Earnings Call: Q2 2016

Jul 7, 2016

Welcome to the conference call regarding the publication of Garezheimer AG's Q2 Results 2016. 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 Mrs. Nicole Winkler, Head of Investor Relations at Gareseimer AG. Thank you. Hello, everyone, and thank you for joining us to review our Q2 results 2016. With me today are Urs Rohof, our CEO and Rainer Brujan, our CFO. As we did in the past, we are presenting a set of slides to accompany our remarks on this conference call. The quarterly report, the slide presentation and the press release are posted on the Investor Relations page of our website at gerthesheimer.com/investorrelations. Please note that this call is being webcast live and will be archived in our website. Now 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 record for the purpose of this conference call. Our agenda for today starts with presentations by Uwe Rohof and Rainer Brochon. After that, we will enter into a Q and A session. Now it's my pleasure to turn the call over to Ube. Thanks, Nicole. Good afternoon, everyone, and thanks for joining our Q2 conference call. I would like to talk first about the developments in our key markets. On the primary packaging glass, we see very good growth with packaging products injectable drugs in North America. This is mainly the result of our recent investments in productivity and quality. New product developments in this segment are expected to contribute revenues in 2017. These include Elite Glass, which represent a high value packaging solution made from borosilicate glass and Vela Packaging, which is a premium value packaging solution with an engineered glass formulation developed by Koning. The latter is still at the prequalification stage. Our newly constructed tubular glass plant in India will start contributing to revenues in 2017. In Europe, we are gratified to witness good growth in cosmetic glass products continuing in the second quarter. With our Plastics and Device division, we recorded strong growth with PENS and Diabetes Care product as well as solid growth in inhalers, principally in Europe. Our new inhaler project at our Peachtree City plant is expected to start contributing to revenues towards the end of 2016. Our most recent development of a COB Syringe with an integrated needle launched last month at our pharma days in the U. S. Is another interesting growth prospect for the coming year. It rounds out our product line of high value packaging and delivery solutions for new sophisticated drug formulations. Significantly lower tooling and engineering revenues compared to prior year's quarter are expected to pick up in the second half of twenty 16. Fluctuations in the tooling business are normal and primarily track the billing of large scale customer projects. For the year as a whole, we continue to expect tooling revenues of the same order as in the financial year 2015. Our project pipeline is substantial and contains a large number of different products with exciting future prospects. In the emerging markets, we saw some weakness in our revenues, mainly affecting our Primary Packaging Glass and Plastic Business segments. This is the result of the recession in Brazil mainly. Generally speaking, we are highly optimistic with regards to our investments in China, Brazil and India because long term growth prospects are intact. After all, the emerging markets are still among the growth drivers for global spending on medicine. Portfolio changes had a significant impact on our revenue base with Centaur contributing at the expected level. However, compared with the prior year's quarter, we had to forego the revenues from our divested tubing business as well from the portfolio adjustments we executed in prior year. Overall, despite our flat organic growth curve, the product mix contributed nicely to our margin increase in the 2nd quarter, which ended up higher than expected. So let's move on to the next slide. All in all, the Q2 of 2016 generated a good set of results. While organic revenue growth was flat, mainly due to the timing effects of the tooling and engineering revenues, we managed to exceed expectations as regards to the EBITDA margin. Again, as I have already pointed out, this is the result of our favorable product mix this quarter. Lower margin product and service revenues came in below expectations for the quarter. But there that once built, they will have a slightly negative impact on the margin. And for this reason, we do not really view this development as relevant for the full year. We generated adjusted EBITDA of EUR 84,700,000 in the Q2 of 2016, which reflects excellent growth of 17.5% on the prior year quarter. On the one hand, the increase at group level came from the inclusion of Centaur and on the other hand from the superb performance of our U. S. Primary Packaging Glass segment, despite the negative impact on the margin from the sale of the glass tubing business in November 2016. It has exceeded our expectations as of the beginning of the financial year. The higher group adjusted EBITDA base is also well reflected in the growth of adjusted earnings per share in the quarter, which were up by 34.5 percent to EUR 1.13 hence, noticeably higher than the EUR 0.84 just a year ago. So last but not least, our operating cash flow was also up on last quarter. In fact, it was up by more than 50% to EUR 60,500,000 driven by higher adjusted EBITDA achieved in the 2nd quarter. Overall, the favorable impact of our portfolio changes last year with the acquisition of Centaur, the sale of the tubing business and portfolio adjustments continue to make their presence felt in all our Q2 financial figures. This clearly demonstrates that our business is moving towards higher profitability and cash generation. To sum it up, we had a good second quarter in 20 16. And now, 6 months into the year, we are confident with regards to how our business will develop in the remainder of the year and in years to come. Let me now hand it over to Rainer, who will walk you through our financials in greater detail. Thanks, Uwe. Ladies and gentlemen, welcome also from my side. Let's have a look at the revenue development for the Q2 2016 on Slide 7. On group level, revenues were up by 4% and amounted to €370,500,000 This growth was driven by the first time inclusion of Centa in the second quarter. On the other hand, the growth rate was mainly dampened by temporarily lower tooling and engineering revenues quarter over quarter. In the tooling and engineering business, this is just a matter of normal variation that you can have. And for the full year 2016, we expect to have tooling and engineering revenues on prior year level. Organic growth in the 2nd quarter was therefore 0%. In the Plastics and Devices division, reported revenues increased by 14.6%, good performance mainly driven by Center. Looking at the performance in the Primary Packaging Glass division, you might have expected to see a downturn in revenues as a result of the sale of our Tubing business in November 2015 as well as the closure of our plant in Milvane in Q3 20.50. But with our strong growth, especially in the U. S. Primary Packaging segment as well as our cosmetic business, we managed to have only a decline of minus 7.5% in the reported growth. Our organic growth rate came in at +3.6 percent in Q2 2016. And finally, in Life Science Research, in the 2nd quarter, revenues were slightly down by €1,800,000 to now €24,500,000 This is mainly attributable to a temporarily weaker market compared to the prior year period. To summarize, even with negative foreign exchange translation effects and temporarily lower tooling and engineering revenues, we managed to grow by a solid 4% growth rate in the Q2 of full year 20 16. The developments in the first half of twenty sixteen were positive, fully as expected, and we expect organic growth to pick up mainly in the course of the second half full year 2016. So let's move on to the adjusted EBITDA slide, and that's Slide number 8. The adjusted EBITDA margin amounted to an excellent 22.8% and was therefore strongly above the level of Q2 2015, where it had been 20.2%. Here, you see the enhanced earnings power from the center inclusion once again. The group's adjusted EBITDA came in at EUR 84,700,000 in Q2 twenty sixteen compared with €72,100,000 in Q2 last year. In the second line on the slide, you can see that the margin in Plastics and Devices jumped up from 21.5 percent, Q2 2015 to now 27% in Q2 2016, 16, mainly because of the high margin center business. And also the lower share of the lower margin tooling and engineering revenues contributed positively to the margin increase in the business. Therefore, the Plastics and Devices division was clearly the main driver behind the margin expansion in Q2 2016. In Primary Packaging Glass, we can see positive effects in Q2 with a strong business development in the U. S, where we were able to increase sales and margin. Overall, we were able to generate a 22.7% margin, which was even stronger than the margin level in Q2 2015 with 22.1%, including the glass tubing business. So we are happy that we are able to more than offset the now missing contribution from the recently sold glass tubing business that was still included in last year's Q2. Therefore, we are very satisfied with the margin development in Primary Packaging Glass, and we can say that the margin level even surpassed our expectations. And finally, in Life Science, we managed to increase the margin to 16.1% in Q2 2016, which is markedly higher than the margin of 14.5% in Q2 2015. We made this possible because of an improved cost position. Overall, we managed to show an excellent margin performance on group level in Q2 2016, not only because of the positive impact from the integration of Centa, but also by having positive margin effects through our strong portfolio optimization efforts and strong execution. Clearly improved earnings profile of our business in Hable enabled a 260 basis points margin growth on group level in Q2. So this clearly was an excellent start for the year to the year in terms of earnings performance, which came in fully as expected in Q1 and even a bit above the expectations now in the Q2. Now please move on with me to Slide number 9. Here you can see that this was a very successful quarter financially. The key points are, as already discussed, adjusted EBITDA was up by 70.5% and amounted to €84,700,000 Depreciation was only slightly above the prior year figure and amounted to €21,900,000 Therefore, adjusted EBITA was up even a bit stronger than adjusted EBITDA and amounted to EUR 62,800,000 plus of 23.6%. Then you see the one off that we recorded. You can see that now in Q2, we had a total of only minus €500,000 in one off effects, which were mainly coming from our portfolio optimization that we implemented in 2015, but were only now bookable in Q2 2016. This minus €500,000 in one off effect in the Q2 2016 compares to minus €6,700,000 in last year's Q2. While the one off effects were a lot lower quarter over quarter, amortization of fair value adjustments were up quarter over quarter, coming from the effect of the purchase price allocation from Centa. The figure in Q2 20 16, including Centa, was minus €9,300,000 compared to minus €3,700,000 in Q2 2015, still include excluding Centa. And for the full year 2016, the total Centa effect that you should expect is approximately US31 $1,000,000 in the fair value amortization. Overall, our EBIT grew by 32.5% in the 2nd quarter and amounted to EUR 53,000,000 which is the highest EBIT figure that we ever recorded in the 2nd quarter, so we set a new record there. Going further down, net finance expense of €8,800,000 was slightly higher than last year in Q2, even though we increased our debt level markedly in the meantime. Overall, that is a very good figure, which again underlines the attractive interest rates that we got as part of our refinancing activities last year. Accordingly, earnings before taxes amounted to EUR 44,200,000, a plus of approximately 35% year over year. Then finally, taxes, which are a bit lower than in the last year, but this is just consequence of a reversion towards a normal 29.5 percent income tax rate. Actually now, in Q2 2016, the tax rate was 29.6 percent. So net income was up by 38.9 percent to €31,100,000 which is an excellent development on the bottom line. So let me now quickly reconcile for you the net income to adjusted net income with a focus on adjusted net income after non controlling interest. This is the basis for our dividend payment. As you know, we have that here on Slide 10. The reconciliation can be described in a few steps. I already explained the one off effects and the fair value amortization on the last slide. Here on Slide 10, these two positions are shown in lines number 23, net of their associated tax effects. The net figures for the add back are plus €400,000 in total one off effects and plus €6,200,000 in amortization of fair value adjustments. After the FX, adjusted net income was up by 29% and amounted to EUR 37,700,000 in the quarter. And so overall, there's a strong increase in adjusted net income after non controlling interest and therefore also in adjusted earnings per share, which is up from €0.84 to €0.0113 per share. With this, we've set a new adjusted earnings per share record for Gerasimen in the Q2. Please move forward with me to Slide 11 and just have a quick look at the development of our net financial debt at the end of May 2016 compared to the previous reporting date on February 29 this year. Overall, the main message is that the net financial debt position was basically unchanged quarter over quarter despite our annual dividend payment that we made at the end of April, where we distributed almost €27,000,000 to our shareholders and the payout of the fixed coupon of €15,000,000 in Q2 for the bond. Including the dividend payment as well as the payout of the fixed coupon, our leverage remains unchanged at 2.9x adjusted EBITDA. Overall, a very good number. Let's then have a closer look at the key balance sheet and cash flow figures on Slide number 12. Overall, a good set of results that we achieved in the Q1 2016 as well as the Q2 2016 is reflected also here, meaning our balance sheet remains healthy and cash flow development very favorably. So when we look at the group equity, we could see that this was basically flat quarter on quarter and amounted to €687,800,000 as of May 31, 2016. Compared to the last reporting date, the positive net income effect was compensated by changes in foreign exchange rate and the distribution of the dividend. Therefore, also the equity ratio remained unchanged at 29.2%. Let's turn to our net working capital. Also here, we saw barely any change compared to the figure that we reported at the last reporting date. Net working capital amounted to €230,700,000 at the end of May. Average net working capital in relation to last 12 months revenues improved markedly to a strong 17.2%, now already getting close to our target of 17% for the whole year 2016 and beyond. So this should be the run rate going forward, and it means that we are fully on track. Then looking at the operating cash flow figure in Q2 20 16, you see that it came in at €60,500,000 which means that it's roughly 50% higher than the figure that we generated last year's Q2. As indicated before, this development is clearly driven by the first time inclusion of the very profitable center business. Besides, all three divisions made a positive operating cash flow contribution. And don't forget, by the financial year 2018, we expect the operating cash flow margin to be at approximately 13%. So that would be another very strong improvement. In the line below, you see that we generated EUR 16,100,000 in free cash flow in the 2nd quarter, which was substantially above the €4,200,000 that we generated in Q2 2015. This again reflects our increased cash earnings power that we now have including the Center business. Finally, looking at the CapEx figures, again, nothing surprising, everything in line with our expectation. There's nothing to add to that. So overall, solid balance sheet figures at the end of Q2 and the excellent second quarter performance is for sure reflected in the strong cash flow figures. With this, I hand it back over to you. Thank you, Reinhard. Q2 2016 came in line with our expectation. And therefore, again, we fully confirm our guidance for the fiscal year 16. Again, we're also fully reiterating our indication for the years 2016 to 2018. So our target is and will remain to profitably grow our company. For 2016, we continue to guide for approximately EUR 1,500,000,000 revenue at constant currencies, which translates into a 9% FX neutral revenue growth. Underlying organic growth will be about 4% to 5%. Our guidance continues to be based on an assumed euro U. S. Exchange rate of EUR 1 for US1.12 dollars Adjusted EBITDA is expected to come in at approximately EUR 320,000,000 at constant currencies. Centaur, as part of the Plastics and Device division, will generate a full year of adjusted EBITDA contribution compared to the Q4 2015 contribution of approximately EUR 11,000,000. CapEx requirements will be at about 8% of FX neutral revenues, substantially below historic CapEx levels. The lower CapEx rate reflects the structurally lower CapEx intensity of the business driven by the disposal of our tubing business, the shutdown of our millage plant and the purchase of the center business. Also, average net working capital will improve from 19% in 2015 15 to approximately 17% in the coming years. And as Reinhard pointed out, we already reached this level last quarter. We are also fully reiterating our indication for the years 2016 to 2018 with a CAGR of 4% to 5% organic revenue growth. For the adjusted EBITDA margin, we still target approximately 22% by fiscal year 2018. And CapEx requirements as in 2016 will stay at about 8% of revenues. So let me finish in saying, Gerasimo is well prepared for the future. We see very healthy market dynamics supporting our growth with stable and highly diversified growth prospects based on long term megatrends. The portfolio changes in 2015 and our growth initiatives with a number of new products coming to the market in the next years have further improved the robustness of our business model. This reflects in the larger product portfolio, greater regional diversification and an expanded customer base while reducing capital requirements. The business is more profitable after our tubing divestment and excluding Centaur, And the Q2 figure makes this visible. We focus on deleveraging while continuing to invest in the future of the business to generate high shareholder returns also in the future. And if there are interesting opportunities, we would be ready to act based on our good financial profile. So we are fully committed to move forward on our path to becoming the leading partner of the Pharma and Healthcare Industry worldwide. Therefore, we have high confidence in the setup of our company, and I am excited about the future of Gerasimo. With that, I would like to hand it back to Nicole. Thank you for your presentation. So let's enter into your Q and A session. The lines are now open for any questions you may have. So the first question comes from Daniel Vendors from Commerzbank. Thanks for taking my questions. 2, if I may. Firstly, I'd like to go back to Centa again. If I calculated it right, the revenue level of Centa was around €28,000,000 €29,000,000 in the second quarter, which would be below Q1. Can you remind me of any seasonality there you can see? And how should we think of that revenue level going into Q3 and Q4? Because if I calculated it right, you wanted to achieve something like EUR 143,000,000 for the full year. And second question is regarding the organic growth in Primary Packaging Glass, which was, I think, 3.6% in the second quarter. Q2. And is that something we should be thinking of going into Q3 and Q4 as well? Or what other factors are influencing that maybe for the remainder of 2016? Thank you. Yes. And this is Eduardo. I start with the organic growth for Primary Packaging Glass. Number 1 is we have not and will not provide growth guidance for a segment in a quarter. The 3.6% actually consists out of various sectors, as we have pointed out. We had good underlying growth for Pharma Products in the United States. We had good growth for Cosmetic Products in Europe. On the other hand, as we pointed out, emerging markets for Primary Packaging Glass were softer. So that is reflected in those growth rates. I think and that is why we keep our guidance of 4% to 5%. If you take a look at our overall business perspective, I think we clearly expect obviously that the second half of the year is going to be stronger than the first half of the year, and that is true for our complete setup. And I'll let Rainer answer the Centaur business, but I think you are your calculation here is quite wrong. I think the 2 year calculation is wrong because the Centaur revenue number is above the number in the Q2 last year where it was 35,000,000 dollars And we said already that the volume was higher. So when you make a calculation and perhaps you try to reconcile the organic growth rate, how you come to 0, you have to deduct from the last year number. The tubing business, like always, which is €9,700,000 then you have to take out the portfolio optimization because we closed our Millville operations, which is the main reason of approximately EUR 10,500,000. And then you take in the center number from plus EUR 35,000,000 from last year approximately. And then you come to this comparable figure, which you need. And you would never come to the result, especially on the profitability, if you don't have a higher number for Centa. If you wouldn't assume that the margin is increasing for Centa well then above about 50%. So we are at the same level like before, about 40%, and that's what we have in mind. And then you come to the numbers, which I said before. So your calculation there was well. Okay. Thank you. Okay. Now Gunnar Romer from Deutsche Bank. Gunnar Romer, Deutsche Bank. Thanks for taking my question. The first one would be on the weakness in the emerging markets. Could you share with us or specify what the revenue decline was in the Q2? And in this context, if you could please remind us of what the growth trajectory in emerging markets has looked like before? Then secondly, twofold question on your guidance. Firstly, on the expected uptake in the revenue growth in the second half, is that just going to be due to a recovery in the tooling business? Or is there any other factors? And if so, which factors? And also, I think on the timing, should it be similar growth rates in Q3 and Q4? Or will it be more back end loaded? And the second part of the question is on your earnings guidance. I think in your prepared remarks, you commented that Q1 earnings were in line. Q2 was slightly better. Would that mean that it's now fair to assume the upper end of your adjusted EBITDA guidance for 2016 is more likely than the lower end? And what would be the main drivers of fluctuation within that corridor? Thank you. There are a lot of questions. And unfortunately, my answer is always the same. We provide one guidance, not the separate guidance for the first and for the second half of the year and also not a second, not a guidance. But I can give you some clarity on the extent. It is correct on the earnings side that Q1 was in line and that Q2 was a little bit better. That is correct. And it is also correct that on the revenue side, Q1 was in line and Q2 was a little worse than we expected it. We commented already on the tooling and engineering revenues. But I can also confirm that it's not only the tooling and engineering revenues we expect to pick up in the second half of the year. That is also true for other important parts of our business. And if you run the numbers, you would also probably see that this is necessary to come to the 4% to 5% revenue guide. On the other hand, higher tooling and engineering revenues at a lower margin have always a slightly dampening effect on the overall margin. This quarter you saw the opposite. So I want to remind you of that. Coming to the emerging markets, yes, you have an excellent point here. The trajectory in the past was fairly favorable. We have seen in different markets growth rates between 5% 10% over years. This is a variety of growth rates in the various markets, the most relevant for us are always Brazil, China and India. And this year we see pretty much a decline of the revenues mainly driven by the recession in Brazil, which is not surprisingly hitting us because we are in plastic Primary Packaging by far the market leader. So if the market sees an impact, the market leader generally is hit as well. We take that quite frankly fairly lightly because we are investing at this time in all of our emerging markets going forward because the long term growth prospects are intact. And we also know how to deal with situations where you might have a temporary decline. And I think that offers opportunities in those markets as well. So for us, this doesn't change anything on our strategic direction for the emerging markets. I would even so want to add that it's rather accelerate our activities to do even better and do things faster. Thank you very much. Maybe just a quick follow-up on emerging markets, if I may. Any kind of indication from your side? Are we talking revenues down in the single digits? Or is it really significant? Any comment on that would be helpful. And then one question to Rainer, technical one on fair value amortization. What would be a fair number for the full year? I think you indicated the contribution from Centaur, but I was looking for the combined number for the group. If I take the Q2 run rate, then I would end up at around SEK 38,000,000. Is that a fair assumption for the year as a whole? Sorry, I'll answer the emerging market question first. So our overall revenues in the emerging markets were about 13%, a little down from where it used to be and you actually have 2 effects. 1 is obviously the change in the portfolio with the Center acquisition. On the other hand, we had the largest decline of revenues, as I said, in Brazil, which is about a little bit more than 3% of the total revenues of Gerasimo. So when you can easily do the calculation. If that is a 10% or 12% or an 8% decline, it really doesn't matter that much. I would say that it is true to say that we have the largest decline in Brazil, as we pointed out, compared to that. The development in the other emerging markets was much more moderate or flat. Coming to your question, the 38,000,000,000, looks as a good assumption, I would say. Great. Thank you very much. Okay. Then we have a follow-up from Thorben Teichsler, Haakon Aufreichsler. Yes. Hello. Thanks for taking my questions. I have one actually on Life Science Research. You used to say that if you surpass 50% margin, you'd be looking to sell it. Now it seems you are doing further streamlining there on the cost side, trying to improve profitability further. How, let's say, determined are you to sell this business in the short term? Or is it more a wait and see approach and if somebody comes around? Or what's your approach on that? And then related to that, what who would be a natural buyer for this? Do you see this rather within the industry? Or would your feeling be that it's rather somebody from outside, some financial investor? Or yes, what your thoughts on that would be interesting? Yes. Life Science Research, you're right. We are working on our profitability like we do on all parts of our business, also in Life Science. I've said that last time. We have started some initiatives, change shift model, have working also with new machines and so on and so on. So takes in right now, we have now a better margin even with lower revenue. On the other side, we always said that life science is not strategic for us long term. So we always said that we and we also said last time that we're validating all options and sale is also an option. So and for sure, we also had some question and we also in discussions. But there is nothing to tell more about that right now. All right. Okay. And then maybe a short question on the Brexit. I mean, overall, the volume of contracts you do in British pound, how much of your total sales is that? And do you expect any major repercussions for you really from that, if it and however it happens? So first of all, you're totally right. That's a minor theme for us right now. Perhaps approximately overall EUR 40,000,000 are with Great Britain there of half of that is then calculated in euros. Okay. So negligible actually. Yes. It's really, really low. It's a low number for us. Okay. Now next is Volker Brown, Bankhaus Lampe. Yes, hello. Thank you for taking the question. It's actually related on the outlook on cash flow. You mentioned the midterm goal of 13% operating cash flow margin, which, if my math is right, you already reached after the 1st 2 quarters this year. And also the guidance related to CapEx shooting for 8% of sales is currently in a ballpark of 5% of sales. Have I missed any substantial investment projects in the next, let's say, 12 months? Or to me, it appears that the cash flow guidance is somewhat conservative and also in that regard also the guidance midterm with regards to net debt EBITDA and these levels. Any updates here? Yes. I think you did a good calculation and found out that we are behind our CapEx spending for the year, but we still intend to spend 8% CapEx for this year. So expect for the second half of the year a higher cash out for CapEx, and that is pretty much the timing how the project fall. We are actually currently right now in a major repair of the furnace in TETRA with the capacity utilization. We have another impact on larger products, as I pointed out, and projects in the pipeline. So we have a higher cash out for CapEx in the second half of the year. And we pointed already out that we are a little bit ahead on our net working capital improvement and have reached that goal almost already in the second half of the year. That is why I think the first half looked quite good. But I think for long term, you should be good with our guidance and we do not believe that this is conservative. We do believe that it's realistic. Yes. And you also asked for net debt. We have given out the target also last quarter, which is that we would like to be at 2.5 times net debt to EBITDA at the end of 2018. Yes, it looks conservative and you see our current run rate. But again, Uwe pointed that out in his speech, we are also ready to do some acquisition left and right and the 2.5 is a number which is our target, which we want to reach and where we feel comfortable with, which also saves our investment grade rating, which is then important for the bond refinancing in May 2018. Okay. So that means that leaves room for some, let's say, bolt on acquisitions in the next 2 years? Yes. And coming back to the CapEx budget, is that the project in the pipeline, could you be a bit more precise either regionally or also product wise what that's what this could be? No. Actually, we don't guide on CapEx spending for single project regionally. Obviously, as I said, we have a furnace repair that always takes a lot of that. That is actually going to happen in Europe. And other than that, we said that we have projects in India, which is completing the facility. We have the Peachtree City project that is driving this. And then if you take a look at the rollout of our standardization machine program that basically happens in all parts of the world. So I think overall, it follows quite well the revenue pattern that we see, maybe with a little bit higher impact in our growth regions and where we target to launch new products, quite normal in our business. Okay. Thank you. Okay. Then we have follow-up from Paolo Scott, Berenberg. Yes. Thanks so much for taking my questions. Yes. So first question, please. Obviously, I'm pleased to see you reiterate guidance this year and margin guidance for 2018. Although 22% margin guidance for 2018, it appears you've more than achieved that in the Q2 this year. So what I really wanted to focus on a little bit was the dynamic particularly in the margin for Primary Packaging Glass, which seem to be tracking pretty favorably considering the high margin disposal of the tubular business. So could you put some comments a little bit as to is this sort of one off favorable regional mix or product mix? Or is this sort of a sustainable level that you believe you now with your efficiency measures can compensate for the disposal of Tubular? So if you could talk a little bit to that, please. And also just a small point, please, on the revenues. I had in my mind you were losing around €27,000,000 revenues for the Primary Packaging Glass business this year as a result of the disposal. Can you just confirm to me whether the number is right and broadly what we've had thus far? So that's question number 1, please. And probably best I come up with my 2 follow ups after that then please. I can start with the last one. We said last year the Tubing business were approximately €34,000,000 and the portfolio optimization had revenues of approximately €16,000,000 That's what we were losing on revenues for the full year. Thank you. And what do we have thus far from Ryanair? Sorry? For H1? For H1, one second. It's for the Q2, it's 9.7% in Tubing and 10.5% in portfolio optimization. And for Q1, we have approximately for the Tubing business, dollars 8,000,000 and for the portfolio optimization, we had approximately $4,000,000 I think. Thank you. So on the margins for Primary Packaging Glass, we always try to improve our margins. That is obviously the core of the volume business. But you should also not forget, Scott, that it is in this business utilization driven. So if you have a good top line, the incremental on the margin is also good. And we have seen that in the first two quarters in Primary Packaging Glass. We did not have a furnace repair in the first half of the year, so you have to figure all this in. I did already tell you that I have a furnace repair in the next quarter, so keep that in mind when you compare the margins. And unfortunately, even though that I like the margin we put in as a responsible Board member for this business, I would say one good quarter with the margin doesn't make a year. And I still have to work my butt off to further improve the margin. So I would be not comfortable here to declare victory today. Understood. But if I was to put it like this, I mean, do you think the full effect of the efficiency measures you made are really shining through now? Or are there still many more of these benefits still to come, would you say? You have always wins and losses in a business. This is never a set that is probably both type of spreadsheet model because you can have in one business a lower margin this year compared to the next year. I'd say generally, I think we made good progress on the profitability levels. And I would also say generally, I see further room for improvement. But I would also think that most of the low hanging fruit has been collected already. Super. Thank you. So one more just technical question and one bigger picture, please. So just technically, you mentioned that tooling revenues will be broadly the same year on year. So just can you as a percentage of that business, can you give us a flavor for what we've had thus far for the first half? Obviously, not much in the second quarter, but for the first half, what percentage of full year revenues have we had just so we can get a feeling for how weighted it is in the second half, please? And a bigger question for me was kind of intrigued by your comments over about some of these new product developments that you've been working on. And certainly, I had very much put these in mind as being sort of high risk or minimal potential for accelerating group revenues. Can you put a little bit more flavor behind some of the efforts and launches you've got going on at the moment? That would be very interesting. Okay. Number 1 is unfortunately, I cannot help you much with the tooling revenues. Otherwise, I have to guide those every quarter. And the problem with the guidance is I don't know them for the next quarter because they have a very strange billing cycle. As I told you, all I can tell you is that I have discussed the pipeline very recently with our engineering department. And I can tell you that we have probably a record number of products in the pipeline. So we I think the pipeline is full. That does not necessarily translate into high tooling and engineering revenues as we have always pointed out. But compared to where we have been, I think the quality of the pipeline is very good. And therefore, I'm quite confident that our billing will pick up significantly in the second half of the year. Okay. Thank you. And maybe we beat prior year. So that's still what I'm hoping for. In billing, you mean? Sure. In billing. I'll also recollecting Reiner because eventually I know. But it's as you know, the tooling and engineering is one piece of what we want to have out of it is part revenues, projects that translate into long term contracts and that is what we why we are doing it for. So I just do not want to put too much emphasis on the emphasis on this segment because the profitability of the business is determined clearly by our parts business and not by our tooling business. Yes, understood. And the question about some of these sort of growth projects that you've been working on? Sorry. Yes, And I think your view on it is not wrong because we are in an environment that is a pharmaceutical industry with high barriers to entry. So if you launch new products, that means you have to go through extensive validation phases, product approvals, etcetera, and you need to find customers that qualify, put that rugs and go through stability, so time to market takes quite a bit. Particularly with those type of products we are launching here because those are targeted more to the biotech market with high value packaging for highly viscous drugs or drugs with complex biological structures that require special packaging or special delivery. So this is more to see as longer term growth prospects than something we know that jumps through the roof already next year. So I would not look at it that way. That is something that addresses the specialty pharma market in no longer term. But I think that once will become an integral part of our value offering for that segment that has the highest growth on medicine spending in the Western world. So that's why I think it is particularly important for Geras Heimer to execute well on those developments. Very good. Thanks very much, Chris. And we have a follow-up from Sven Kirtan from DigitPark. Yes, thank you. I have an accounting question. Could you please explain the EUR 6,300,000 in finance income? And also that seems to be offset somewhat in the higher finance expense of EUR 15,100,000. Could you please explain what's behind that? Perhaps you can repeat your question again because I couldn't hear it correctly. So you're asking me about the financial income. Exactly. The financial income was SEK 6,300,000 and the finance expense was quite high. It was SEK 15,100,000 that seems to be offsetting some of the something of the finance income. So I just was wondering what is behind that? Yes. Give me some seconds to have a look into it. Perhaps you have another question. I have to check that later on. I will come back to you, okay? Okay. Thanks. Yes. Okay. Then Gunnar Romer once again Deutsche Bank. Yes. Thanks again for taking my follow ups. Three quick ones. Firstly, on the furnace repair, you indicated, is that going to be a Q3 event only? Or will that stretch over into Q4 as well? Then secondly, I'm still struggling a little bit with the organic growth in the quarter relative to your full year guidance. Based on my calculations, the impact from emerging market revenue decline should be more or less neglectable, 10, 20 basis points drag maybe. Then even if tooling revenues were close to 0, then that should have dragged down organic revenue maybe by 200 basis points, which would still mean you should probably be more in the region of 2% organic growth, while you have reported flat organic growth. Just curious from a big picture perspective whether you can help me understand what's going on because I think your comments on all other parts of the business actually sound quite positive. So I'm struggling to find the missing link here. And then last but not least, on RTF IV, if you have an update on that for us, please? Yes. RDF4, I can say we are very pleased with the developments in our Brinde facility. So everything is moving in the right direction. Continue to make progress on good line utilization on that line. So that is, I would say, all good. On your Q3 question with the furnace repair, absolutely correct, full Q3 impact and only Q3 impact for the furnace repair. And where I probably cannot help you with on the Q2, obviously, our flat organic growth rate is correctly calculated. And I can repeat my numbers again. And I think at the end of the day, and I think that is what going forward, what you have to consider, I think you are right, the drag on from emerging markets and it's 13% of overall revenues for the full year is not substantial. I would agree to that. I think the same is true for the tooling revenues. They are in the ball if they end up in the ballpark. But due to the high fluctuations in the quarter, I can tell you that in the quarter, it can be quite substantial because you have to keep in mind how much was in the previous year quarter. And whatever you use as a number, you cannot divide by 4 for an average quarter, unfortunately, in that business. And that might make it so difficult to look at it. That is why I'd say if you take a look at the annual guidance, I can only advise you to neglect that impact pretty much for the quarter to neglect that impact for the quarter for the Tooling and Engineering revenues and look at the full year. As you said, the baseline of the business is intact, And that is why we are confident that we will achieve our guidance, absolutely. So let me give you some numbers. Let me give you the numbers again. We had revenues in Q2 2015 of €356,400,000 you take out the Tubing business of €9,700,000 you take out the portfolio optimization of €10,500,000 then you end up at €336,200,000 then you add on the last year center number, which is then approximately €35,100,000 And then you have because these are reported figures, you have an ex effect of whatever €0.8 €8,000,000 or whatever. And then you come to €370,500,000 for Q2 2015, and that's exactly the €370,500,000 which we have in Q2 2016. So therefore, it's 0 growth. That makes perfect sense, Rainer. It was more about the composition and the potential effects on from the tooling. But I think I had to give it a try anyway and I appreciate it. Yes, but you should allow us that we have stay also on the numbers because otherwise, it would be problematic for us to. All right. Thank you. Thank you. So are there any further questions? So if there are no further questions, we would like to thank you for joining us today. And please note that we are going to publish our Q3 results for 2016 on October 6. So thank you so much.