in our P&L, this is still a critical element of our daily focus.
Finally, we recently attended a QuintilesIMS presentation on the subject, four long-term mega trends that we have listed as part of our equity story are still extremely relevant, and from that angle, our general external environment has not changed. For now, Rainer and myself are happy to take your questions, and I hand briefly over to Severine for the Q&As.
Thank you very much. We are now ready to start our Q&A session, and the line will be open for any questions you might have. To register for a question, you need to press 9 star on your telephone keypad, and in case you want to cancel your question, you just need to press 9 star again. The first question will come from Falko Friedrichs from Deutsche Bank.
Hi, thanks for taking my questions. I have three, if I may. Firstly, could you share with us why you're adjusting your EPS guidance to the lower end while keeping the midpoint of your EBITDA guidance? Are there any changes below the line that we should be aware of? Secondly, could you share a bit more color on what is causing the order postponements in your inhalation business? If I remember correctly, you mentioned on the previous call that the business was performing very well in Q1. Thirdly, you stated the main part of your CapEx went into creating additional production capacity for Plastics & Devices. Could you maybe share with us for which product categories you're spending the most here?
Let me start with the adjusted earnings per share guidance, the EUR 4.25, which we have given out. The metrics below the adjusted EBITDA haven't changed. We believe that the depreciation for the group will be around maximum 7% for the year. We also believe that the financial interest or financial result will be around the number which we have given before, which is around the year 2016 number, which is approximately EUR 32 million up to EUR 34 million. Also the tax rate should stay at 29%. The reason why we have EUR 4.25, you can say it looks a little bit conservative, but currency effects and all the stuff we have to figure in, and the EUR 4.25 is a little bit more conservative. If you would calculate downwards from the EUR 3.20, you also can come up to EUR 4.30.
At the end of the day, it's a little bit calculation, whatever you have in mind, here or there.
Yeah. I continue with the CapEx question. On the plastic side, basically, the capacity increases are related to two main projects that are worth mentioning. Number 1 is capacity increase in primary packaging plastics. That is in the investments and of course our inhaler project in North America. Those are the two. In the glass sector, basically all the spending that we have is around the injectable product category and around providing for capacity step-by-step here for the new product that I have mentioned, and you are going to continue to see that as well in the near future. On the order postponements in Q2, I want to put that a little bit into perspective. We are, I think, by far the market leader in providing inhalers and contract manufacturing to most of the large pharma companies serving that business.
What we have seen here is, particularly with a couple of customers, a very soft Q2, based obviously on the demand pattern of our customers. We are expecting that part of that is going to return to normal in the second half of the year. In one case, actually, it is more of a shift of the orders into the second half of the year. On top of that, I mentioned that the ramp-up of the U.S. business pretty much hits the hot phase in the Q4 2017. We are basically running here on all cylinders we have installed, so to speak.
Okay, great. Thank you. Just one follow-up question on the guidance. Do I understand it correctly that revenue and adjusted EBITDA guidance is at constant currency while adjusted EPS isn't? If that is true, could you potentially share what sort of FX impact you factor in here?
The EUR 4.25 is also based on adjusted means, also currency neutral. At the end of the day, we see a certain risk here. The EUR 4.25 doesn't calculate correctly to the EUR 3.20 if you go downwards with the numbers which I provided with. We have taken here a little bit of conservative stance. You can have a higher number here, a little bit as a test. But again, there is fundamentally between the lines, no change. We will see at the end of the day, if the tax rate is exactly 29%, we have to have in mind is the financial result is around EUR 32 million to EUR 34 million. A million up and down plays for the adjusted EPS a very important role.
That's the reason why we take here a conservative stand on the adjusted earnings per share with EUR 4.25, because the little changes do have major impacts on this number.
Great. Thank you very much.
Thank you. We're going to take the next questions from Scott Bardo from Berenberg.
Thanks very much for taking my questions. First question, please, just relates to the flexibility that the organization appears to have on the cost side. If I remember back, post-crisis, where the company had quite a lot of destocking effects and impacts to capacity utilization, that was very apparent in negative operational leverage for the business, given your fixed costs, margins got impacted. That doesn't appear to happen this time. If you could just highlight what has actually changed, and whether this is a change for the future. A bit more details there, please. Second question relates to the Plastics & Devices business. I think, not only this year, but over the last few years, this business has not perhaps lived up to some of the higher growth rates we've seen in the past. You're pulling out asthma inhalation.
This year, I wonder if you could confirm whether this has also been the case in previous years, so this market coming off the board a little bit, or whether you have high exposure with customers that are not doing so well in this segment. Perhaps a little bit of flavor as to whether anything is changing in the end market, or your exposure to it, please. The last question for me relates to the drivers of the end market volume growth. I think you refer again to IMS volume growth trends for the industry. I think if I understand correctly, that a major volume driver at the moment is coming from the Chinese market, for which Gerresheimer has limited exposure and not been so successful.
I wondered if you could talk a little bit as to plans to move more firmly into some of these higher volume growth opportunities. Thank you.
All right. Thanks, Scott. I'll start with the flexibility, I think the most fundamental difference that you might keep in mind is that we have exited the tubing business, which means on the glass side, if I have a certain underutilization in capacity on the tubing converting side, I am fairly flexible in handling that because I have no furnaces anymore. On the Molded Glass side, this is from a capacity perspective, unchanged, we certainly have moved to a more flexible way on running our factories over the years. That gives us opportunities to flex costs up and down in a short term.
For this business, I want to caution, however, that if we would see a longer underutilization, we always would have to go and attack the fixed cost short term because those methods and tools we use, basically help for periods like we have seen, where we only see a temporary issue when we see the capacity coming back. At the tubular glass side, our flexibility has tremendously increased by not having the furnaces anymore. On the inhaler side, yes, you're absolutely right. As I said before, we have a very high market share, which means, we have a high exposure to that sector by nature. We have, by nature, a number of customers that we single supply. We are obviously depending on their success. In addition, I would say a couple of things that need to be observed.
While we still have a number of inhaler projects in our pipeline, we see continued development towards new products and new products coming to the market where Gerresheimer is a partner. What we have observed over the past is probably more cannibalization between existing devices and new devices, or better, actually by the medication, the new devices use versus medications as in old devices and have seen more cannibalization than we probably have seen before because we generally think that customers or patients stay fairly loyal to the device, even if the medication goes generic.
From that perspective, I would say that is, and quite frankly, we haven't launched a big one other than the U.S. project in the last two years, which basically means that we were at a timing effect on life cycle, where we probably saw a couple of negative impacts with some larger ones that actually, we will overcome, with the new launches that we have in the pipeline, in the future. Looking forward, I'm quite optimistic with that. Keep in mind that this is probably the device area, where for us it is fairly difficult to grow above the market, because of our already high market share. On the volume growth, I would say if you look at the growth for the next two years, I want to really give you a different perspective than what you have outlined.
That is the work of the last 18 months we have done, we have added a number of products into our portfolio that have enhanced value. That is actually to add a growth dimension to our portfolio, particularly for injectable drugs, and here, particularly for specialty products in the injectable and biotech market, where we have not participated on the growth opportunity as we should have been in the past. That actually, particularly for the next three years, if you take a look at our growth profile, will add significantly to our growth with those type of projects and products. You are absolutely right, that the volume growth for standardized products will actually only come out of the emerging markets.
What I can confirm this year is that we are doing fairly well in China again, even though that our exposure is particularly for standard products only in the tubular glass market with a significance. We are doing much better than we have done in the Brazilian market that is returning to normal. We have difficulties this year in the Indian market, particularly after the tax situations and changes and monetary changes we have seen. That is a very sensitive market to those things. I think we are reasonably positioned, but that has upside potential. However, for the next years, I think the real potential is in the new products and in the product pipeline of medical plastics that is heavily, and very heavily geared to the injectable market and not to the inhalation market.
Very comprehensive answer. Thanks. Is it possible just to clarify, of this 4%-5% growth that you foresee next year, how much of that is reliant, if you like, on this new wave of products? Is this just a feeling you have, or already are you in sort of discussions and commitments into next year for these new products? Thank you.
I think if it would be a feeling, they should have let me go already five years ago. No, it is hard discussions. It is already commitments. It's project that we are working on. I believe that the value of new products over the next three years on average, the contribution is around 2%-3% of the growth overall.
Wow. Great. I'll jump back in the queue. Thanks, guys.
Actually, there is no queue right now, if somebody wants to ask a question, it's probably the last opportunity. Maybe we can poll one more time, if anybody wants to ask a question by pressing nine star. It looks like there are no other questions. With that in mind, we can conclude the call. Sorry. Scott, you want to ask something? Go ahead.
Sorry. Thanks. I hadn't appreciated there were no further follow-ups. Yeah, thanks. I just want to understand a little bit this Peachtree development, because obviously this was strategically very important for Gerresheimer to enter the North American injectable plastics market. We've talked about this for some time. I know there's been a high degree of investment in this facility. Just to understand, if we consider 2017 being X% of the full volume of that facility, can you give us some degree of, is next year twice the contribution of this year, or just to help us understand how tangible and how timely the scale-up is of this facility.
How can I phrase that without talking too much about things that I'm not allowed to talk about and give you some guidance on that? What I would say is that, a significant contribution of our expected 2018 growth in Plastics & Devices will come out of this product compared to 2017.
Which explains to you that the volume output very much is geared to the very end of the year, and that we achieve already a high output level then. That makes the run rate going into 2018 much, much different.
Okay. Thank you very much. Understood. No, I'll call it there. Thanks very much, Uwe. That's much appreciated.
You're welcome, Scott.
Okay. Well, if in the meantime, you have any other questions, the Investor Relations team is there. Just as a reminder, the next set of results will be released on October 11th. Thank you very much for joining us today. Bye-bye.
The conference is no longer being recorded.