Earnings Call: Q3 2021

Oct 12, 2021

The conference is now being recorded. Welcome to the conference call regarding the publication of Gerasimer AG's Q3 Results 2021. 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 Ms. Carolyn Navenu, Head of Investor Relations at Gerasimer AG. Welcome, everyone, and thank you for joining us to our Q3 conference As always with me today is Dietmar Simson, our CEO as well as Doctor. Bernd Metzner, our CFO. We will present a set of slides accompanying the management's notes. The quarterly statement, the presentation and the press release are posted on our website, too. Please note this call is webcast being live and will be filed on our website. Before we start, I have to remind you That the presentation and discussions are conducted subject to the disclaimer, we will not read the disclaimer, but proposed take it as read into the records for the purpose of Now it's my pleasure to hand over to Dietmar Seiden. Dietmar, please go ahead. Thank you, Caroline, and good afternoon, ladies and gentlemen. Good morning to those of you joining Welcome to our Q3 conference call. Yes, Gersheimer is on the growth course. This is the headline of our Q3 results. The transformation which we are continuously implementing is bearing fruits, and And it's even more than that. The effects of our growth strategies are kicking in, and we will maintain the momentum for growth also in the quarters and years to come. We are on track for sustainable growth. The strong growth in the Q3 proves that our growth strategy is successful. The increasing demand of our innovative and sustainable solutions show that our transformation is bearing fruits. As an innovative solution and platform provider, we are a strong partner of our biotech, Pharmaceutical and beauty customers. This is exactly what our new GARREHZEMA stands for. We are innovating for a better life. As Juan Gerasheimer, the team is working on the best solutions for our customers, offering and continuously extending our unique product portfolio. Now this clearly translates into growth. Let's start with the key takeaways of the Q3. In the Q3, We showed organic revenue growth of 10% on group level and named 9.8% in our core business. Year to date, we are now on 6.9 percent organic revenue growth. With that, we are on a clear track to deliver our guidance. Significant revenue contribution again comes from our high value solutions and our Dedicated business unit biological solutions, both growing by approximately 30%. And we expect this trend to continue. Looking at the bottom line, the organic Adjusted EBITDA margin reached 20.9%. A solid result with raw material prices and energy costs are continuously and significantly increasing. The adjusted earnings per share increased on an FX neutral base by 5.2%. Also for this KPI, we are well on track to deliver to our guidance. Dear ladies and gentlemen, we are already in the middle of the 4th quarter, and we are looking confident into this quarter and our full year result. With this, we can confirm our guidance for the fiscal year 2021 and for the midterm as well. Looking selected at Q4, we will maintain the momentum for growth. Capacity increases In various product segments, we'll turn in and we will see additional revenue contribution in the area of contract manufacturing projects. Let us now have a closer look into the growth drivers of the 3rd quarter. Good proof point for our new reshaped Gerasimer and growth comes alongside the whole portfolio. Let's start with our high value solutions. Here, in particular, biologics are a strong growth driver. In this business, We are supported by the global megatrends towards more and more biological medication, which are mainly administered by injections. In the underlying business, we see positive effects of our regional expansion initiative. Just to mention a few examples. The vial expansion in China, primary packaging solutions In Brazil and also high quality Type 1 glass in India. With our global footprint, we are close to our customers, a clear success factor for us. For our contract manufacturing business, The order intake has been continuously strong and the order books have been filled very well over the past 2 years. With this, A solid foundation for growth in the next years has been put in place. The growth opportunities in this business are very For sure, with regards to the new Oudaniekte business, but also with regard to further projects, which will turn in over the next quarters and also years. Important today is for me to have a closer look into our business solutions serving the markets for cosmetics and beauty. In particular, the businesses for high end cosmetic products such as perfume flacrons has been hit By the global pandemic. Nevertheless, this business must not be underestimated as we expect the recovery to be strong. Even more important is that we further developed our business for cosmetic and beauty. Now we see first recovery of this segment, and we see strong Potential by new innovative products, which will be accretive for both revenue growth and also margins. This is why I will today elaborate in more detail on that topic. For our beauty segment, we anticipate global megatrends, and we are sizing attractive niche markets also in this business. 1 of these global trends is the focus shift from pure beauty and cosmetic towards health care. What does that mean? More and more beauty and cosmetic companies are further developing their products And product innovations alongside global health care trends and have in a consequence significant higher requirements to our solutions. We are talking about the increased focus on Healthcare and Nutrition in general as well as the Continuous trend for advanced cosmetics like more health care applications at home. Another For us, relevant trend is the increasing demand towards a strong sustainability positioning. An important end from Gersheimer, very much Appreciate the trend as we, with our strong experience in pharma, are well positioned to fulfill this. We anticipate and understand these trends, and we are innovating towards the best product and customer solutions. We are leveraging our long term pharma competences in order to innovate on new solutions for the cosmetic and beauty market. The expertise we established over decades helps to define new markets and convince existing as well as new customers to partner up with us. We already have a leading market position in the cosmetic segment, And we are continuously increasing the amount of high value beauty solutions in this segment. The broad portfolio in products and capabilities of Gerasimer is a key success driver. We are offering the best customer solution through joining forces of our businesses and business units, concentrating our capabilities in our newly formed network of innovation centers. In order to find the ideal customer solution, it is essential to integrate products and know how from all divisions and all business units. By this, we customize our product alongside the customer's requirements and have a unique competitive advantage. Based on global trends in Pharma and Beauty, we see increasing requirements Of all beauty customers, upgrading their demands towards pharma and healthcare standards. These are exactly the customer needs We will serve and this corresponds perfectly to our expertise and the strategy of Formula G. Already now, the range of product solutions for our cosmetics and beauty customers is diverse as well as solution combining glass and plastics. We are focusing on the best solution for And we are continuously enlarging our portfolio. I will give you some examples. We extended our portfolio in perfume samplers By wilds for small size cosmetic products. The latest innovation for beauty customers is a dropper solution, combining our capabilities in tubular glass, molded glass as well as plastic packaging. In addition, we are providing ampoules in various sizes and diameters as well as tube containers for liquid cosmetics such as mascara. Within the production and manufacturing process, we are continuously moving up the value chain by offering various decoration options And finishing techniques such as lacquering, printing, mat treatments and metallization and so on. Also here, we are using our long term expertise in decorating our pharma solutions. Furthermore, we are expanding the business with customers in the Selective segment, in particular for premium skincare products as well as for selective fragrances. The underlying market Growth for this selective segment is very attractive and the recovery since the COVID-nineteen pandemic is dynamic. We are following these trends with our regional expansion plans and this approach contributes to our strategic target to move up the value chain of our customers. A third point, very important, the sustainability. Sustainability is a key pillar of our growth strategy. We are fully committed to our ambitious sustainability targets and are contributing to these goals and targets of our customers. We are offering to our customers the usage of cost consumer recycled glass as well as recycled plastics. Together with our customers, we create products developed under Eco Design principles. Together, we are considering sustainability requirements right from the beginning of the product life cycle. Already today, many of our cosmetic and beauty customers are convinced By our high quality of products with recycled glass content up to 40%, 45% and up to 100% recycled plastics. Beside the reusage of resources, we are focusing on further key criteria such as, for example, weight reduction Or packaging density. The extension of our Portfolio for cosmetic and beauty customers alongside a holistic cross divisional developing and manufacturing approach offers promising growth opportunities in all divisions. This doesn't only apply to the cosmetic business. It's a building block on our way to become a complete solution provider. We will leverage that In each business unit and alongside the whole product portfolio, always focusing on our target, Transforming our Gerasimer into a growth company as innovation leader and solution provider. We will Continuously implement this approach globally. We will innovate globally with a particular focus on own products And own IP with strong partnerships and collaboration. With this, I hand over to Bernd To elaborate on the financials. Thank you, Bernd. Go ahead. Thank you, Dietmar. Thank you, Dietmar, And welcome everybody also from my side. Before we go into the analysis of our Q3 2021 figures, I want to briefly summarize our achievements in the Q3. First, the revenue development was strong, Achieving double digit organic revenue growth, marking 1 of the strongest quarters in Gerezheimer's history. 2nd, our revenues were again particularly boosted by our key growth drivers. High Value Solutions grew by almost 30% And Biological Solutions outperformed again with more than 30% revenue growth year over year. 3rd, We achieved an organic adjusted EBITDA increase of 3.5% despite significant headwind from higher prices for raw materials and energy. This shows that we are quite resilient against the inflationary pressure and demonstrate Our strong market position provides significant pricing power. Now let's dive into the analysis of the key financials for the Q3 2021. Reported revenues increased from €349,000,000 in Q3 2020 €13,000,000 to €382,000,000 in Q3 2021. This represents a Strong organic revenue growth of 10% for the group and 9.8% for the core business, respectively. FX had only a slight negative impact of a low single digit €1,000,000 amount, resulting in a reported sales increase by 9.4% for the group. This is a strong accomplishment even without considering approximately 2.5 to 3.0 percentage points as tailwind from passing through inflation effects. Now let's turn to the earnings. In Q3 2021, we were able to organically expand our adjusted EBITDA. For the group, we reached an adjusted EBITDA Of €75,000,000 this represents an organic increase of 2.1%. FX headwinds were minor and amounted to a low single digit €1,000,000 amount compared to previous year. In our core business, we reached an organic adjusted EBITDA growth rate of 3.5% year over year for the adjusted EBITDA. This is a corresponding organic margin of 20.9%. I will later zoom into the margin details, But the adjusted EBITDA expansion of our core business compared to the previous year is very reassuring. For the 1st 9 months, we achieved an organic adjusted EBITDA growth of 4.2% Year over year with a corresponding margin of 21.1%, which is only slightly below previous year's level of 21.6 percent. Before we come to the net result, I will briefly comment on our EBITDA adjustments. In Q3, we had adjustments at the EBITDA level of around €6,000,000 As in previous quarters, our main adjustment in Q3 was related to COVID-nineteen one time costs associated to quarantine obligations of employees, which had been by part time workers as well as hygiene measures in particular in our plants in Brazil and India. Good news. These costs are exceptional in nature and will not exist going forward. So we will see a significant reduction in the EBITDA adjustments from now onwards starting Q4 2021. Let's move to the bottom line. The adjusted EPS adjusted by FX effects Increased from €0.96 by 5.2 percent to €1.01 This brings us to an organic year to date growth rate of 16.3%. By the way, also in Q4, we will see a double digit EPS growth. Before we look into the divisional performance, I will put our core adjusted margin Of 20.9 percent into perspective and briefly explain the adjusted EBITDA impact From pass through effects for resin prices and the energy costs. What you will see is That we are well positioned to weather the inflation pressure. We are able to pass on the sharp rise in resin prices to our customers on short notice. While revenues benefit from these pass through effects, There's almost no contribution to adjusted EBITDA. This effect technically dilutes the adjusted EBITDA margin by approximately 60 basis points. The rising energy costs have, however, burdened our adjusted EBITDA with a mid single digit €1,000,000 amount. Good news is that these headwinds are only temporary In nature and will be passed on to the customers with a certain delay of a couple of quarters. If you exclude this temporary burden, The adjusted EBITDA margin would have increased by approximately 1.5 percentage points. So on a pro form a basis, adjusting for these two effects, you would arrive to an adjusted EBITDA margin of around 23.0 percent compared to 22.2% in Q3 2021. It shows that the positive trend in structurally improving our profitability continues. If you look at the big picture, the transformation of our Gerezheimer into a growth company is successful and backed by global megatrends. We are well positioned in attractive niche markets. This enables us to almost completely to pass on the inflation pressure either in the short term or at least in a couple of quarters. Now let's have a closer look into the divisions. Plastics and Devices. Revenues in Q3 increased from €194,000,000 in Q3 2020 by 14 €4,000,000 in Q3 2020 by €14,000,000 to €208,000,000 in Q3 2021 And were partially supported by pass through effect from increasing raw material prices. So organic growth amounted to a strong 8.0 percent. Adjusted for slight FX headwinds of a low single digit €1,000,000 figure, The reported revenue increase amounted to 7.1% year over year. The revenue tailwind from passing through Rising resin prices amounted to a high single digit €1,000,000 amount. Let's have a look at the moving parts within Plastics and Devices. First, the divisional growth was strongly supported by primary plastic packaging, including Centaur, which benefited from passing through higher raw material prices. 2nd, our RTF Syringes business improved again and showed solid mid single digit revenue growth. We are continuously ramping up new capacity lines, which will continuously kick in from full year 2022 onwards. 3rd, the contract manufacturing business was stable, which was due to a slight shift of revenues amounting to a mid single digit euro amount from the 3rd into the 4th quarter. The underlying organic adjusted EBITDA for the quarter was stable and reached €51,000,000 in Q3 2021 compared to €52,000,000 in Q3 last year. In Q3, FX was of minor importance and only slightly impacted EBITDA. The organic adjusted EBITDA margin amounted to 24.6% and compares to 26.8% in Q3 last year. As mentioned before, there are in particular two factors impacting the organic adjusted EBITDA development. 1st, This is a technical effect from the pass through of resin price, which only supported our top line. 2nd, but to a lower extent, a slight shift In the product mix, we had phasing effects in our contract manufacturing business, resulting in a slight weaker mix. Looking at the broader picture and comparing the adjusted EBITDA margin of 23.6% in Q3 twenty nineteen With the 24.6 percent in Q3 2021, we show a solid margin improvement in our plastic and devices division, And this trend will continue. Now let's turn to Primary Packaging Glass. The Primary Packaging Glass division showed another impressive double digit organic revenue growth. This is the 2nd consecutive quarter of double digit revenue growth for primary packaging glass. Revenues increased from €156,000,000 in Q3 2020 by €18,000,000 to €174,000,000 in Q3 2021. The organic revenue growth amounted to 12.2%. The FX effects had only a marginal Negative impact resulting in a reported revenue increase of 11.8%. The Tubular Glass business once again benefited from a high demand in high value solutions. Our high value solutions increased by around 30% in Q3 2021 year over year, which was mainly driven by biological solutions, elite glass and RTF wires. The adjusted EBITDA increased from €32,000,000 to €35,000,000 in Q3 2021. Adjusted for FX effects, the organic adjusted EBITDA growth surged by a strong 11.2 percent year over year despite the strong rise in energy costs. So we are able to largely compensate for the notable energy Costs increased and achieved a solid organic adjusted EBITDA margin of 20.3%. Now I come to Advanced Technologies. Revenues amounted to €2,000,000 in Q3 2021 and were in line with our expectation. Further, Adjusted EBITDA loss in Q3 totaled minus €4,000,000 also as planned. Please note That gut advanced technology is not part of our full year 2021 and midterm guidance. Let's turn to the cash flow. During our analyst call for Q2 2021, we indicated that the second half Of the fiscal year 2021 will be, as usual, significantly stronger compared to the 1st 6 months of this year. And the development in Q3 2021 clearly demonstrates this and a strong Q4 will follow. In Q3, we generated a free cash flow of €39,000,000 which is comparable to the prior year. And we achieved this development despite €20,000,000 higher net CapEx. We managed to compensate the higher CapEx through a strong Improvement of net working capital by more than €20,000,000 Let me conclude the cash flow discussion with a comment on our CapEx program. We are executing on our unique business opportunities. As you know, we are sizing attractive business opportunities to accelerate Our profitable growth performance. So we are investing, for example, into the capacity extension for injectables and build up capacity to accommodate the announced attractive auto injector contract. As a summary, We have once more accelerated organic revenue growth rate to a high single digit range in Q3. We expect the positive momentum to continue in the Q4 of the financial year 2021. Our structural growth and profitability drivers, high value solutions and biologic solutions are sustainable and will continue to further contribute to profitable growth. With this positive outlook, I now hand back to Dietmar. Dietmar? Yes. Thank you, Bernd. Yes, we are looking into a strong Q4. The growth drivers defined at the beginning of the year are developing as expected. We will keep the momentum for growth, Again, with strong contribution from high value solutions. In more detail for Plastics and Devices, we expect mid to high single Mid to high single digit organic revenue growth from our plastic business as well as drug delivery devices. For plastic packaging glass, we expect double digit organic revenue growth, backed by a further strong development in our high value solutions. We expect both molded and tubular glass to contribute strongly to this growth story. The projects we are working on In Advanced Technologies, businesses are on track and we are continuously evaluating and working on new projects and business opportunities. This business is getting more and more exciting, has significantly changed in the last 2 years, in particular with new business and growth It is with own IP products and also digital connected solutions. For the guidance, we reaffirm our guidance for the current fiscal year as well as our medium term outlook. The current developments mean that we expect to achieve the upper end of our guidance for fiscal year 2021 with With regards to organic sales growth, while the adjusted EBITDA margin is expected to be at the lower end of the guidance. And good to see, Regardless of some headwinds from rising raw material and energy cost, we are very well underway and on track to achieve the absolute adjusted EBITDA targets. By implementing our growth strategy of Formula G, we stated that every business unit will Due to our growth track, this turns in. With fiscal year 2022, we will improve further significant revenue contribution from our high value solutions through, on the one side, capacity expansions as well as through further innovative solutions. We will continuously implement our regional expansion plans in order to accelerate growth with existing customers, but also to win new customers globally. The contract manufacturing business will also increase its growth momentum based On the strong order intake over the last years. For example, order injection devices, pens and diagnostic devices. With these order intakes, we are successful defending our global leading position in contract manufacturing for inhalers, pens in all auto injector devices. Additionally, we expect further recovery in our cosmetic business as well as Revenue contribution from the new innovative beauty solutions as elaborated earlier in this call. Ladies and gentlemen, We at GARREZYMER are on a mission. We are transforming our GARREZYMER into a growth company as innovation leader and solution provider. With an intense focus on profitable sustainable growth, we will consistently prove that the transformation is happening, And we will bring evidence to our long term guidance for high single digit revenue growth from 2022 onwards. With that, I hand back to Carolyn and look forward to your questions. Thank you for your presentation, Dietmar and Bernd. So let's enter into our Q and A session. The lines are now open for your questions. And the first question comes from David Adlington, JPMorgan. David, hi. Hey, guys. Thanks for taking the questions. Yes, a few, please, Mostly financials. So I just wondered in terms of the I think it was €5,700,000 of exceptional costs this quarter being related to COVID. I just wondered actually what those costs were and how you see those evolving from here. And I think you mentioned that you're expecting those exceptional costs to come down both into Q4 and to next year. So as we think about that, what sort of base should we be assuming in terms of The EBITDA margins, I guess that's supported your EBITDA margins in some ways. I'm just wondering how we should be thinking about margin as we go into next And then following on from that, the guidance for both this year and last year, I don't think anticipated any inflation So the mid single for this year and the high single for next year. Should we be laying the inflation tailwinds on top of that? So 5% to 6% plus, I'm going to say about 2% for the full year for this year. And what sort of tailwind do you expect from inflation for next year? Thank you. Thanks, David, for the question. As I actually, you touched the exception. Practically, we have exceptions linked to COVID mainly. And this was basically all these quarantine measures in place. If you look all this in Europe, but you have to look at Brazil, India, and it was basically due to the temporary workers where we have to take over and so on. So this was basically the brand of our exceptional. What is very important is that we don't see this obviously will not exist going forward. So you will see a significant reduction from this €5,000,000 €6,000,000 in Q4. And also going forward, we don't expect any relevant exceptionals. That's basically our how we see and how we plan going forward. Regarding the margin for the next year, I mean, what we clearly see is that we will have this strong Growth momentum, what you see is we'll continue as we speak. And we want to discuss our guidance for the next year in February, what we are doing regularly, I'm talking about sales growth and EBITDA growth. And what we can see is definitely that we will grow also our EBITDA For into going into the next year, that's all I can answer to our outlook for 2022. Yes. I think we gave a midterm guidance For the year out, which is high single digit, I have no doubts in this, actually that we will also confirm this guidance. You asked the question with how much the inflation would impact. Honestly spoken, when we guided mid single digit for 2021, we didn't see any Impact coming from inflation, we stick to this. When at this time, we also guided high single digit for 2022 And we did not consider any inflation. So if there would be an inflation, that would come on top. That's great. Thanks guys. Next question comes from Veronika Dubeyova from Goldman Sachs. Hi Veronika. Hi, guys. Good afternoon and thank you for taking my questions. I have 2, please, to start with. 1, I just want to follow-up on Energy cost headwinds and kind of a 2 parter here, if that's all right. 1, would love to understand what your expectations are for The headwinds from elevated energy costs as you think about the Q4 and how much visibility you have on those headwinds in terms of the proportion that is hedged Versus unhedged. And then the second part to the first question is, as you think about 2022, if my math is correct here, I think This year you will have incurred about $10,000,000 to $15,000,000 of EBITDA headwinds from higher energy costs. What proportion of this do you think you can offset through price increases as you transition into fiscal year 2022? Just a rough guide here would be helpful. And then my second question is on T, I think you have mentioned, Dietmar on multiple occasions potential for new customers here on the auto injector. And I'm just curious if you have an update on that. Thank you. Maybe I'll take your first two questions, Weronika. First, regarding the energy costs. Basically, we assume that probably you have also a mid single digit Euro amount is a headwind in our bottom line. But don't forget, partially, it was already planned for. Partially, we are increasing the prices. And partially, how we have demonstrated so far, we will compensate for that in this area. And with this, we really Come to our budgeted numbers for the full year, that's the outlook for Q4 and we are in the middle of Q4. So we have a very good forecast Accuracy on especially Q4 as you can imagine. On another note, the price increases. The price increases overall Regarding the inflationary pressure, basically for the resin prices, it's already transferred to our clients. For the energy prices, what we're always saying, we have basically trickling in, in the next couple of quarters. And We expect that over the course of the next year, we will be able also to pass on the price increases totally to our customers. That's Our work assumption for the next year. Yes. I take the other questions around advanced technology. Veronika, you are a bit Too early with this question as I can't disclose any details because we have not signed the contract. But The fact is that in advanced technology, there's a lot of very positive and strong news that we most likely will disclose with the Q4, If not a bit earlier, we think about this at the moment. It's not only a new contract with a new customer. It's also Couple of other news that are really strong. For me, it's really motivating. The existing projects are running very well finally, Which is very positive. There are new businesses coming in. It's not only in the direction of additional pharma customers, but it's really also maybe going in another direction with Smart devices in, for example, even cosmetics. So it's really dynamic here and very positive to see That finally here the success stories are coming in. But it's a little bit too early to disclose at the moment because I would like to sign the contract first. Understood. Thank you. And just to circle back on the energy question, Brent, if that's all right. So if I look at sort of this $15,000,000 or so of EBITDA that you will have lost by the end of this year from higher energy prices, We should assume that through the course of next year, you basically offset that through higher prices? Exactly, Weronika. That's exactly our base case. Perfect. Thank you, guys. I'll hop back in the queue. Thank you, Veronika. Next question comes from Scott Bardo from Berenberg. Hi, Scott. Thanks, Karen, and hi team. Thank you for taking my questions. So first question, please. I'd like to understand A little bit the capacity considerations constraints in syringes. I think you mentioned a mid single digit growth this quarter, which I think is a little bit Below market and somewhat contrary to your growth ambitions in that segment. I was under the impression that you were building out additional capacities for this year. So Perhaps give us an update on that and when you believe that you can start to say take market share again in those categories please. The second question, please. It relates a little bit to this energy topic. I understand that You're already in discussions, negotiations with price pass through for Your Glass business, can you help us understand a little bit in terms of the magnitude of price rises that you consider here? Also give us some sense of the attitude towards customers for these price hikes. I think historically, Geraheimer has not been so aggressive with price. So Maybe some feedback on this notion. And also help us understand, is there any clause with this price rise such that if energy costs come down, We need to concede and go back to the old prices. So I'd like to understand that, please. The last question, please, relates to the Advanced Technologies business. Obviously, a technology rich area, which has been pretty slow in contribution, Still significantly burdening your profits. Am I right in saying that your pre communicated financial guidance for this division Into next year being that losses will significantly abate in 2022 and maybe even indeed in some sort of EBITDA neutral situation, I'd like to understand whether you're following that trajectory. Thank you. Yes. Hello. I take the first question around the syringes. The syringes actually, I cannot confirm your statement Yes. There are some smaller mix effects probably in the Q3, but the growth story in the syringes is fully ongoing. The ready to fill 6 line is In the ramp up, which is in plan and we will continuously see strong growth in the syringes, That will be solid. I would call it solid double digit, for example, for 2022. And we are here On track. Scott, and I would come to the second topic, the energy, how we are behaving towards our customers. I mean, it's a very sensitive topic, as you can imagine, also from a competitive point of view. But obviously, you said we are not let's say, in the last 10 years, we're not used to We approach our customers with, let's say, we never have seen such a hike in prices. So we really mobilized our The sales organization to really make sure that the energy cost hike is really transferred to our customers. And we are doing this, I have to say, in a fair but very effective way. That's what I can say. And regarding the clauses, whether it comes back the price decrease if the energy price goes down, It's something I would like to keep, let's say, as a competitive secret. It really depends from the customers at the end of the day how you're managing That's clear. Last topic regarding advanced technology. It's Advanced Technology from a concept is obviously at the core of our company. And we see here the really the success potential And of our growth story as well, as you mentioned, we have this not part of our guidance. Why? Because we always said we want to Not overpromise and underdeliver, but the opposite to over really deliver. And therefore, we said Better to keep this aside. This was our advanced technology approach. We'll reassess whether this is now the appropriate way going forward As closer we get to the realization of the project, which was mentioned by Deepa. That's what. Thank you. Well, just furthermore, I mean, I think you're this is loss making to the tune of €15,000,000 or so annually. And I understand, of course, This is an investment for the future, but I think your pre communicated structure was that this was going to become less burdensome on EBITDA from 2022. So Can you confirm that today? Is that the outlook that you foresee? Yes. I think we can also confirm this because also the new projects will support. What I forgot to mention is that one of the new projects we're discussing, usually, you win a new customer, it takes a couple of years in the advanced technology area To launch this product here, we are now talking an application where our go to market would be significantly faster than normal. And it's not unlikely at all that we also hear in late 2023, latest 2024 really see Already strong sales, and that is really a great thing and a good story. More In a couple of months when we disclose the Q4 and the details. Very good. And maybe one last question, if I can, please, and maybe Somewhat of a difficult one to answer. But we're seeing, of course, lots of your competitors, like, Come to the Capital Markets, I'm thinking Stebianta Group in the U. S. And there are obviously other publicly traded peers That are seeing strong growth and enjoying very high valuations. And I think that compared to Geraheimer now trading on 52 week lows today, I'd like to understand from you, Dietmar, why you think there is a different performance or perception of performance? And indeed, why you think Gerasheimer is not resonating, if you like, with the investment community today? Yes. It's a tricky question. And I'm not sure whether I'm the absolute market specialist. But I from my point of view, what we see out there is that there is a lot of Our investors, but also some of our analysts that are still sticking with the old GARREZZEK. We've been able to bring the new Gerasheimer story across because what we actually are doing at the moment and the kind of Story that we are writing is really amazing. And what you see meanwhile, 2 years ago, I was talking about the story. Now we are In the middle of the story and it's happening as we talk. And we have really transferred the company from a classic packaging company into a medtech Hi, innovative company. And it is on us, on the one side, to upgrade the story, bring The story across in a better way, but also our performance deliveries over the next quarters years will also help To underline the strength of the story. From my point of view, we are extremely well positioned In GARREZAIMA. And it's more likely that we were writing a story that is probably significantly more interesting Then the story of 1 or other of the players that are doing an IPO at the moment to an extremely high valuation. Okay. Thank you very much guys. The next question comes from Chris Gretellaff from Credit Suisse. Thank you, Carla, and good afternoon, Dietmar. Actually, just two questions. The first relates To your guidance, actually, as I look at your year to date growth performance of 7.3%. And essentially, actually, I was A bit surprised by your optimism about Q4 growth, I think with the double digit growth in Primary Packaging Glass. So I mean, wouldn't that be kind of enough for an upgrade to the growth guidance? Because I mean, I think mid single digit could still be up to 7%. But I guess just doing the math, you probably Given your plans here on Q4, you will likely end up above the 7% range. So what kind of not would Trigger you to kind of not know actually upgrade your revenue growth guidance for what prevents you from doing so? And the second question is just with respect to your energy hedging cost hedging strategy. I think Bernd, you a predecessor, provided at some stage a bit of guidance on kind of your hedging strategy. Could you update us on kind of how that works at the moment and what your strategy is in this Relatively volatile environment. That would be great. Thanks. Yes. I think I take the first question. Bernd, you do the second or? Yes, okay. We are aligning here a little bit, sorry. Yes. Upgrading your guidance, it's a good question. It's what I usually love to do the most. At the moment, we stay a bit conservative here, But there's no doubt, yes, we guided mid single digit. You heard that we expect that it'd be some 2% tailwind coming from the inflation. And I told you also that My earlier guidance did not include the inflation. You can add up whether it's now 7 or 7 something or a little bit more. It's up to your fantasy. I think we are very well underway. Q4 will be strong. You're right. It's not a total surprise that the Q4 will be strong because actually We planned a strong Q3, and we also planned a very strong Q4 from the very beginning. And it's not a total Surprised that Q4 will now come in very nicely. So let's see for the Q4. I'm just saying on my end, sometimes now it's good to kind of also to provide positive surprises to the market and To get this more beat and raise going. So just to counter some of the headwinds, I think, and Scott was mentioning before, for example, On the financial market side at least. But I appreciate your comment. Just take your second Question regarding your regarding our policy, regarding hedging. I mean, as you I'm sure you understand, I mean, we are now in the middle of the price negotiations In these areas and in the end, we keep this precisely the precise amount secret. But be assured, we are really appropriately hedged, especially also for energy And gas and electricity in particular. Okay. Thanks. Thank you. Thank you, Chris. Next question comes from Falko Friedrich from Deutsche Bank. Hello, Falko. Hi, Hi, thank you. Two questions, please. My first one would be whether you still expect to be free cash flow positive in fiscal year 2021. And then the second one, it would be great if you could provide an update on the SQ Innovation project and whether you still expect your first revenues from that project next year? Thank you, Feike, for the first question. I thought that maybe it's forgotten, our free cash flow. It depends a little bit our free cash flow. Whether we will arrive to basically to a black zero depends a little bit from our CapEx program. But what I can tell you is that we will have that's our plan the strongest cash flow quarter of the year In Q4, in this quarter, Q3, we had €40,000,000 So if you calculate this, It should be very strong, Q4 as well. Yes. I take the SQ Innovation project. Yes, the SQ Innovation project is On track for the ones that are interested. We just made it. I think it was last week. On the top page of The Herald in Scotland next to the Queen, it was a picture of the Queen next to our article that said, Scotmedics in world's first Trial to treat heart failure KCET at home, which is another confirmation of a very positive clinical study. The project is in plan. It's of course at the moment, of course, it's the customers are driving it. We are still planning All right. The customer is still planning to bring it into the FDA beginning of next year. And as such, if things run further according to plan, it's true That we are shipping the first pumps hopefully by end of in the end of 2022, whether it's then November or December, but that's clearly the plan. And at the moment, everything looks very positive here. Okay. Thank you. Now we have Daniel Randorff from ODDO BIAF on the line. Hi, Daniel. Hi. Thanks for taking my questions. 3 Also, if I may. And the first one is on the margin development in PPG. If you would exclude the negative Impact from high energy cost and the margin development would have actually been quite strong In my view, in that division in the quarter, maybe you can give a bit more color here where is that coming from, how sustainable that is, Maybe related to that question, that's also my second question, on the number of new beauty Solution products within the cosmetics part of the business. You highlighted to us, how important are these Already. And has this any impact on margin development in this division? And then my last question would be on the High Value Solutions part of the business and the strong growth you presented to us. Is that more related to really product lines which are growing so strongly? Or is that related to very specific peculiar products For single customers, so I think I'll try to understand a bit the granularity whether you can provide here a bit more granularity of Where the growth is really coming from for high value solutions? Thank you. Daniel, I would take the first question regarding the margin development for PPG. Actually, pro form a, if you really want to See, you have to increase actually your EBITDA slightly in PPG by €3,000,000,000 4,000,000 if If you really want to look through the inflation and then you really see the structural growth momentum also as far as the margin It's concerned, so margin expansion is concerned if you really want to look through. And one of the key drivers is obviously that we have in our High Value Solutions area and in the Biologics, definitely also a nicer margin Then you have with your, let's say, standard business, if you want to, and this helps us. It's basically a product mix effect. And therefore, I can answer that it's conceptually structurally sustainable. Hi, I'll take the second question. The beauty and cosmetic, it's interesting that Especially last year, we always discussed cosmetic to be something negative because due to the COVID, the perfume flankers, they didn't sell well. Actually, the rest of the Beauty and Cosmetic business also in 2020 did very well. And it is in general an effective business with also reasonable margins. The recovery now, of course, helps. That is coming back. But on top of this, we should not forget that cosmetic business, if it's not COVID, is Actually a business that is almost growing double digit. And this is what we will see again in the loop of the next quarters years. And the new products, which are on the one side upgraded perfume flacones that are Decorated in a certain way. But we also talk about the new pipettes, for example, the things I spoke about where we Include the know how of tubular glass and plastics together. It's a product that is used quite a lot now not only in cosmetic but also in pharma. But in cosmetic, it's does the ramp up of the sales starts in the Q4? And it's I don't know exactly how many million, but you will probably see the first million of sales in the Q1. And we probably see €5,000,000 to €10,000,000 of these sales already in 2022. So it's pretty interesting to move into this business segment. It's a little bit, as I said in the speech, the advantages that we have in GARREZA AG is that we Other than the normal cosmetic customers really have this pharma know how and can easily include this. Then the next question was regarding of high value solutions. Of course, there is a broader portfolio of high value solutions that we, for example, sell Especially into the biological market with our new founded biological segment, these are, for example, very special syringes, whether it's P syringes are syringes with metal free, tungsten free or special surface treatment, But it's also ready to fill vials and ELITE vials that we are doing pretty good sales with end of Q3 already. Q4 will be more and even more in 2022. Important is that these ready to fill vials are increasingly Strong market. And that's the area where capacities that we actually added for COVID will Easily and heavily will used up when the COVID topic is over and the sales goes down in this area, We are using the free capacities to add up on our ready to fill and also ELITE vials, and that's a pretty good story. Another high value products are, of course, solutions that we are now bringing by combining know how in plastic and glass, for example, by a Glass container with plastic closure, which is a system, a big added value for the customer, and we are selling Okay. Thank you very much. Yes, definitely. I just wanted to know whether that really Very peculiar product for single customers involved really. Are there any further questions from you on the list side? This seems not to be the case. We would like to thank you Thank you for the call today and for joining us, and all the best and stay healthy. Bye bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.