Earnings Call: Q2 2015

Jul 9, 2015

Welcome to the conference call regarding the publication of Gareseimer AG's Q2 Results 2015. 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. Anke Lenard, Corporate Senior Director, Investor Relations and Creditor Relations at Gerasheimer AG. Good afternoon, everyone, and thank you for joining us to review our Q2 results 2015. 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 atgaroseimer.com/investorrelations. Please note that this call is being webcast live and will be archived on our website. With me today are Uwe Rohof, our CEO and Rainer Broujung, our CFO. 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 read into the records for the purpose of this conference call. Our agenda for today starts with the presentation by Uwe Rohof and Rainer Bouchon. After that, we will enter into a Q and A session. It's my pleasure to turn the call over to Uwe. Ladies and gentlemen, good afternoon, and welcome to our call. Let me start and say that I'm pleased about our results in the Q2 of 2015. We are presenting a strong set of results fully in line with our expectations. We saw solid driven by favorable currency tailwinds, resulting in a growth rate of 6.3%. Organically, we recorded a gradual pickup in revenues of 1.9% as expected. Organic growth rates accelerated in Q2 2015 compared with Q1 2015 in all our divisions, but €72,100,000 and adjusted EPS was to €72,100,000 and adjusted EPS was up 15.1% to €0.84 We recorded good product mix in plastics and devices, but also primary packaging class showed good results based on improving demand situations. Operating cash flow also advanced substantially. The improvement also reflects the fact that CapEx is not evenly dispensed throughout the year and most of the spending will come in the second half of the year. Let us now focus on the divisions. In Plastics and Devices, we saw very strong revenue growth in inhalers and diabetes care. Brights from tooling revenues faded away as expected and communicated. Thus, the adjusted EBITDA clearly profited from a positive revenue mix. In our Primary Packaging Glass division, we saw increasing demand in the U. S. For our Pharmaglash bottles. Adjusted EBITDA increased on a better demand situation, but also because we had no major furnace repair. Additionally, as part of our portfolio streamlining that we announced last year already, we decided to consolidate our Molot Plus operations in the U. S. We will bring together all our Pharma Type 1 molest glass production at our Chicago Heights plant and decided to close our molded glass plant in Millville, U. S. A. In the Q3 of 2015. We will start the expansion and infrastructure improvement of our Chicago plant in Q3, so this is well on track. And this move will improve product quality and productivity. In Life Science Research, we profited from currency tailwind, And this business is nearly 100% U. S. Dollar based business. After the balance sheet days, we completed our refinancing and are now under the divestiture of our tooling business. And I would like to make a few comments on the deal we announced last week. So just go with me to Slide 6. So I'm very pleased about the transaction with Corning. After the sale of the tubing business, we will fully concentrate on serving the market with pharmaceutical packaging product. This is our core competency. Glass tubing is an intermediate product. It produced borosilicate glass tubing in our 2 tubing plants and sell the majority of the products to our own converting plants worldwide. To a lesser extent, we sell proving to external customers. At our converting plan, we manufacture the end products out of our droopings such as ampoules, vials, cartridges and glass syringes. Since the groupings remains a very important material for us, we entered into a 10 year supply agreement with Koning. So supply is safely secured. Koning has a very strong expertise in glass, material sciences and material innovation. They are well positioned to manufacture and further develop glass tubing for Garrett Simon and the product we supply to the pharmaceutical industry. The deal also reduces CapEx requirements. CapEx will be lower because the Tubing production is a capital intense business due to frequent furnace overhauls. And the deal will be supportive of capital returns. This should be good news too. In full year 2014, the Tubing business stood at €83,000,000 in total revenues, internal and external, with an EBITDA margin of about 23%. However, given that CapEx requirements are high, the EBITA margin came in at about 11%. Sales proceeds out of the deal will amount to €196,000,000 What we also announced last week is a joint venture with Corning. The rationale behind that step is that we want to accelerate innovation for the pharmaceutical glass packaging market. We believe by combining our strengths, we can do more together than either company can do on its own. We combine Corning's know how in material innovation with our product and end market know how in pharma and healthcare. This is how we will accelerate innovation for the pharmaceutical industry. Bonin Winovol is 75% stake in the joint venture Geras Pharma, 25%. The closing of the transaction is subject to certain conditions as well as regulatory approval. Closing is expected by the end of 2015. We view this as a long term partnership with Koning based on the core competencies of both companies. I now would like to hand the presentation over to Reiner. Before I will get back to you to walk you through our guidance. Thanks, Uwe. Ladies and gentlemen, welcome also from my side. Let's have a look at the revenue development and the relevant effects for the Q2 2015 on slide number 8. On group level, revenues were up by 6.3% and amounted to €356,400,000 Excluding the effect of foreign currency movements as well as portfolio optimization, acquisitions and divestments, organic revenue growth quarter over quarter was 1.9%. So like in Q1, we had a strong and positive currency translation effect, which can mainly be attributed to the U. S. Dollar, the Chinese renminbi and the Indian rupee as these currencies were all stronger than the euro. You can see this pattern of stronger reported growth rates compared with organic growth that's in all of our 3 divisions. Let's start by having a look at the Plastics and Devices division where the growth came in at 5.3% helped by currency translation. The organic growth rate amounted to 4.6% and reflects very strong growth in part sales, especially in inhalers and diabetes care. Also, primary plastic packaging products made a contribution to growth. On the other hand, the tooling and engineering revenues, which had been abnormally high in the prior year Q2, came back down to a more normal level and dampened growth a little bit. But overall, in organic terms, 4.6% growth means that Plastics and Devices proved again that it is and will remain our growth engine. In the Primary Packaging Glass division, the soft demand that we saw in the first quarter 2015 did improve in the Q2. Organic revenue growth was minus 0.9%. On the one hand, this was caused by the softer demand due to some FDA related issues in the plans of our U. S. Customers, which we managed to partly offset with effective countermeasures like the extension of planned holidays in the U. S. On the other hand, we decided to close our molded glass plant in Millville in Q3 2014 as part of our portfolio optimization efforts and going forward to produce all molded glass products in our Chicago plant, which will be fully modernized in Q3 2015. Despite these temporarily dampening effects, positive currency translation effects did push revenue growth well into positive territory and reported growth in Primary Packaging Glass amounted to 5.6%. And finally, in Life Science Research, the strengthening of the U. S. Dollar quarter over quarter caused a 20.9% rise in reported revenues in the Q2 2015. But this positive development was almost prudent thanks to euro U. S. Dollar exchange rate movement and organic growth was 0.4%. The softer demand was due to temporary dampening of demand of laboratory glassware in the U. S. To sum it up, we still saw muted customer demand in the Q2, but organic growth rates improved markedly in all three divisions when compared to the Q1, so sequentially growth picked up. And in addition, the strengthening of our key currency, most of all the U. S. Dollar pushed the reported growth rate markedly up into positive territory. Overall, the development in Q2 and also the first half of twenty fifteen were fully as expected. So let's move on then to the adjusted EBITDA slide and at slide number 9. Here the development in the Q2 2015 was positive driven by good margin development in all three divisions. The adjusted EBITDA margin in Q2 twenty fifteen was 20.2% compared to 19.4% in Q2 of the prior year. The group's adjusted EBITDA came in at €72,100,000 in the quarter, that's the number in the prior year's quarter where it had amounted to €65,100,000 In the second line of the slide, you can see that the margin in Plastics and Devices went up from 20.6 percent in Q2, 2014 to now 21.5% in Q2, 2015. This is coming from a positive mix effect from the increased inhaler and diabetes care sales in the quarter, but also the lower amount of tooling and engineering revenues when compared to last year. In Primary Packaging Glass, the margin also rose to 20 2.1% and was higher than the margin level in Q2 twenty fourteen, which has been 21.3% given that we had no major repair. And finally, in license research, we achieved a margin of 14.5% for the quarter, which compares to a margin of 14% in Q1, 2014. To sum it up, we managed to increase profitability in Q2 compared to the previous quarter year and that was achieved by a good business performance in Plastics and Devices and then also by a continuous high cost discipline in Primary Packaging class. Now please move on with me to Slide number 10, which shows the improvement of our earnings figure in the Q2 2015. Starting with adjusted EBITDA, which was up 10.6 percent, we first of all deduct ordinary depreciation and amortization as well as the amortization of fair value amortization of fair value adjustments. Ordinary depreciation and amortization was flat in the quarter, while the figure for the amortization fair value adjustments was lower and reflects the fact that some fair value adjustments have been fully amortized in line with their economic life. Then we have EUR 5,800,000 of restructuring and one off costs, which are mostly costs related to the closure of our molded glass plant in Millville and then also some costs related to M and A projects and the refinancing. The cost of portfolio optimization also raised to the Millville plant shutdown. So after these costs, EBITDA amounted to €40,000,000 which is 5.6% above the figure that we recorded in the prior year. Then the next items are the net finance expense for the quarter, which was flat quarter over quarter and the charge, which was a touch lower like the tax rate, which was 31.5% compared with the 32%, which we had in Q2, 2014. So the combined figure for the finance expenses and taxes was slightly higher in this Q2 compared to the last Q2, but as EBIT was higher quarter over quarter, net income also rose by a healthy rate of 7 0.4% and amounted to €22,400,000 after €20,800,000 in Q2 of the last year. Accordingly, both earnings per share and adjusted earnings per share were up by 6% and 15.1 percent to €0.65 €0.84 per share, respectively. So overall, on the earnings side, it was sure a successful quarter with good improvements in all earnings metrics that you can see on the slide. I then have a closer look at the key balance sheet and cash flow figures. Overall, we recorded a good set of results, meaning our balance sheet remains healthy and cash flow developed favorable. Total assets were up by 4.2% on the comparative quarter's end and that's coming from higher current and non current asset values, which was mainly driven by changes in foreign exchange rates. Excluding the positive effect from U. S. Dollar to Eurex change rate translation, the total assets figure would have risen by a 0.5% rate. Group Equity was up by 7.8 percent to €615,200,000 Most of the increase is attributable to the continued positive development of group net income. Accordingly, the equity ratio rose to 36.2%. Net working capital was up by about €37,000,000 compared to the previous quarter's previous year's quarter. However, a lot of that was coming from higher inventories, which was driven by the strengthening of the U. S. Dollar and from a lower amount to trade payable at the reporting date. As a percentage of revenues, average net working capital was up to 20% of revenues compared to 18.5% 1 year ago. But at constant currency, net working capital was only about €19,600,000 higher than the figure 1 year ago. CapEx spending was 5.2% lower than in Q2 2014, but this is only a temporary effect as CapEx for the whole year will be spent as previously guided for both growth purposes and also the continued implementation of our machine strategy in Primary Packaging Glass. And finally, looking at the key cash flow figures for the Q2, what I can say is that all of them are up. Main reason for that are the higher earnings figures quarter over quarter as well as the lower CapEx spending compared to Q2 2014. So overall, the good Q2 performances for shareholder reflected favorably in the balance sheet and cash flow figures for the quarter. Speaking of cash, let's move on with me to Slide number 12, where you can see our financing structure. At the end of May, it remained very solid and provides us with funding security. The interest rates were completely fixed and the bank debt and the bond has residual terms of about 1 3 years respectively. As already communicated on the occasion of our full year results conference, we intended to do a refinancing during this year and we have done so in June, of course, without touching the bond. I will give you the details on that in a minute. At the end of the second quarter, the amount of cash and cash equivalent that we had was €73,400,000 in our revolving credit facility still gave us more than €100,000,000 to draw on an instance. The net financial debt figure of €465,600,000 was higher compared to the February 28, 2015 figures of €441,100,000 This was also driven by the further strengthening of the U. S. Dollar versus the euro since the end of Q1 2015. But also because of the last 12 months adjusted EBITDA improved further since then, the adjusted EBITDA leverage figure was only slightly up and still at a very good level of 1.8 times last 12 months adjusted EBITDA. That means at the end of Q2, we still had a lot of headroom within the then existing structure to continue to implement our growth strategy. But in order to profit from the February market environment, we successfully refinanced our syndicated bank debt in June right after the end of the second quarter. You can see all this on Slide number 13. So as indicated, we did not touch the bond. We refinanced the revolving and amortizing credit facility that we previously had in place. Now we repaid both and have agreed with the bank's unused syndicated and fully revolving credit facility. The improvements are as follows: 1st, increased capacity because the new facility has a capacity of EUR 450,000,000 instead of a combined EUR 400,000,000 before. 2nd, savings and annual interest expenses of up to about €1,000,000 per annum. And third, current interest rate based on drawings of €225,000,000 is at about 1.1%. €5,000,000 is at about 1.1 percent 4th, foreign exchange rate flexibility because we can draw the facility in a combination of euro and U. S. Dollars S. Dollars. And 5th, we also have negotiated an improved set of covenants with net debt adjusted EBITDA of 3.5 times. The bottom line is this. Overall, we managed to profit from the favorable market environment in June and successfully completed the refinancing. So we now have increased our financial capacity at reduced expenses. Now before I hand it back over to Uwe, let me just wrap up key points from my part of the presentation. In Q2 20.50, we increased the operating profitability of the company by 80 basis points to a 22% EBITDA margin. And the same time is true for EBIT, which we manage to increase by 5.6 percent to €40,000,000 Also, we increased reported earnings per share by 6% and that's despite higher one offs and restructuring costs compared to Q2 20 40. And operating cash flow also improved markedly to €40,100,000 in the quarter. Free cash flow was up by €30,000,000 over quarter on top. And last but not least, we successfully completed the refinancing of our bank debt facility and now we have increased capacity here. And at the same time, we have reduced expenses. So overall, we continue to have a very strong setup in place that will enable us to execute on our strategy for profitable growth going forward. With that, I now hand it back over to Ulf. Thanks, Reiner. So let me start with our guidance for the financial year 2015. We fully confirm our guidance. There is no change resulting from the deal that we announced last week. Closing of the deal is what we expect for the end of the year 2015. So this is not anticipated to affect our guidance for 2015 at all. In the first half, we recorded blended growth of 0.1% organically. But as we have said earlier, we expect growth to further accelerate throughout the year. So we should be fine and in line with our guidance. We expect organic revenue growth of 1% to 3% for the full year 20 15. The refurbishment of our Chicago plant actually started yesterday. In Q4, we will resume production at full capacity. We will continue to invest in the future of our business with market being in good shape and the megatrends of our industry supporting our growth initiatives. To achieve these targets, we will require an estimated investment volume of between 9% 10% of revenues at constant exchange rates in 2,050. We continue our strong focus on profitability. For the adjusted EBITDA, we reiterate the range of €250,000,000 €255,000,000 up to 2 €65,000,000 at constant currencies Our updated outlook for the financial year 2016 to 2018 reflects the disposal of the Tubing business, as we expect the deal to be closed by the year. Here comes what needed to be updated. First of all, no change to our revenue guidance. We reiterate revenue guidance as it stands and we continue to aim for average annual organic growth of 4% to 6% in 2016 to 2018. For the adjusted EBITDA margin, we defined an uplift was 21% by 2018. This is what will change now to approximately 20% by 2018. The reason being that the revenues with external customers that will be eliminated from the revenue line are low and only a bit higher than the EBITDA contribution of the whole business. So the targets for the remaining business remain completely unchanged. In order to achieve these targets, we will require less CapEx than before due to the nature of the Tubing business being more capital intense than the average of now down to 8% to 9.5% of revenue at constant exchange rate. So we are well positioned for the years ahead. We have defined clear steps to ensure our continued success going forward. These include expanding capacity at various locations, further standardization of our production technology, some of which were initiated during the past financial year and further progress is scheduled for this year. With that, I hand it over to Anne. Thank you for your presentation. We will now open the call to questions. The lines are now open for any questions. Thank you. First question comes from Oliver Reindeer, Kepler Cheuvreux. Good afternoon. Oliver Reindeer from Kepler Cheuvreux. Three questions, if I may. I probably don't have too many questions on the quarter. Can you just briefly comment on the depreciation charges? I was a bit surprised seeing this actually ticking down. I thought with the machine such a euro going to roll out, this is probably going to increase. So can you just give us a kind of run rate what kind of asset to euro charges and depreciation should we actually model going forward? And what D and A would probably disappear once you start to deconsolidate the Cuban business? And secondly, can you just briefly comment on the phasing how we should think about the second half? I mean so far Chicago has not impacted the Q2. So is it fair to assume that the earnings generation will be more dependent on Q4 this year than it is usually the case? So what is actually the impact from Chicago in the Q3? And then lastly, not sure we can say much about it. Obviously, part of the Rexam assets on our for sale called Centaur. Leaving valuation and everything aside, I mean, just strategically, I mean it's U. S, it's plastics, but the client base will be somewhat different. I would assume this is more pharmacy business rather than kind of pharmaceutical clients. Would this be a kind of theme that you would consider when evaluating whether such a target would be interested? And also from your general comment on your kind of M and A pipeline currently? Thank you. Yes. Thanks for your question. I might start with last one. Obviously, generally, we do not comment on individual projects and M and A opportunities. Our strategy remains unchanged. So priority number 1 is expanding our plastic business for devices and pharmaceutical packaging in the United States. As we continue to look at opportunities for primary packaging in the emerging markets. We look currently at a number of projects and we continue to have that high on our agenda. The phasing second question, phasing in the second half of the year for Primary Packaging Glass. Obviously, the Chicago Heights repair has an impact on Q3. That clearly is the case. Nevertheless, I do not really anticipate that for total Geberhard Moore Business, that we need an extraordinary strong Q4 to achieve our goals in a different level that we have seen before. So I do not see that. But certainly, at Chicago High, it's an impact on Primary Packaging performance in Q3 clearly. And the last one I would refer to Ryan on the depreciation because I could not answer that. Thanks, Uwe. So first of all, when we talk about the depreciation, for sure, we can say that we had last year 6.8% and we don't give the guidance for the quarterly numbers. We have given you an idea going on further, which was that this will increase with roughly 0.2% for 2015 for the whole full year. And we don't want to be too precise for 2016 after the tubing business is out because we don't know exactly when it will be out. We assume it will be the year end. But Uber has said and given you before the EBIT figures. So with the EBIT figures and percentage, you can model it pretty easy. So because then you can translate that how much money that is and I think you will come to a good conclusion on that basis because that will always stay the same amount and it's a high depreciation well above 10% because that's clearly the reason why we think it's Asset Light going on further. 3rd one was second question was fair value amortization. There will be no change due to the fact that the tubing sale has nothing to do with the fair value amortization because that's normally always based on customers, customer stuff, which we bought something in the past and the Tubing business wasn't bought. So there's nothing getting out of there. Great. My briefly follow-up, can you just remind us the Chicago impact? I think you were talking about initially last year about €15,000,000 of sales. Is that correct? And what kind of EBITDA impact would that be? We did not give guidance on the EBITDA impact, but €50,000,000 of sales is correct. Right. Okay. And can you just confirm that the kind of Corning transaction is completely independent from any kind of further M and A transactions that you currently have in mind, right? Yes. Thank you. Okay. So next question comes from David Hecking. Afternoon, guys. Thanks for taking the questions. First one, just with respect to the disposal, just wanted to see if you're recognizing any profit on that and presumably that's not included in the guidance. And then secondly, just in terms of your EBITDA corridor, obviously, noticing that still assumes a $130,000,000 exchange rate. I just wonder why you continue to use that and where would that corridor be at the current exchange rates? Thanks. Yes. We have perhaps I'll start with the second one. We have given you a guidance that our current exchange rate by the way the guidance is correct. We have a current exchange rate of €130,000,000 If our exchange rate changes with €0.10 downwards, So getting the U. S. Dollar stronger that has an influence on revenues on the yearly basis of €23,000,000 to €25,000,000 and totally the same margin. We are always we stay with our guidance because that's the comparable guidance also for the last years. And we always provided you with the numbers and our planning is also built on 130 because when we finish our planning, we finish it before November. And therefore, all our internal plans as well as all our external discussions are based on currency neutral and that's how we also manage our company. Second question is for sure, the profits out of this disposal of our Tubing business is not included in our guidance right now, but here also we haven't given that out, but you can be sure it's a good amount, but we don't talk about it right now, I would say, Because it's extraordinary, it's adjusted and we will show it separate from the from our normal results because when we give you our guidance, it's always achieving business and all effect is excluded. Sure. And then maybe one follow-up please. When I look kind of high level, you obviously disposed of the you raised a decent amount of proceeds from the disposal of the tubing business. You've refinanced the debt giving you some further headroom. It looks like you're gearing up for a transaction in the nearer term. Is that a fair assessment? No. We would not comment on that. We would not comment on that because for sure M and A is always part of our strategy. As I said before, that was completely independent of the M and A activities. Fair enough. That's right anyway. Thank you very much. Okay. Andre Vendors, please. Good morning, and thanks for taking my questions. 2 remaining, if I may. And I'd like to follow-up on Oliver Reinbeck's question on the negative impact from the Chicago plant upgrade. And if we assume a certain improvement of dynamics in Primary Packaging Glass and then on the positive side and the non negative side, you have the negative impact from the Chicago plant closure. And seeing overall dynamics in Q2 from this business, if I add these positive and negative things up, is it fair to assume that we might see a similar organic sales growth rate for this division in Q3 year on year as we saw in Q2? That would be my first question. And the second question would be on the positive momentum you saw in Diabetes Care. And I'm wondering what kind of product lines you're referring to. So what do you actually produce for customers which are facing such a great quarter? Thank you. Yes. Number 1, Chicago Heights. I really cannot help you much with that since we generally do not provide guidance for a quarter. As I've said, the guidance for our year stands. We have half a year in Chicago highest. It's coming and the effect is completely in the second half of the year. The little advice that I can give you is that in a furnace repair situation taking it down, you might not have all of that in Q3, maybe a little carried over in Q4 because you work off inventories and you shut down. And generally, at the end of the shutdown period repair, that is actually when you experience most of your revenue losses. So that is pretty much how much can help you with your assessment of that. Hope that helps. On the diabetes care, we basically we talk here about products that are as such as drinking device or products that go into delivery systems for insulin. So it's a very narrow customer base as you know on that end, we just had a good quarter with our customers on a very traditional product line. Thank you. Okay. Gunnar Romer, please. Gunnar Romer, Deutsche Bank. Thanks for taking my question. Just two left actually. Firstly, coming back on Plastic and Devices. I was wondering whether you can give us an organic growth figure excluding the effect of normalizing tooling revenues? And also where you stand in terms of the delayed product launch you've been talking about in earlier quarters? Any update in that regard? That would be my first question. And then secondly, on the syringes business, a brief update from you on RTF IV that will be appreciated where we stand here. And also where we stand overall in terms of the profitability of the syringes business? Also in a historical context, how close are you back to historical margins here? Thank you. Yes. Maybe first not for good news. On the RDF business, we are not back at historical margins yet. The good news is that we are very happy with the performance of RTF IV. It's a good investment and we really think that we are well on track here with the business. Overall, I am quite pleased with the continued improvement performance of the Syringe business. I think that shows a solid upward trend. But there is still a distance to go to historic profitability levels, I must admit. On the delayed product launch for the inhaler, I would say so far, we the product performs to our significantly reduced expectations. We have no visibility today if the pickup will come in 2016. I'm personally a little cautious. It generally might take a little longer, but we have right now no visibility really how much will be and what level we will be in 2016. But right now, customer is clearly meeting the expected revenue levels. On the parts growth excluding the tooling, we generally do not provide that growth rate, but we are to be admitted, I can say that we are very happy with the development so far this year. Clearly, an excellent development. That's very helpful. Thank you. Okay. Thank you so far. Scott Bardo, please. Thanks very much, Anke. Yes, Scott Bardo from Brandenburg here. Yes, thank you very much. I just wanted to just talk a little bit about the portfolio construction at Geraschwurm and now that you sell for a relatively reasonable price your tubelift business. I wonder if you could just comment a little bit then about whether this precludes you doing something similar in Life Science now or whether Life Science is still an opportunity to the USS. Following on from that, there's been some press reports that the old Wrexham Medical Plastics business in the U. S. Is up for sale again. Might we see some of these efforts you make a signal to free up capital to do something a little bit more bold in U. S. Plastics? Perhaps if you could comment on the dynamic there that would be appreciated. So far, I'll start with Life Science. Always the same discussion which we had in the past. It's not it's a good cash generator for us overall. But at the end, it's not really strategic. But again, as cash contributor, it's well accepted and we're happy about the performance overall because as you know, this is a business with an operating cash flow above 10%, which is a good number. And to the portfolio, Scott, I would say, as said before, the divestiture of the Tubing business itself was not part of a greater portfolio move. This was more from a rationale perspective, a move to concentrate on end products and leave the material science to a partner that has much, much more firepower on developing the materials. And admittedly, I think we sold it at a reasonable price. So that opens certainly opportunities for reinvestment and we will see what is available according to our M and A strategy that I have explained just before in the future for reasonable pricing. I think that is and as I said before on a single company that is on the market, I would not like the comment at this point. Okay. Thanks very much. And very much pleased to have you communicate more fully about the Melville facility somewhat shrouded in mystery prior to the announcement. Can you help put this into some degree of perspective how significant this consolidation is to realize your earnings improvement trajectory by 2018? And whether we should also expect some additional manufacturing consolidation as part of this plan? Or are we now pretty much all the heavy lifting now done? Thank you. Yes. I think that's a very good comment and question. A molded glass facility in West I'm sure you have seen one of our portfolios is generally a facility that requires high utilization and excellent cost to make some money. We obviously have taken the opportunity to consolidate our Type 1 molded borosilicate business into 1 facility in Chicago. The Millville facility actually has 2 furnaces, so called type 3 furnaces for solar line containers that basically go to pharma over the counter type of product. And it is very small furnace that produces containers for injectables. That furnace we basically consolidate now into the Chicago Hyatt furnace, which is a very large furnace, actually one of the largest in the industry for those type of glasses. And we believe that we actually create a plant here that can create substantial economies of scale out of that consolidation. The Millers facility will be closed. There is we have announced a layoff of a little bit more than 100 people in step 1 and a little bit more than 100 people in step 2. So I think that is pretty much the heaviest lifting we could do. And so with respect to now your 20% margin targets for 2018, Can you help us understand was this an important part of that or Yes. It was an important part, but not the only part. There are a number of activities that always have to be done. Do not forget that one is our remachining strategy for tubular containers. To go to the same machine type in all facilities that should give productivity. There are always furnace repairs that we need to execute in glass with productivity improvements to just keep the margins at the high level. So always a number of activities, but this is the most significant one in a single plant. Great. Thanks very much for taking my questions, Juve. We have one follow-up from Oliver Heinebeck, please. Yeah. Thanks a lot for taking the follow-up. Can you just briefly give us an update on your pen business? I think in the past you gave us some kind of market share data where you currently stand. Can you just update us what is currently your market share in pens? And can you comment have you actually won any kind of new clients in this kind of area? Or is that something that is on the horizon in the foreseeable future? Secondly, can you just comment, I mean, M and A pricing obviously seems to be a challenge globally. Is that to any extent probably impairing your ambition that you have for external growth? And lastly, I would assume Brazil for you is a small issue. Obviously, you have Vida there. Brazil has economic challenges. Is there anything that is impacting your business as well in a meaningful way? Thank you. Yes. Thanks for the follow-up question. I'll start with Brazil. So far year over year, we did all right in Brazil, surprisingly sold. And so the business is in Brazil, generally, the difficult situation businesses. We do expect further slowdown in our anticipation for the year end. So we but it does not a significant impact on our performance. So let's see if maybe we can keep it running as good as it has. But generally, we are we believe that second half of the year might be a little bit more difficult than the first half of the year in Brazil. In the Lindtend business, no, we have not one new customer. We are, as you might know, quite well positioned at 2 of the large accounts. Therefore, our market share remains unchanged. And I'd say it is likely that we are in a range of that we are at the lower end of our target range. We're always saying that we want to get a share of 20% to 30%. And we are, I would say, here in a position where we are not the number 1 yet, but a very, very strong number 2 in the market. And try to increase on that. And certainly, we look at certain products, but there's really nothing or project. There's nothing that is worthwhile sharing at this point. I think there was Can you please put the question for the call, right? Just one question on the M and A pricing, whether that is actually any kind of Yes, I think there was one. Absolutely. Well, it is I actually think that M and A pricing is a challenge these days. What you see is that particularly private equity closes deals at internal rates of returns that are significantly lower than in the past with money still being relatively inexpensive that makes the competition on those deals tough unless you have significant synergies that others do not have. Perspective that we are generally very aggressive people when it comes to paying prices. So I would say I would not sit here and say we are generally people that in this context, say that we are that it would be very, very easy for us to close deals just because we might be in possession of more money in a few months. I think that the environment still needs to be evaluated and that a deal for us in whatever that needs to make economic sense. Strategic and economic sense have to go together. All right. Thanks so much, I think as there are no further questions, we would like to thank you for joining us today. Thank you for support. Please note that we are going to publish our Q3 results on October 8 this year. Thank you so much. Bye.