Thank you, operator. Please note that the recording will be made available on our website shortly after the call. Please let me hand you over to our CEO, Dietmar Siemssen, to run you through our preliminary Q3 results and explain the adjustment in our growth guidance together with our CFO, Dr. Bernd Metzner. Dietmar, please go ahead.
Thank you, Pickert, and hello, everybody. We have to apologize for the small technical problems we are fighting here on a very spontaneous call, as you can all recognize. So welcome, everybody, and thank you for joining us today. As you all already recognize, this is a call outside our regular reporting routine. You have, most likely seen our ad-hoc announcement, an ad-hoc announcement, and, the corporate news we issued today. Unfortunately, we needed to revise our guidance for our financial year two thousand and twenty-four, as well as twenty-five. We know that this raises a number of questions from your side, which is why we decided to publish preliminary figures for Q3, 2024 , and move our analyst call forward to now, to today. So let's give you an overview of our Q3 figures, and then we can guide you into questions.
Q3 was solid, but did not show the growth dynamics that we anticipated. We achieved an organic revenue growth of 2.6%. Adjusted EBITDA growth came in at 3.5%. Adjusted earnings per share growth at 3.6%. We are still growing stronger in our bottom line than in the top line. That means profitable growth while expanding the margin. But believe me when I say that these are not the results we are satisfied or happy with. We anticipated a stronger, significantly stronger pickup in growth. Plastics and Devices showed a continued good, good performance, with organic revenue growth of 8% and Adjusted EBITDA growth of 11%. The growth was mainly driven by drug delivery systems such as syringes, inhalers, pens, and auto-injectors.
We are currently experiencing particularly strong growth in product solutions for large molecule biologics, such as GLP-1, but also other devices went very well. Primary packaging glass, however, was still very much affected by the still ongoing destocking in the market. Our internal three-month forecast and the 2024 planning discussions with our sales teams showed a much slower market recovery in the vial market than anticipated, even recently, and a softer growth rebound in 2024 , or 2025 , excuse me, than we hoped we would see. Now we see signs of market recovery with order pickup in vials, but this is coming later and also slower than we expected, impacting also our twenty twenty-five results for tubular glass and our PPG division, with lower than expected growth rate.
In addition to that, Hurricane Helene caused floodings in North Carolina, and our vial plant in Morganton is severely affected by this. We are working intensively on the topic at present, but it might take us several weeks until we'll be able to restart the production. The long-term underlying growth trajectory in the vial market remains intact. We also see that the market advanced the adoption of ready-to-use vials, which holds significantly higher value to our customers and also better margins for us. Q4 2024 will be stronger again in both plastic and devices, as well as primary packaging glass, as new production line ramp up as planned and the effects of destocking continues to fade out. Before I jump into the new guidance, I will hand over to our CFO, Bernd Metzner, for a deep dive into our preliminary figures in Q3 2024.
Bernd?
Thank you very much, Dietmar. Revenues grew from EUR 488 million to EUR 499 million. This leads us to an organic revenue growth of 2.6%. The negative impact from FX was around EUR 2 million. Adjusted EBITDA for the group improved from prior year's level of EUR 100 million to EUR 104 million. This leads us to an organic adjusted EBITDA growth of 3.5%. Organically, adjusted EBITDA margin increased by 20 basis points to 20.9%. The impact from FX on adjusted EBITDA was plus EUR 1 million. Adjusted EPS increased from EUR 1.07 to EUR 1.16. This leads us to an organic adjusted EPS improvement of 3.6%. The impact from FX on adjusted EPS was plus EUR 0.05.
Let's move on to the divisional development in Q3 2024. Revenues grew from EUR 261 million in plastic and devices to EUR 279 million. This leads us to an organic revenue growth of 7.9%. The organic growth was especially driven by strong contributions from drug delivery systems, as mentioned before by Dietmar. The impact from FX was around minus EUR 3 million. Adjusted EBITDA grew from EUR 63 million to EUR 70 million. FX contribution was almost neutral. This leads us to an organic Adjusted EBITDA growth of 10.9%. Organically, Adjusted EBITDA margin increased from 24.4% by 70 basis points to 25.1%. This improvement was driven by a better product mix. Now, let's move on to primary packaging glass.
Revenues declined from 228 million EUR to 221 million EUR. This leads us to an organic revenue decline by 3%, 3.0%. The impact from FX was almost neutral. The temporary destocking effect at our customer's level still impacted our pharma glass business and was the reason for the revenue decline. Compared to the first six months of 2024, with an organic sales growth of -6.9%, we are in Q3 with -3.0% organic sales growth, at least gradually improving, and we do see green shoots. So all the momentum of our customers has most recently improved, and we expect to come back to a positive sales growth in the next quarter in our segment, PPG Tubular Glass. Adjusted EBITDA declined from 49 million EUR to 45 million EUR.
The impact from FX was plus EUR 1 million. This leads us to an organic Adjusted EBITDA decline of 9.4%. Organically, Adjusted EBITDA margin decreased from 21.9% by a hundred and forty basis points to 20.5%. Coming now to the cash flow development in the third quarter of 2024. Compared to prior year's Q3, Adjusted EBITDA increased from EUR 100 million to EUR 104 million. For Q3, we had not yet a positive cash contribution from the release of working capital. Somehow, like in Q3 2023, if you adjust by the one-time prepayment in the amount of EUR 70 million related to GLP-1 contract in Q3 2023. And as we have not seen such down payments in this year, Q3 again, this explains the year-over-year development.
Regarding cash taxes, the outflow of EUR 50 million is a bit higher than last year's figure of EUR 12 million, as explained by the timing of tax payments. Moving now on how we utilize the funds. Net CapEx in Q3 was almost on prior's year level as we continued to execute our investment program into highly attractive growth opportunities. As you know, our currently elevated net CapEx cash out is a consequence of very attractive and unique business opportunities. We are especially ramping up our capacities for medical devices, GLP-1 products, and biologics. Finally, let's turn to net financial debt as well as the adjusted EBITDA leverage. Net financial debt, according to credit agreement in force, stands now at EUR 1.1 billion. With this, our adjusted EBITDA leverage slightly increased from 2.3 times to 2.6 times.
Looking at the full year, in line with also, with our seasonality pattern, we expect a strong free cash flow performance in Q4 in the magnitude of plus EUR 50 million to EUR 100 million. As you know, our free cash flow performance is strongly influenced by the timing of the execution for our investment program in profitable growth. Especially on the back of this CapEx phasing variable, we expect to arrive at a range of minus EUR 50 million to minus EUR 100 million free cash flow in 2024. With this, I hand back to Dietmar.
Yeah, thank you, Bernd, and I hope that the connection is good enough that you can follow the presentation. Let's come to the guidance update. Looking at the remaining quarter, we will once again see a robust growth from Plastics & Devices. As new production lines actually ramp up, and we also anticipate that the glass side, the PPG, will return to a slight growth compared to the previous year's quarter, as we clearly see the destocking effects to steadily fade out. The market recovery in the wine market is coming late, and the pickup in growth is not as strong as we had hoped for. We also see a softer demand in molded glass products for the food and beverage industry. In addition to that, no doubt, we have to deal with the effects of Hurricane Helene in our plant in Morganton, North Carolina.
As a trigger point, the flooding led to a halt in production, and it might take us several weeks until we'll be able to restart production again. All these singular effects combined are waiting on our initial expectations of a double-digit growth quarter, and that's why we need or needed to review our guidance. 2025 will be much stronger again than 2024, but even not as strong as we anticipated in our previous guidance. The long-term growth trajectory in vials with the trend forward ready-to-use platform is intact. So for the 2024 financial year, we now expect organic revenue growth of between 3% and 4% compared to the previous year. Adjusted EBITDA is now expected to come in between EUR 450 million and 430 million. The adjusted earnings per share is expected to grow between 2% and 8%.
For 2025, we now expect organic revenue growth of between 7% and 10% and an EBITDA margin of around 22%. We will give you an update on the adjusted earnings per share guidance for 2025 when we publish our results for the full year 2024, in February 2025. Our midterm guidance remains unchanged. Our growth prospects in the coming years remain positive, despite the temporary market weakness in one of our submarkets. We are still an unchanged strategic partner of choice for the global pharma and biotech industry, a one-stop shop for containment solutions, drug delivery systems, and digital therapy support. As explained several times, we are the ones that bring the drug safely to the patient, ensure that the drug can be safely administered, and improve the patient's health outcome with our digital solutions, for example, to support medical adherence.
We are currently experiencing particularly strong growth in solutions for large molecule biologics, such as GLP-1. We expanded the share of revenue with biologics from 13% in the first nine months of 2023 by 400 basis points to 17% in the first nine months of 2024. Here, the successful transformation of our company through our Formula G corporate strategy process, with an increased focus on these high growth, high margin markets, is well paying off. The biologics market in general has a much higher growth dynamic than the pharma market. The core biologics focus markets, on which we are already active, show market growth of more than 15%. We are excellently positioned to profit from our dynamic market growth with our broad portfolio, our dedicated solutions for large molecule biologics, our industrialization expertise, and our global footprint.
We will continue to profitably grow in the coming years, thanks to the high order backlog, the capacity expansion for long-term customer orders, and the combined strength of two successful market players as soon as the acquisition of Bormioli Pharma will have been finalized. With this transaction, we will expand our portfolio with additional high-value solutions in glass and plastics and system integration that will accelerate our growth and help us to expand our margins further. The transaction is still, as we all know, subject to customary closing conditions and antitrust approval. We're in close dialogue with the respective authorities and are working towards completion of the transaction as planned in the fourth quarter, twenty twenty-four. We will, of course, keep you updated. We have decided to postpone our Capital Markets Day to spring, as we want to give you an update for the combined organizations after closing.
We will publish the Q3 and nine-month results of 2024 in our quarterly statements on the tenth of October on our website. The next opportunity to check in on our financial performance will be our results of the fiscal year 2024, which will be published on February twenty-six. Thank you, and we will now take your questions.
First question comes from Oliver Reinberg, from Kepler Cheuvreux. Please go ahead.
Yeah, thanks very much for taking my questions, and three if I may. The first would be on the twenty twenty-five sales growth outlook. I guess you're still guided for 10%-15% when you still had a kind of 5%-10% growth in mind for twenty twenty-four. So I guess the decline in vials has lowered the base quite materially, making it in theory, easier to grow in twenty twenty-five. So I'm just trying to understand what else drove the decision to take down the kind of outlook for next year. Is it just vials? You talked about, I think, food and beverage, but it appears that there's anything else where you're expecting a certain softer demand. Any comments would be appreciated.
You don't have to-
Second question would be just, I'm not sure if you can provide any kind of color on the flooding, what kind of sales and EBITDA margin effect you're going to have in mind. And then thirdly, on Bormioli, I think, when you announced the transaction, you talked about that the EBITDA may come down to three times or lower within one year post-closing. Now, given the kind of revised forecast and also the recent softer performance of Bormioli, can you just provide an update where you expect the leverage to be, and do you work any kind of equity measures here? Thank you.
Yeah, I didn't get the second. You have to answer the second. I didn't get the-
For the...
I can answer these things relatively short, Reinberg. The first one, the effect on 2025 are driven by vials. That's it. Yeah? So it's, it's vials. The rebound effect comes slower than expected, and it's driven by the vials. And also the Bormioli topic, yes, we also saw that they obviously reported shorter, financial results compared to the guidance that they obviously had out, but this is to date not affecting the, acquisition business case that we were looking for.
I would take the flooding question. This is somehow only a certain tipping point, I have to say, because it's what happened. Actually, we were informed about it Saturday. Actually, and this current flooding at the Morganton vial plant caused by the Hurricane Helene, which basically will halt our production by several weeks, and obviously, with our updated and adjusted guidance, we recovered actually the potential shortfall in this regard, but it's really too early to really quantify this by the last penny.
Right. And just in vials, when I guess the guidance for 2024 was impacted by more than five percentage points, I guess vials must have been cut in half, so it's probably only 5% of group sales. I'm just trying to reconcile. We're just talking about 7%-10% growth next year. So there's nothing else at all where you have to revise your kind of expectations?
I think what we saw very clearly is that, you're talking twenty-four, twenty-five?
No, no, no. Total.
Twenty-five.
Yeah.
Five expectations.
Basically, when we just to step into, when we gave our guidance for two years, actually for 2024 and 2025, if we would not have, to be clear, if we would not have this kind of events, if we had not this recovery as we have hoped for, then we would not have this kind of call now, because we would not have a need for adjusting our guidance.
Okay, so all expectations for GLP-1 and all other projects are unchanged for next year?
That's correct. That's if this is the question, that's correct.
Right. And on the leverage forecast from only one year post-closing, any update on where this could be? I guess it will then be higher than three.
It's too early a bit.
I mean, you mentioned the leverage with the expected closing now. As I have said, we expected the closing now in Q4. Then if you look at 2025, I don't think that we have a leverage above 3.5 times EBITDA, and this remains still intact. Obviously, we are in the preparation for our plan, as you know, in the next couple of weeks, but that's our clear idea. Not above 3.5 next year.
Thanks so much.
The next question comes from Ed Hall, from Stifel. Please go ahead, sir.
Perfect. Thank you, guys. Yeah, just a couple of questions from me. The first one, I mean, could you just share the percentage of your business, which is currently within long-term contracts versus short-term? If you could split that out between PPG and P&D, that would be quite helpful. And then could you talk about lead times you're seeing across the business units, I guess, now versus maybe the start of the summer, and how do you evolve over sort of the next six months, nine months? I mean, do you envisage any scenario of improved visibility? And then I think just following up from Oliver's question, can you just quantify the percentage of sales of vials? I think it was my understanding it was close to around 10%, maybe slightly below.
So I'm just curious as how a 4% cut to the midpoint is attributed 100% to just vials. Is there something I'm missing here? Is the market outlook for cartridges or ampoules structurally weaker? Any comments here would be great. Thanks.
The first question is a tricky one. How much in percentage of your business, long-term, short-term? Because we have, with the broad portfolio, all different characteristics. You have very long-term, like, for the devices, and if you split the business, yeah, maybe it's easier for the business unit. You can actually, it's thirty... Maybe you've done this.
Maybe one, I would say we have one third of our business is basically protected by long-term contracts. One is, let's say, medium-term contracts, one third, and the other one third is basically based on concrete order intakes of one to three months lead time. I think this is a fair assessment as a rule of thumb.
Perfect. And the medium-term, I mean, how do you define that in terms of length of time?
Medium-term is, for us, actually four, five years.
Yeah.
Three, four years in the average.
We're still talking about a regulated market, where a change is not easily done because you most likely have to re-qualify the whole drug packaging solution.
Perfect. And then, yeah, on the lead times across the business units, could you talk about them now, I guess sort of maybe on vials, but also across all your different portfolio, and how you see this changing over the next, let's say, twelve months?
I think you, what you see is that the lead times in the especially tubular glass side has shortened over the course of the last year, yeah. So it's one of the destocking effects that these lead times clearly have shortened, which also leads to the fact that the stock optimization of our customers is become easier for them because they have a higher, shorter lead times, and that helps them.
Do you see a scenario? I mean, do you see in your forecast where sort of lead times and visibility improves for your business? Or right now is your assumption lead times are staying pretty much where they are for the next six months or so?
I would say so, yes. It stays constant.
Perfect. And then just the last question on just the percentage of sales in vials. I mean, my last expectation was around 10%, and I'm just curious how this causes, the 10% of sales causes sort of a 4% cut to the midpoint of the guidance. I mean, is there something else in the market outlook? From my understanding, it's not just vials that have been destocking. So is there anything else that, in your portfolio, that is also causing any structural weakness outside of the, your midterm targets?
Tricky question, but I repeatedly emphasize that the primary effect for next year that makes a difference in the guidance is actually the tubular glass business.
Yeah.
And again, there are two effects. Yeah, the rebound comes a bit later, and the rebound comes softer. And with this, also, some of the disruption of the markets into the direction of high-value products also comes a bit later. It will still come, but it comes later, and this has an effect that affects not only twenty-five, but all the next years.
Back to repeat what we've just said before to Oliver, without this effect, which as Dietmar said, we would not sit here. Very simple.
Yeah.
At this stage.
Note also that the facility, the flooding of the facility was a kind of.
Mm.
But, this is not what we see that will influence, twenty-five, you know?
Okay, perfect. Thank you very much, guys.
The next question comes from Victoria Lambert from Berenberg. Please go ahead. Ms. Lambert, your line is open.
Yes, sorry. My first question is just, so are you now seeing delays to your new capacity additions that you were planning for Q4? And is this because it's Morganton, is this just the high-value vial? So yeah, maybe the flooding, you can just explain which glass products have been impacted. And then, I guess, this was asked a bit earlier, but you don't... There's no change to your GLP-1 orders because this, these weren't in vials. Thanks.
The second one, I take the second one, question first, because it's very easy. No, that has no impact on the GLP-1 story at all, because all these ramp-ups, the projects are all in time. The ramp-ups are doing well and are in time. To your first question, that's tricky to answer because, as a matter of fact, we were able to go into the facility today for the first time. The plant is not producing. There's not even power supply at the moment. Why I can't answer this question straight away is that, 'cause we are trying to find ways to balance out production stop in Morganton with opportunities in other facilities. But the whole situation is unclear at the moment. As positive, I'm optimistic that we will not have an impact on 2025, but it will definitely impact 2024.
One of the reasons why we are sitting here.
Okay, thank you.
And the next question comes from Gaurav Jain from Barclays. Please go ahead.
Hi. I have, you know, three questions. One is that if I take the bottom point of your EBITDA, which is 415, and your depreciation is going up by 10 anyway, YOY, so your EBIT will not grow, and interest expense is going up. So why is your EPS growing 2% is not very clear to me. Like, is the tax rate coming down quite substantially on a YOY basis? So that was question number one, and I can ask the others later on.
Maybe just to answer. In the end of the day, we expect that, I think in the end, we see this as a lower endpoint, just to start with, with four hundred and fifteen. And if you really calculate this through, ultimately it boils down also to the tax rate, and in the tax rate we see, and you see this also when you're assuming into Q3, we were really able to capture also net operating losses because our business is running in certain areas very strong, and we can also basically make profit from our net operating losses and reducing our tax rates. That's basically the reason why we are quite safe on this 2% to 8%, I think, EPS growth.
So would it be fair to say that the tax rate will be closer to 25% this year versus almost 28% last year?
Yeah, yeah, but it's really too early. You need to calculate the net operating losses and so on. But if you look at the trend now in Q3, it's a quite encouraging thing. So therefore, we are quite safe on the EPS side.
Sure. And will this lower tax rate then continue into FY 2025?
No, maybe-
And beyond or?
... We have also the tax rate forecast, basically a forecast of 25% tax rate also going forward, this is our guidance, but in the moment, when you have a basically size which is really turning, have a turnaround, a certain size and legal entity has a turnaround, there's a lot of net operating losses you have to activate, then the or capitalize the net operating losses, and this is what is actually happening in Q3, and we have to look how these things develop in Q4, so therefore, our EPS grows from 2% to 8% is safe. Also, if you would end with a lower endpoint of our guidance range for EBITDA, but it's definitely not our aim, to be clear, yeah?
Sure. And then, look, I think across the industry, and for you as well, there have been multiple guidance, but which have frustrated investors. So how confident are you that you can do what you are now saying for FY 2025? Like, is there sufficient buffer in your guidance for next year?
There's no doubt. Also, one of the, I think it's also a question, an answer to one of the question earlier. There's no doubt that we decided to be a little bit more prudent on the whole guidance to make sure that we deliver. And 'cause I'm not very happy to sit here at the moment, and I don't want to repeat this.
Sure. Okay. And then just lastly, I mean, while it is true that, you know, PPG is weak, but it does seem that even plastics and devices hasn't picked up as much as you were probably thinking. So is there any shortfall happening on that side as well, on the plastics and devices side?
Plastic and devices actually runs very well. There's a smaller exception for the South American plastic packaging business, which is principally not relevant. The business actually is doing very well.
If you, if you look at it, we have 8% growth in Q3, and the year to date, a growth of, I think, 9%, something like this, 9.2%, so really strong and nothing-
Business strong. All ramp-ups are completely in plan. All new projects, also the planned projects are completely in time. We're doing very well.
Sure. Thank you so much.
The next question comes from Falko Friedrichs from Deutsche Bank. Please go ahead.
Thank you. Two questions from my end, please. Firstly, can you give a little more flavor on what you're seeing with regard to destocking? Your German peers sounded quite a bit more optimistic. That is largely concluded. So would be interesting to hear a bit more what you're hearing on the ground, and when you think this has finally concluded. Can that still happen this year, or is that something that most definitely goes on next year as well to a more significant extent? And then secondly, can you share with us the sort of how much of your global vial production capacity fits in Morganton?
Coming to the destocking first, from my point of view, you can see that the destocking more or less is clearly fading out, and I don't expect that we see destocking anymore in 2025. The reason for the point that we are facing now is that the rebound effect actually comes slower and softer than we anticipated. It's not that we do not grow in Tubular Glass, and we will also grow strongly in next year, very clearly, both top and bottom line. It's just not as strong as earlier anticipated. The vial capacity in Morganton compared to the worldwide is an answer. I have to calculate. I do not know exactly. It's probably, yeah, less than 20%, yeah.
Okay. That's helpful. Thank you.
Yeah. Which is, no, not a hard answer, because this is actually changing, because as you all know, quite some investments, quite some investment moves into this facility, not only for flooding recovery, but also the, it's the, the new lines, supported by also BADA, yeah.
I assume you have insurance in place, right, to cover the damages?
Falko, we have it. We have an insurance in place, and we're all hands on deck to manage this now, yeah.
What we need to do is now get the production back in production, the plant back in production. That's important, yeah? Because it's not only a question of sales, it's of course also a question of making sure that your customers get what they need.
Understood. Thank you.
The next question comes from Curtis Moyes from BNP Paribas. Please go ahead.
Thank you for taking my questions. I just have a few. First one, looking at P&D in Q4, just maybe a little bit more color on how much acceleration you're expecting there. Is it maybe safe to say low double digit or mid-teens %, or kind of what are you seeing there, maybe? And then in the PPG segment, given this rebound is slower and softer than expected, should we kind of expect quarter-on-quarter improvement throughout the rest of twenty twenty-five, or is it gonna kind of level off at some point? Yeah, any color there? Thanks.
... So I can take the first one. The Q4 for Plastics and Devices is, as I said, it's not affected. It's running according to plan, and it's running well. Yeah.
Taking your PPG question actually for this year, I mean, I alluded basically that I think we have an almost 6-7%. For the first six months, we have 6-7% decline, if I'm right, and then we have now a decline of 3% in Q3. But we really see we will see a growth in Q4, and actually not even a bad growth, but significantly less than expected of what we had actually hoped for. That's the situation here. But as you know, we don't give guidance for specific segments, for a specific quarter.
Yeah
but only that we have a certain direction. So you really see a nice uptick there, which is really material better than in Q3.
So this, in principle, goes also in the direction of the question of your predecessor, more or less. The destocking is fading out, the rebound comes slower. Yeah, that's the point.
Okay. And maybe just a super quick follow-up. If you were to maybe try to pinpoint, like, market normalization for vials, is that maybe mid-2025, or is that a bit too ambitious?
The question of what normalization is, but,
So basically, it's really quite difficult. We see now growth in this area again, and we will see this the first time now since fifteen months in Q4 this year. And we also expect a nice growth in the next year to come. But I repeat what Dietmar said, repeat what Dietmar just said, and echo, you have expected more, yeah?
Yeah, because we have to answer this different. Are we confronted with a general overcapacity or lower demand in general? And here, my point of view is that the general trend towards more injectables, yeah, which includes not only the vials, but also, of course, the syringes, cartridges, and injectable devices, is, from our point of view, unbroken. What we are facing at the moment is a combination of first destocking and then a slower rebound effect, and this is actually causing the difficulties that we see now. It's a primary reason, there's a couple of others, and also the slightly slower growth also in 2025. I will not give out a guidance for 2026, but I mean, the 2026 goals will be back on track, yeah?
Okay. Thank you. Appreciate the call.
And the next question comes from David Adlington from J.P. Morgan. Please go ahead.
Guys, thanks for the questions. Four, please. So firstly, given the slower performance at Bormioli, we just wondered if you've had any scope to renegotiate the price. And following on from that, second question is, how is the performance impacting your view on the subsequent strategic review? Third question is just on the insurance side. Just wondered if you had any insurance for the lost revenues. We might come in to see at a later point. And the final one, why are you comfortable giving EBITDA guidance for next year, but not yet EPS guidance? Thanks.
Maybe just, regarding the, just start with the EPS guidance and the EBITDA guidance. We are where we are now at the stage of our planning process is not yet serious to precise the guidance for EPS 2025, given where we are in the budgeting process. There are basically two elements, David. The key element is we have not yet finalized the CapEx plan, depending on the order intakes; it's not yet final. And obviously, this has an impact on our financial debt and interest rate, and interest expense. And the second is, we have a certain, as we have discussed before, also a certain variance as far as our jump-off point 2024 for EPS growth.
Therefore, I think it's on the one side prudent, and on the other side would not be really serious to predict now the EPS guidance. It's a little bit different from EBITDA for this reason just mentioned. Then, coming to the insurance coverage. I mean, it's also if you lost business, you are also insured, but obviously the revenues you cannot do anything, yeah? It's therefore the bottom line is somehow protected. You have a certain threshold that you need to cover on your own. But other than that, also the business disruption, let's call it, is protected by our insurance. As other income, yeah, but not as revenues, obviously. Then the strategic review, I don't know, Bormioli.
I didn't get this completely, the question.
Oh.
He was asked, the Bormioli figures are the worst performance. I saw this as well, but what you have to consider is not the worst comparable performance against their plan, but you have to look at the performance against the acquisition business plan, and that is the relevant one. Here, so far, we included a couple of cushions, which obviously turns out to be the right thing to do. The strategic revenue from molded glass, okay, here I'm also have. Yeah, we will. Let's do the closing first, and let's then see forward what the strategic review brings in detail.
... Okay, thank you.
Thank you, David.
Then the next question comes from James Vane-Tempest from Jefferies. Please go ahead.
Hi, thanks for taking my questions. Three, if I may, please. Firstly, just on Bormioli. I understand your point that recent performance doesn't impact your business case for the acquisition. But you mentioned at the time it was around 370 million EUR, growing around 5%, with a 21% EBITDA margin as a starting point at the time of the deal to think about. So can you give us an indication if this is still the right starting point at this stage? Second point is, the question is just on visibility into the market in your business. As you're guiding down now two months before year-end, and we understood you had at least had some visibility.
So how much of this was within your control, given you seem to be warning on the same issues your peers, who warned several months ago? Or is this actually a worsening of current trends? And I'll come back for a third question. Thank you.
Yeah, to the Bormioli, we still believe the business case is intact, unchanged, honestly spoken, and there's no deviation to the estimates in the business plan for us. It's a bit theoretical, hypothetical, because we are in between signing and closing, and as such, only have limited access and see the same figures as you see as well. And that I don't think has a major impact to us.
Okay, so EUR 370 million growing 5%.
It's-
I understand.
With the Bormioli acquisition, I don't know what he's referring to, but with the Bormioli acquisition, we are not talking about buying just sales and profits. I think what you have to see here is the joint business that has certain performance, and here I think it's important that we see the total plastic business, together with synergies, is performing in a certain direction. I think this, I assume this is what we guided for, not the Bormioli business, but the joint business that we guided for, and here I clearly see that this is the performance we are expecting, but what is important, we cannot basically make. We are not managing now the Bormioli business. As you know, therefore, it's very difficult to make any statements regarding Bormioli and the actual current business.
But, as I said, what Dietmar just mentioned, for us-
It's a great topic. It will very be very accretive to our total business. We see a lot of synergies in system integration capability and growth, and that will definitely lead to what we call high-value products in plastic, and so the business is very attractive for us.
Just come back to the question, why now, the visibility topic. I mean, we made it crystal clear also when we released our Q2 numbers, that we are close to the lower end of our sales guidance. This was very clear in July, and we also said that Q3 will be stronger than Q2, and it happened. And now Q4 will be materially stronger than Q3, and in terms of organic growth, and this is really what is happening. But despite a strong Q4, this will be basically not sufficient. And what we have seen is there are three major aspects. One, the tipping point. This current flooding, as we talked about it, was something what ad hoc happened. This second topic is lower than expected market recovery for our vials business.
We talked about it, and definitely not helpful was that we had a certain headwind in our molded glass food and beverage business in Q3 and Q4. This is something what we need to face, and as soon as we had it clear on the table, we decided to make our ad hoc decision. Yeah.
Thank you.
Thank you.
My third question is, apologies if I missed at the start, but how does the vials business perform in Q3? Does your guidance assume sequential growth in vials each quarter through the end of twenty twenty-five? I guess I'm also struggling to understand how the guidance can just be due to vials, given the relative size of that business, unless you assume significant growth there in that segment, just looking at the magnitude of the group downgrade. Thank you.
Just looking at the vials business, Q3 in comparison with Q3, so it's really relatively stable. There's no growth in Q3, actually. A small decline still, and therefore, we still have this kind of destocking, but it's crystal clear that our Q4 will be the first time that we see a substantial growth in our vials business, and which is really substantial, yeah.
Yeah, but I understand that everyone's kind of looking for general weakness in the business, and I cannot help them, because the key driver of the problem we have at the moment is the delay in the ramp-up of the tubular glass business and the softer recovery, and that is the point. Otherwise, like Bernd said, we would not sit here.
Thank you.
No doubt. On the tipping point, no doubt, was the Morganton facility, which is not very helpful. But we tried earlier also, as we indicated several times.
Yeah.
Then the next question comes from Alexander Galitsa, from HAIB. Please go ahead.
Yes, thank you very much for taking the question. Just on this, on the vial situation, maybe you could give us a sense by how much the vials were down in Q3, and also nine months, and what are you baking into your guidance for twenty twenty-five as far as vials are concerned? Thank you.
We cannot disclose all the business in detail, but it was down, yeah?
... So, Alexander, thanks for asking. I mean, we really don't make now a disclosure precisely for our vials business. But definitely in Q3, we had, let's say, further shortfall in the magnitude of our mid-single digits euro amount, actually, in Q3. And we expect that the euro, and we expect that we can grow significantly in Q4. That's our idea, and this is how we see the business.
Understood. Thank you. And then maybe just generally, or rather, on the adjusted EBITDA margin guidance for 2025, what stands out is that you have reduced your sales growth expectation for 2024 and 2025, so that the 2025 absolute sales are going to be materially below what previously was expected. Yet, you only marginally, I think, changed the adjusted EBITDA guidance for 2025 from at least 22% to now around 22%. So just wondering, where is this confidence regarding the strength in margin coming from, considering that the absolute revenue-
Mm-hmm
... will be quite a bit lower than initially what was planned?
Basically, this comes from the trajectory of our business now. We are really improving, and you can see this also in our numbers, year to date, and you can see this also from the full year basis. We are gradually improving our margin, from 2023, where we're around 20%, now going into the direction of 21%. And obviously, we want to go and grow then by 1% further, by one percentage point. We should not forget that we're really changing our product portfolio and that we're having more high-value products. The GLP-1 is helping us as well, and, yeah, that's basically the core of the whole matter. Based on the product mix and the growth, which is between 7% and 10%, this should really drive our margin improvement, which we have demonstrated also in the last years.
Yeah, because the key drivers of the margin improvement are fully ongoing. It's new devices, the new line finds, it's in syringes, it's in several areas, and here, that's the drivers of the margin improvement.
Understood. And maybe the very last one, if you can provide here any color onto what has been sort of the, I guess, the main. Sorry. What has been the main sort of tipping point for the adjustment now? Because it seems that there were several messages from the industry, I think, Schott, that commented positively that the demand or the situation in the destocking seems to be improving. And then you also, in July conference call, seemed to be quite optimistic on the situation as well. But then Q3 growth came at only 2.2%, which probably suggests that there was significant deviation in August.
Maybe if you could just comment, what were the developments, I guess, that tilted your also expectations for the upcoming quarters to quite a bit negative direction?
Yeah. It was clear from the very beginning that the year would be back and loaded. I think this is important, yeah. Our markets have gone through the longest and deepest phase of destocking by customers, and like our peers, we were also affected by this. So no doubt about this, but this drove us down from a guidance of 5%-10%, where we actually initially planned to reach the upper end of the guidance, to the lower end of the guidance, and we always communicated this. The tipping point now are the three points that Bernd disclosed, yeah? It's a combination of, no doubt, the more... The slower ramp up and slower recovery of the tubular glass in general, so the rebound effect.
It's Morganton that is clearly a tipping point. It's not helpful at all. Plus, of course, the mentioned weakness in food and beverage, molded glass segment, that is also not helping at the moment. And that together, when each and every point are individual, you might have been able to compensate, save them almost, but the three together now are leading to the fact that we are sitting here in this call and taking the guidance down.
Thank you.
The next question comes from Olivier Calvet from UBS. Please go ahead.
Yeah, thanks for taking my question. So shortly, just on Bormioli, you've said your expectations haven't changed. I just wanted you to confirm, you know, consensus that you distribute excludes Bormioli. Your guidance update is strictly excluding Bormioli, right?
That is an easy answer: Yes.
Okay, then moving on.
Or better, yes, it does not include Bormioli.
Yeah. Yeah, yeah. On Morganton, you know, if we assume roughly 10% of the business is vials and a fixed percentage is Morganton, how much was the ramp up in high-value vials and cartridges in Morganton for next year?
Now, too early to answer because we have to look at the situation in Morganton first, but most of the high-value vials, hopefully and lucky-wise, are actually out of Querétaro, the Mexican facility. But we also planned some high-value ramp ups in Morganton, but we have to see how much they are affected or whether we can still materialize them, because I hope at the moment that we can restart the plant within 24.
Yeah, but I'm just wondering in terms of what was expected to come incrementally in terms of either, you know, sales or volumes, out of Morganton. You know, you have this ramp up in the second half of twenty twenty-four before that issue with the hurricane. So basically, are we talking, you know, adding 20%, 30%, 50% capacity to the Morganton site? Or is there any color you can give us there in terms of the ballpark of the volume increase you had before that hurricane issue?
I mean, there will not be any volume increase now in the next weeks, and we have to make sure that the Morganton plant is restarting again until end of the year. Well, I cannot answer this completely because it's absolutely fresh and early. We're still working on how much we can relocate to other facilities and still run these things.
Right. No, no, just wanted to understand what's your expectation prior to all of these issues where I understand we've obviously got a changed situation. But it's just to understand also the magnitude of the cut for the vial business being around 10% of sales, yeah.
We planned growth there. We planned also a couple of ramp ups, and as they are not coming, this is one of the tipping points why we are sitting here.
Okay, and I just wanted to also get a sense of, you know, if you can talk about the requirements related to reopening that North Carolina site. You know, you said some other sites might offset, you know, might be able to serve short-term demand. But would it be fair to assume that the site would be starting operations from Q1 next year?
No, I hope it. I hope actually earlier, but it starts too early. We are talking several weeks. It might be four, it might be six weeks. That's something that we really have to investigate. We were able to go into the facility again today, and now the engineers are working, and I hope to get an update over the next few days.
Okay. And final one, just if you could differentiate your restocking comments between high-value vials and bulk vials. Any difference there that you're seeing?
Yeah, the majority is in bulk vials. The wide majority, vast majority, yeah.
Thanks for that.
The next question comes from Michael Hannig from Pareto Securities. Please go ahead.
Hello, thanks for taking my question. I have a quick one on the flooding. Could you give us a ballpark figure, how much revenue the plant was generating last year to just get a better understanding of the missing revenue?
We don't usually disclose this, but it's $40 million or something dollars. In the ballpark of $40 million dollars.
Okay, thank you.
The next question comes from Gaurav Jain from Barclays. Please go ahead.
Hi. Thank you for taking a follow-up question. So, you know, you know, you and a lot of your peers have cut guidance, multiple times, and, you know, so how should we think about CapEx in the industry for this year and the next few years? And shouldn't there be now a big step down in CapEx that we should be expecting?
The CapEx, basically, your question was whether we think also our CapEx program in the light of these adjustments for 2024 guidance and 2025 guidance, if I understand this correctly.
No, that's not the case.
But why would that be the case? Is my question, because then essentially, your EBITDA numbers are coming in below expectations, and your CapEx is the same, so the business is becoming worse and worse when it comes to the returns profile.
But we have not guided the CapEx for twenty-five, huh?
Yeah, but then answer it though. I mean, it's a bit. In the end, our midterm, you know, our the midterm of our company, which is really driving the whole thing, we are not short-term oriented in our company. We are really pursuing a long-term profitable growth path, and this is really intact. As Dietmar worked this out before in the slide deck, we have several growth accelerators that will deliver on our double-digit growth ambition. We have, be that the conversion to ready-to-fill vials, cartridges, be that our high-value devices, our own IP devices, the IP pipeline, be that our syringe business serving into robust injectable market growth, or frankly, also our high-value pharma plastic platform. We are a mission-critical supply chain partner of choice, and we have this kind of one drug point. And all, all of this, this is really important.
These are profitable growth opportunities, and we need to capture them, and therefore, there's no reason to announce-
Yeah
... this kind of long-term CapEx projects.
It was a bit hard to understand your question, how I understood it. It's not the way you raise it. It's actually, we have here only a cell phone at the moment, yeah. Yes, and that's very clear. I mean, we are planning to grow next year between 7% and 10% organic, yeah, very clear. And we are planning to go back to double-digit growth over the loop of the next years. That has unchanged in the midterm guidance. What we're doing at the moment with the CapEx, we are laying for the foundation for the growth in the future. That's the new facilities for auto injectors, for syringes, for pens. And this is the right thing to invest into. This is the turnaround of the company in both top line.
But we should not, also not forget, it's the materialization of what ensures the midterm margin improvement also, that is driving the company to 2023 and beyond EBITDA margin, and this is what we are investing into.
Thank you so much.
Yeah.
Ladies and gentlemen, this was the last question for today. The conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.