To all of you, welcome to our Q3 2025 or nine months 2025 results call. With us today are our CEO, Dietmar Siemssen, and our new CFO, Wolf Lehmann, who will run you through the Q3 and nine months results and then go into the financials. Afterwards, we will open the floor for questions and answers. With that, I hand over to Dietmar Siemssen. Dietmar, please go ahead.
Yeah, welcome everybody. Thank you for joining us for this call. As you all know, we held a conference call yesterday morning after issuing preliminary figures for the third quarter and the profit warning for the 2025 financial year the night before. Today, we want to provide you a full update after releasing the final numbers. There are no changes to the preliminary figures, by the way, and give those who couldn't participate in yesterday's call the opportunity to ask questions. Yesterday's participants will find that we cover a lot of the same material, but we will also provide additional information. Q3 came in lower than expected. Organic revenues were 1.2% below the previous year's quarter, and adjusted EBITDA was 9.4% below. The adjusted EBITDA margin was 18.8% and thus 1.7 percentage points lower than in the previous year period.
We won't be able to compensate this until the end of the year, even though we expect the fourth quarter to be stronger than Q3. We did not expect this development. It is disappointing to say at least that we clearly have to increase our measures to get back on track. I will elaborate on this later. Our performance in the first nine months of this financial year is clearly below our expectation, and we can't sugarcoat this. Yes, there have been a number of market influences, but the development in total is disappointing. On a reported basis, our revenues grew in the first nine months by 14.6%, the EBITDA by 7.2%. Both increases due to the first-time consolidation of Bormioli Pharma. On an organic basis, however, revenues declined by 1.8% and adjusted EBITDA by 7.5% compared to the previous year's pro forma figures.
We had expected a much earlier market recovery of the cosmetic and oral liquid market. Instead, the weakness of the markets prevailed. Overall, our operative performance in Q3 lagged behind. On a positive note, our focus on being more selective with CapEx is beginning to pay off. We recorded positive free cash flow of EUR 21 million in the third quarter, and we expect a stronger fourth quarter in comparison to Q3 2025 with the ramp-ups of new lines for drug delivery systems. The disappointing operative performance in the first nine months and the third quarter in particular does not change the strategic rationale behind our growth investments or the Bormioli Pharma acquisition. We are still convinced that broadening our portfolio with new high-value solutions, particularly for the growing biologic market, has been the right strategic decision.
The Bormioli Pharma acquisition brought Gerresheimer to a new level in terms of revenues and EBITDA and strengthened our market position. It was also a prerequisite for building a strong molded glass powerhouse and being able to take the next steps separated and initiate a sales process afterwards. Looking at our numbers, we understand we need to act, and we already have by initiating measures to reduce costs and improve our performance. As you can see, for example, from our restructuring costs in the third quarter report, we will elaborate on this later. From our recent news, you have seen that we have a number of changes in our leadership team. Wolf Lehmann succeeded Bernd Metzner as CFO in September, and Achim Schalk will succeed Lukas Burkhardt as a member of the Management Board in November.
Achim Schalk has more than 25 years of experience in international corporate management and specialized industry sectors. He will assume responsibility for the molded glass, tubular glass, and syringe system business units. His onboarding has already begun. In order to implement change, recover our margin, and to get back on a profitable growth path, leadership is essential. In the last few months, we have hired and appointed new business unit heads for Medical Systems, for the newly established business unit Syringe Systems, for Tubular Glass, and most recently for Molded Glass. Hans- Norbert Topp has been heading up our Molded Glass business unit since August. He has more than 30 years of leadership experience in various management positions.
His focus is clearly on the operational and commercial performance of the business unit, and he is driving the separation of our Molded Glass business forward to prepare the sales process in 2026. The establishment of the new business unit Syringe System and the reassignment of responsibilities within the Management Board have been preparatory measures for a new business segmentation that we are planning to implement for the start of the 2026 financial year. Molded Glass will be a separate division as part of the carve-out process. We will introduce the fully new segmentation with our 2025 results in February 2026. We are in the process of hiring a transformation officer who will report directly to the CFO. This officer will be responsible for driving the implementation of a comprehensive transformation program focusing on reducing costs, increasing performance, and improving free cash flow. A quick update on our growth projects.
The new furnace in Lohr, Germany, is up and running since May, and we expect the production volumes to increase steadily with some new projects in the fourth quarter. In Morganton, U.S., the building and most of the existing production lines were fully restored in the second quarter of 2025 after the flooding of the plant in September 2024. Now, the ramp-up of the new lines from our expansion projects has started. The project to increase our annual production capacity for vials, supported by a program of the Biomedical Advanced Research and Development Authority, BARDA, had been considerably delayed because of the flood damages. In Skopje, North Macedonia, our new syringe production facility has now been qualified by key customers.
In Peachtree, U.S., we are currently ramping up the new lines for drug delivery systems from the second expansion stage of the plant with contributions from commercial production expected for or in fourth quarter 2025. In Bünde, Germany, we have successfully increased the number of customers and the revenue share of syringe systems for biologics. Querétaro, Mexico, is a great example for the market shift from bulk to ready-to-fill vials. We have seen significant growth for our Gx Elite Ready-to-Fill Vials this year already and will be able to offer these high-value vials also with the innovative packaging platform EZ-fill Smart. We have also just announced that we will expand our production facility in Wertheim, Germany, to offer our Gx Elite vials in a ready-to-fill configuration with startup production expected for mid-2027. This is a growth project which we have planned for around two years.
We held a groundbreaking ceremony for the new production hall at the end of this September. I'm also finally pleased to announce that the FDA granted S2 Innovation approval for Lasix ONYU for the treatment of edema in congestive heart failure. Lasix ONYU is a combination product consisting of a novel high-concentration formulation of furosemide and our Gerresheimer on-body drug delivery device Gx InPuls. The FDA's decision underscores our expertise as an innovative solution provider for our customers from product design to large-scale manufacturing. This is our own IP device, and the FDA approved it as part of S2 Innovation's combination product. This is a great achievement for our advanced technology division. We designed and developed the two-component infuser in line with our eco-design principles, and we manage production of the device as a full-service solution provider. We produce the disposable unit of the infuser, for example, in Wackersdorf, Germany.
First products are expected to be available before the end of this year. Most importantly, the FDA approval for Lasix ONYU is the proof of concept for Gx InPuls, our own IP on-body device for small molecules. The device can now be adapted for a number of other small molecule drugs for other therapeutic areas, significantly shortening time to approval. Just a few words about our sustainability efforts. I know that this topic might take a backseat in everybody's attention right now, so I will keep this short. Nevertheless, sustainability is an important pillar in our corporate strategy, and we made significant progress also in 2025. We received an A rating by CDP for our transparent disclosure of climate-related goals, processes, and performance. This rating confers leadership status and places Gerresheimer well above both the global and the industry average of a C rating.
EcoVadis once again awarded us gold status with a score that places us among the top 4% of all assessed companies and within the top 1% of our industry. EcoVadis evaluates the management systems of companies worldwide in the categories of environment, labor, and human rights, ethics, and sustainable procurement. You see all the other external ratings which we have received on this slide too. We will, for the first time, publish a CSRD-compliant sustainability report in 2026 for 2025, which has been audited or which will be audited by BDO. I will now hand over to my colleague Wolf Lehmann for a closer look at our financials. Wolf, please.
Thank you. Following up on the revenue and EBITDA drivers year-over-year, on nine months year to date in more detail, we show the numbers in the prior year pro forma adjusted for the Bormioli Pharma acquisition.
Numbers are not adjusted for FX. Let me explain revenue trends on the left first. year-over-year, the anticipated market recovery after the first half and growth did not happen. Instead, net were down $47 million from $1,728 million down, with a mixed picture between the segments. Plastics and devices up $15 million, and primary packaging glass down $59 million. Within Plastics and Devices, the net up $15 million is a mixed bag. Medical devices, we grew around $36 million, not as much as we would have liked, as Dietmar mentioned, but initial growth in devices such as autoinjectors and pens came through. This is partly offset through plastics packaging down around $12 million, driven by continued less oral liquid containment demand. In addition, around $10 million - from foreign exchange, mainly the unfavorable U.S. dollar to euro exchange rates impacting our U.S. business.
On the Primary Packaging Glass, PPG side, revenue is down $59 million, mainly driven by around $44 million decline in molded glass, with disappointing weak cosmetic and oral liquid markets. Furthermore, lower sales in food and beverage to some extent, yet this is partly due to the renewal of our furnace at Lohr. Also, around $10 million decline in tubular glass. Here, standard products are down, yet higher value products like ready-to-fill vials are up, as Dietmar mentioned. Finally, also here, around - $5 million from foreign exchange, again, mainly U.S. dollar to euro. On EBITDA in the middle chart, EBITDA is down $27 million, $341 million to $314 million. Thus, overall, a high fall through of $27 million EBITDA versus $47 million revenue or 57% fall through. This is driving down profitability from 19.9% to around 18.8% year- over- year.
I'll focus on explaining the different sales to EBITDA dynamics. On Plastics and Devices, P&D, EBITDA is down $18 million on sales, up $19 million. Mainly the impacts are medical devices did have growth in revenue, $36 million, as explained, but EBITDA is down $2 million, since especially our new assets, like our Peachtree site in the U.S., are partly up, partly still in ramp-up, but underutilized or insufficiently loaded yet to cover all the additional costs as we invested ahead of demand. Plastics packaging sales are down $12 million year- over- year due to the mentioned oral liquids market downside, falling through to EBITDA with a high around $8 million impact. This partly highly automated plants producing our high-value plastics packaging parts are sensitive to suboptimal capacity loading levels.
On Primary Packaging Glass, PPG, molded glass with sales decline of $44 million from cosmetics, oral liquids, et cetera, falling through as to be expected around $11 million EBITDA. Tubular glass, the sales decrease of $10 million does not fall through to EBITDA, mostly due to the better mix, as mentioned, less bulk, standard, and more high-value growth focus like ready-to-fill vials. Overall, this compresses EBITDA margin from 19.9% down to 18.8%, a full 110 basis points, and stresses again the point to focus on cost through operational excellence as well as commercial excellence to drive price and margin recurrence. Adjusted earnings per share on the right. Simply, the EBITDA decline fell through after tax and impacts from higher depreciation and interest, mainly driven by the Bormioli Pharma acquisition. In summary, two, three main issues, as Dietmar also mentioned.
One, market decline and continued longer market softness versus expectations, especially in cosmetics and oral liquids. Two, growth projects starting to deliver, but slightly slower, and this leads to three, suboptimal capacity utilization levels with new assets. Hosts are still in the middle of ramp-up and similar host renewal of old assets like the glass furnace renewal mentioned. Going to page 10. We can skip most of the page pretty much. It is the usual format we present, but it's the same just with absolute numbers of sales and adjusted EBITDA. We already covered all the drivers year-over-year. Only a new aspect is that the EBITDA margin compression is coming mostly from Plastics & Devices, P&D, with 25.2% in nine months 2024, down to 22.9% in nine months 2025. As mentioned, due to the ramp-up in the U.S.
of our growth projects in medical devices, as well as partly suboptimal capacity loading levels at plastics packaging. Primary Packaging Glass is at a lower 18% profitability, flat year-over-year. Turning to page 11, the quarterly cash flow development. The free cash flow before M&A started low in Q1 at a -$141 million. Q2 at +$2 million, and so far the best quarter in the year was Q3 at $21 million +, resulting year-over-year, overall in a - $119 million. On the next page, page 12, we explain the drivers of the third quarter $21 million + cash flow. Q3 was a good quarter for cash flow. The adjusted EBITDA of $103 million fell through to operating cash flow at $85 million, or a strong 83% cash conversion rate.
Going from left to right, -3 0% from items we adjusted out from EBITDA due to their one-time nature, like the reorganization, like closure of our Bad Königshofen plant, the ramp-up, as mentioned, Peachtree, as well as integration cost from Bormioli Pharma. + 21%, primary reduction of networking capital, mainly stemming from better management of payables and receivables. We paid taxes of 10% and interest of 17%. The +1 8% in other is linked to the first item I mentioned on adjustment, and this is the accrual portion. First position 30% is the P&L impact, and 30%, -1 8%, 12% is the overall impact on cash. From the subtotal of 85 operating cash flow, one needs to deduct net CapEx of around $65 million to get to free cash flow before M&A of 21. Of the $65 million net CapEx, around $28 million is base CapEx, rest is growth.
The $28 million base CapEx is an average number as a typical year could be around $100 million or so. In summary, Q3 was a good quarter for cash flow, yet we stayed laser-focused on cash also in the fourth quarter. Also, we focused on cash flow much in the ongoing budget analysis for next year as we strive for positive cash flow as a key priority. Please turn to page 13, referring to our capital structure, leverage, and liquidity. Main points on this page are around leverage and liquidity. On leverage, Q3 stands at 4.15 leverage, which is 1933 over 466 last 12 months adjusted EBITDA. We are fully compliant with all covenants.
On liquidity, on the right chart, in fourth quarter and Q4 20, we have, sorry, in fourth quarter 2025 and in the fourth quarter 2026, we have 339 and 75, so a total of 414 maturities coming up. The available revolver of 545 covers these upcoming maturities up to mid-2026 to 2027 entirely and is sufficient liquidity. Back to Dietmar for the summary.
Yeah, thank you, Wolf. I mean, you see this. This is performance in the first nine months and the third quarter in particular. The continued subdued demand in the cosmetic market, as well as in the containment solutions for all liquid medications, forced us, again, we have to say, to revise our guidance. We expect a stronger fourth quarter compared to the third quarter, but we will not be able to make up for the business performance of the first nine months.
We now expect an organic revenue decline between - 4% to - 2% and an adjusted EBITDA margin around 18.5%- 19%. The adjusted earnings per share will decrease by a mid-digit percentage. It is crystal clear that we can't wait for selective markets to recover, but we understand we need to act now. We will immediately implement an even more comprehensive transformation program. It includes the more selective investment planning with a clear focus on free cash flow that we have already announced. In addition, it includes further measures to increase operational and commercial excellence and to optimize our global production network. As the details of these programs are still being worked out, the insights we can provide at this time are limited. Rest assured, we will leave no stone unturned to recover our margins and get back on a profitable growth path.
We will give you regular updates on our progress with our next quarterly calls. Let's come to the summary. Before we open our round for your questions, let me summarize the key takeaways. Third quarter and the first nine months were clearly below our expectations. Q4 will be stronger due to ramp-ups of new production lines for drug delivery systems, yet this will not fully compensate for the development in the 2025 financial year to date. We therefore needed to revise our guidance. We'll have a new leadership team in place going forward with Wolf Lehmann as our new CFO and Achim Schalk as a new member of the Management Board from November. Hans- Norbert Topp now heads up our business unit Molded Glass and drives the separation forward. Starting with the 2026 financial year, we'll implement a new segmentation with Molded Glass being a separate standalone division.
We repaid EUR 200 million of our bridge loan and managed to reset our governance, increasing our financial flexibility. Most importantly, we take actions to reduce cost, increase performance, and improve free cash flow. The newly established Transformation Office will report directly to the CFO. Thank you so much. We will now take your questions.
Thank you very much, Dietmar and Wolf. We would now like to open the floor for your questions. As the stat operator, please go ahead with the instructions on our Q&A session. Operator?
Thank you very much. It's a pleasure. Dear ladies and gentlemen, if you would like to raise a question, please press nine and the star key on your telephone keypad now to enter the queue. Please note that it is only possible to raise questions on the conference call. I repeat, the combination is nine and the star key. If you wish to cancel your question again, please press three and star. For now, please press nine and star. The first question is from Olivier Calvet of UBS. Olivier, over to you.
Hi again. Thanks for taking my question here as well. Maybe, first one on the covenants. I guess the question is, would you breach your new covenants or credit agreement at the bottom end of full year 2025 guided EBITDA? Assuming a flat net debt, net financial debt, close to 4.6 x, or any color you can give or comfort you can give on the covenant level or credit agreement in place by year end?
Thank you, Olivier. Look, covenants, as I mentioned, we're fully compliant. We now have a leverage ratio of 4.15x. You asked before year end, and we're fully aware of the covenants. We feel comfortable, and we're fully aware as every $10 million EBITDA up or down impacts the leverage by about 0.1x. Trust, we're fully aware of that.
Okay. Thank you. I guess the second question would be just on sort of a pecking order of capital raise measures. If you could give us some color there, are you thinking if it would come to it, fixed income, convertible cap raise, any assets you might sell besides the molded glass?
Olivier, good question. I think we have the capital structure as laid out. Currently, no covenant transaction is planned. Thank you. You're right. In terms of assets that we were working on separating and selling, you're aware of molded glass, and Dietmar explained that. We're at full speed with our new leader, Norbert Topp. As Dietmar mentioned, we look at that, and with it, we give it a complete new segmentation for the business that will start 1st December , which is our new business year. As Dietmar mentioned in our earnings call and in February, we'll provide more details on it.
Thank you. Okay, cool. Just on the free cash flow by year end, trying again here. If we think about it, at least in terms of the CapEx phasing, you did $240 million net CapEx year to date. I think there was a level that you guided close to $340 million, if I'm not mistaken, for the full year. Should we expect roughly that level in Q4, or is there any CapEx projects that are moving over to 2026?
I think it's a good question, Olivier. As I mentioned, in the fourth quarter, we already started in the third quarter to be laser-focused on cash. You see that in the results. We have a positive cash flow of $20 million. We continue to be laser-focused on cash. Yes, CapEx is one of the items. That's the biggest one in the cash flow statement, as well as working capital. We continue to focus on that, and we will manage accordingly.
Okay. Sorry, just one on P&D. We have a bit less visibility than within PPG. Would it be possible to give us an order of magnitude of your size in medical devices, perhaps including the syringe systems and in plastic packaging, respectively, either for 2025 or for the nine months?
Let me get back to you on that. I don't know at the top of my head.
All right. Final one, just sorry, on molded glass EBITDA. You gave it the last few quarters. I was just wondering if you were able to give it also for Q3 as well, just to give us a sense.
Say that again. Which part for Q3, Olivier?
Molded glass EBITDA, because you gave the year-on-year delta, but we had the base in Q1, Q2, 2025, and 2024.
I think same. Let me get back to you on that, Olivier.
Thank you. Same level.
Yeah. Thank you.
Thank you very much, also from my side. The next question is from Falko Friedrichs of Deutsche Bank. Please, over to you.
Thank you and good morning. My first question is on the oral liquid container business. Given how severely stuffed the channels for these products seem to be, do you think that the upcoming flu season is really enough to flush all of this out and to see normalized end market again next year?
Yeah, we clearly see your first indications that, let me say, the downside is stopped. We see the strong flu season that is expected, that this will finally empty the warehouses of our customers and their customers respectively, and we hope that this leads to a certain recovery.
Thank you. My second question is whether you can share a little bit more of your view on this BaFin investigation and how certain you are that this only pertains to these bill-and-hold contracts at the end of 2024 and not to anything else.
Falk, a very good question. Again, on the BaFin audit, look, we fully support the audit, and we still have to learn more on the rationale for the audit from BaFin. Referring to bill-and-hold, I think, you know, bill-and-hold, there are strict rules and regulations to ensure proper bookkeeping. We are absolutely aware of those rules and regulations, follow those. If you look at 2024, I think we mentioned already that at the end of 2024, we have accounted for a low double-digit amount of revenue from bill-and-hold, and this is very well controlled. We'll keep you posted on the BaFin audit. I think we're thinking about a landing page to facilitate communication, keep everybody aware on progress. If you just look at bill-and-hold, this is, as I mentioned, a low double-digit euro amount, and in the grand scheme of things, it is less than 2% of our revenue.
Again, we are absolutely aware of the strict rules and regulations around accounting for bill-and-hold.
Okay, thank you. My last question is, is there any more color you can give on the planned timeline for the molded glass exit?
I think, as mentioned, we are in full swing preparing the separation. I think, as Dietmar mentioned, we're preparing for, or we'll try to sell the business in 2026, next year. That would be preferred. Again, we'll keep you posted on progress. Thank you.
Okay, thank you.
Thank you very much. Next question is from Odysseas Manesiotis of BNP Paribas. Over to you.
Hi, thanks for taking my questions. Firstly, you did flag liquid oils and cosmetics as the key corporates here. I get an around 3% impact from the full year and export.
Sorry, Odysseas, could you... Apologies for interrupting. Could you speak up and a little slower? The line is not as good. Thank you.
Yes, of course. You have flagged liquid oils and cosmetics as the key causes of the growth downgrade here. On the numbers you've provided, and thank you for the additional detail here, I get an around 3% impact for the full year, which is, let's say, around half of the impact or a bit less than half since your guidance, let's say, pre-Q2. Could you talk about the two or three other key factors in play for the downgrade here other than just liquid oils and cosmetics? I have a couple of follow-ups.
Yeah, it was super hard to understand. That's why I'm not really sure what are the reasons beside oral liquids and cosmetics. Yeah, there are no.
Yeah, other than I think we explained in the EBITDA explanations for the nine months, I think we explained the main drivers, one of which was our liquids and then cosmetics. Our liquids impact both glass as well as plastics packaging, right? Cosmetic is glass. I think I also explained, you know, as Dietmar mentioned, we have invested in growth and these projects are coming through. They're coming slightly slower than we would like, but we're at it. For example, I think I mentioned Peachtree, and that slower growth than wanted has an impact currently on the capacity loading of these new sites. As such, the profitability of the new site suffers because the capacity loading is not yet where we would like to be, but we're at it, you know, obviously for Q4 and next year to improve that.
The other rationale I had mentioned to you was we did spend money on certain sites on renewal of furnaces, which we've done. Example given, I mentioned Lohr in Germany, and we've done that. That renewal process and the ramp-up thereafter is important for profitability. Also, there we had some slight delays that had an impact on profitability. Again, we're at it and we're improving that already in the fourth quarter as well as going forward into 2026. If we understood the question correctly, it was you understand cosmetics and oral liquids. I think I gave you two more reasons that impacted profitability, which we're improving on as we speak in the fourth quarter and going forward.
Thank you. That's helpful. I have another one, the midterm guide versus next year. I mean, considering the dynamics that you're seeing now and not asking you to give us guidance here, but do you remain confident on that 6%- 9% range for growth, including next year?
Very good question. Yes, we did not give the midterm guidance, and there's a logical reason for that. We're in the middle of planning our budget for next year. As such, we're still in the middle. It doesn't make sense to comment on midterm guidance as the first year of the midterm guidance is 2026. We wait for giving an update on that until completion of the budget process, and then we'll provide that midterm guidance again for you. Thank you.
Great. Thank you. Thirdly, a housekeeping one. How should we think around interest for next year? I mean, as you presented, you have around EUR 340 million to refinance at the end of the year. Guessing that's at a higher interest rate environment than you raised it. Is it fair to assume a bit of an increase from that around EUR 90 million financial result that we expect this year, excluding adjustments?
No, I think it's more or less flat for next year. I mean, I think what Dietmar had mentioned was that we took the opportunity to pay EUR 200 million of the bridge loan back, and we replaced that through slightly longer-term term loans. In the long run, those longer-term term loans are more attractive than the bridge loan. As such, I see more or less a wash here, and I don't see any material increase in interest, assuming a flat interest environment, because as you know, we're looking at variable interest rate. Assuming a flat interest environment, I don't see an increase for next year.
Thank you. Thank you.
Thank you very much. Just a little reminder, ladies and gentlemen, to raise a question, please press nine and the star key. The next question is from Oliver Metzger of ODDO BHF. Please over to you.
Yeah, good morning. Thanks for taking my questions. It's also a kind of follow-up of yesterday. I really appreciate that you provide more disclosure also within the segments. If I look in plastics and devices, you mentioned that the liquid headwind was quite severe and pressed it down. Could you also quantify this for Q3 just to give us a better view how strong the headwind actually was? What's the expected phasing of this headwind for the plastics for the next quarters? Also, in this context about this, let's say more detailed disclosures, when would you start to report also on a more subsegmental view that we get a better understanding which dynamics are creating the strong headwind and which dynamics are already well on track, like you also disclosed for the medical devices, for example, would be great to hear.
Oliver, thank you very much for your question. I think, yes, we took a conscious effort to provide more transparency, right? We've done that in the given segmentation. I also respect Olivier's question on molded glass, but please note, molded glass is not an official segmentation of ours. It will be from 1st of December onwards. I do want to respect the segmentation we have today. I think we've tried our best step forward here to provide more transparency in the given segmentation. I think we've done that. From 1st of December onwards, we will go live with our new segmentation, including molded glass. From then on, you will get also separate financials for molded glass, etc. I won't talk about the new segmentation today, but we're at it. As of 1st ofDecember 1, we'll go live with it.
I think Dietmar mentioned various leadership changes that all play a vital role in that new segmentation. We're excited about it. We're doing it. Until then, we respect the current segmentation. Thanks for the compliments, I think we've provided more transparency and we'll continue to do so, but always with the official segmentations and we'll follow those rules and regulations.
Okay, understood. Thank you.
Thank you.
Thank you very much. Moving on to the next question. I'm very sorry in advance for maybe mispronouncing your name. Xiangru Cheng, over to you.
Thank you. Thanks for sharing the Q3 and nine months results. I'm Xiangru Cheng from KSW IPEX. I just have a question regarding the reset of the covenant. What is meant by that? Does it mean that you pause the covenants for a certain time or what does it mean by the reset of the covenants?
No, what it means is, look, you know, as you know, in our prior financing, we have a certain step down in the covenants. We reset that, and now we have, again, sufficient and more headroom. As I mentioned, we closed the third quarter at 4.15x leverage. The key ratio there for the covenants is the leverage. We feel comfortable there. We're fully, fully compliant with our covenants. That's what we achieved, right? Next to the covenant reset, we also, as mentioned, the other thing we did after post third quarter close, we paid back EUR 200 million of the bridge loan and replaced it with a term loan, as mentioned. Yeah, those were both covenant reset plus paying back EUR 200 million of the bridge loan. I think we're both good steps in our covenant in our overall capital structure. Yeah, the other aspect I had explained is liquidity.
I mentioned what are the upcoming maturities in the fourth quarter in 2026, and those are fully covered through liquidity tools that we have already today. With that, all the way until the end of 2027, there's no other maturities coming up. That's what I tried to explain. Hopefully, that helps.
Thank you. Currently, the RCF, they have a covenant in place, but the promissory loans, I think they do not have, right?
Correct. Promissory loans, yeah, correct, that are not tied to leverage. Correct.
Okay. Could you give us just some color on where you are targeting the leverage ratio to end of the year, or it's a little bit too early now?
No, as you know, we don't provide guidance on the leverage ratio. As you know, as explained, I think we provide our guidance on the organic growth, as explained. We provide guidance on adjusted EBITDA and on adjusted EPS. I think we went through that.
Okay, thanks a lot.
Thank you.
Thank you very much. Next question is from Delphine Le Louët of Bernstein. Please, Delphine, over to you.
Yes. Good morning, everybody. We are definitely at the time of the year where you have a bit of visibility regarding the book to build for next year. Can you tell us a bit more about that, especially regarding a traditional book to build at this time of the year? It would be, I think, quite useful. The second question will deal with the immediate cost-cutting initiatives that you plan to implement prior to the transformation of Vista to be named. Third question, and I don't know if you tell us that or can disclose it, but I think it would be very much useful to understand what is the EBITDA margin of Bormioli , standalone in Q3, for us to understand what is happening here.
Also, willing to get a bit of a vision of what you think about the CapEx for medical equipment in Q4, considering the level you had already this year and for next year. Staying up a bit with the MedTech, I was willing to know what are the exact reasons for having such a negative contribution in the MedTech, considering the very push that you had from the MedTech on your top line?
Great. Thank you very much, Delphine, for your questions. Let me go step by step. I think you have mentioned book to build. Book build also for next year, et cetera. As I mentioned, we're in the middle of the budget process, and as such, we're not yet commenting on next year, but we will do so. If I understand your question more right now, currently, I think also yesterday already at the call, I mentioned that when you compare sales from third quarter to fourth quarter, if you look at our guidance, let's say at the midpoint, what we expect is around EUR 50 million incremental sales from third quarter to fourth quarter. As Dietmar mentioned, we're looking at the stronger fourth quarter compared to the third quarter.
That EUR 50 million, we also feel comfortable around, and that is, you know, book to bill, or this is in our order books if you want. We see that it's backed up by the progress in orders. You have mentioned, I think, transformation and cost. Let me elaborate a little bit more on that. As Dietmar mentioned, we have initiated our transformation process, and the rationale for formalizing that and having the transformation office reporting to me is to accelerate and formalize that transformation, which I want to stress, this is complementing our efforts on growth. We continue to be a growth company, and yes, we push our growth projects. Nevertheless, as Dietmar mentioned, we are facing the current realities of the markets as they are, and that has a bit of a delay on our growth projects. It is what it is. We're dealing with that.
Based on that, to protect our profitability and continue to deliver profitable growth, we're doing a transformation, which I think is the right thing to do. Transformation office, what are some of the key initiatives? On the one hand side, we're looking at operational excellence. This is particularly looking at variable cost productivity. Two levers, those are not the only ones that we're clearly looking at, are sourcing efficiently. We currently have a rather, let's say, decentralized sourcing approach, and there we see opportunities to do things selectively better and more efficient. Here also, we might also go, we are getting external help to do this as efficient as possible. Secondly, in operational excellence, also targeting better variable cost productivity is cost of non-quality.
It is an initiative that we're already driving, and we're looking at ways to accelerate that because we see in benchmarking that we have still some room to be best in class. That's on operational excellence, two aspects that we're strengthening and accelerating. Second aspect of transformation is commercial excellence. Here also, we will engage some external help. A couple of aspects there. We will drive our price rigor harder. We have invested a lot of money for our customers to service our customers, and we're looking at price excellence. We're segmenting the portfolio by customer, by product, by region in a classic way to really look at other opportunities to improve our profitability. The other aspect in commercial excellence is we have existing capacity available. Where the money is spent, the capacity is there. We'll focus on filling that capacity, which also has a positive impact clearly on margin.
Third aspect that we also mentioned yesterday is footprint consolidation. You know, we have more than 40 plants globally, and we very rigorously have scrubbed through this, and we're looking at a very classic grow, fix, close or sell approach. I think we made you aware of one business, molded glass, we're looking at selling, and then we scrub through, make sure that we're absolutely efficient in our footprint network. The other aspect is, again, timing of transformation. Some of the initiatives that I mentioned to you are not done in a quarter or two. This will be with us, and we focus on it. We mentioned the transformation office, but again, I want to stress this is complementing our efforts on growth. We are not stopping our growth effort.
We push those hard, and this is just complementing, reacting to the latest reality of maybe some markets as well as some slower growth, but this is just to complement our growth efforts. I think that's on transformation, Delphine. One other part of your question was Bormioli standalone. We don't provide Bormioli standalone numbers. You know that. Also, yes, as Dietmar mentioned, the business is now integrated and split into plastics and glass, and glass went to molded glass, and you know that we're looking at building a molded glass standalone business. CapEx on Q4, I think I mentioned, I think I answered the question already before. We're not providing only details on CapEx Q4, but again, I want to stress we're laser-focused on cash. You see already positively in the third quarter, and we continue to focus on that.
Yes, we're fully aware CapEx is one of the biggest chunks in our cash flow, so we manage accordingly. I hope I captured all the parts.
Yeah, no, at the end, just to understand the EBITDA negative contribution when it comes to the medical device. Any explanation on the back of that?
I think on medical devices, if you're referring to page nine, where we provided.
Your breakout, yeah.
I think we did that already, the U.S. ramp-up. Yeah, and this is exactly what we explained. When you invest for growth, yeah, and you build a new plant, we've done, for example, in Peachtree, and Dietmar gave you an update. We're making great progress on it. Yeah, we also were clear that the growth was a little bit slower than expected. What you end up with is you have a fully functioning plant or parts of the lines. We have various lines in Peachtree are producing. Some are still in ramp-up. You have the full cost there, but not yet the turnover that you expect. As such, that has then a negative impact on your current profitability. This is what we're fixing, obviously. As I mentioned, we're focusing on growth, and as we then load the lines, the profitability of the plant obviously improves. Yeah, thank you.
Thank you.
You're welcome.
Thank you very much. Next question is from Pallav Mittal of Barclays. Please go ahead.
Good morning. A couple of questions. On the transformation program, thanks for all the details. If you could just give us some quantification in terms of the costs associated with this program and then the profitability improvement that you expect in a couple of years' time, that's the first one. Secondly, on the audit that you are going through right now, you have highlighted that it is less than 2% of revenue. When we think from a margin point of view, any comment whether it is pretty much in line with group margins or it is higher or lower and how we should think about that place?
Okay, let me start with the last one. The audit, yeah, you're right. I mentioned less than 2%. In terms of revenue, in terms of margin, I think that's fair to assume an average margin percentage. On transformation, I think that's a little bit early. As I mentioned, we're going through a detailed budget discussion for 2026, and we're not providing today midterm guidance. The transformation is now a vital part of our efforts. When we provide details on budget and on midterm guidance, we can integrate to provide you more details on it. Thank you.
Of course, Dr. Thank you.
Okay, with that, we will end. Thank you for attending our Q3 and nine months earnings call. We will be attending conferences until year end and also at the beginning of the new year. We hope to meet some of you there, and we continue to be available for your questions, as you know. Please all stay safe and bye-bye.