It's good afternoon, everybody, and welcome to today's Zoom conference of Ringmetall Group SE on behalf of our H1 2022 results we just published today. You probably recognize that we increased our outlook yesterday as well and released some fantastic figures today. I will now pass on to Christoph Petri, the Spokesman of the Management Board, and he will guide you through 30, 40 minutes of actually just good news. Christoph, please go ahead.
Thank you, Ingo. Good afternoon, and welcome to Ringmetall's presentation of the half yearly figures of the financial year 2022. We are very pleased to present another outstanding performance of our group in a actually very challenging environment. Ringmetall once again delivered both strong revenue and EBITDA growth against an already very historically strong first half of 2021. While revenues are up 47% year-on-year, EBITDA is up even 53%. On the revenue side, we see continuously high raw material prices pushing the top line, supported by significant volume increases in the industrial packaging liner and the industrial handling business units and favorable currency exchange rates. Also, our latest acquisitions, Hosto and Rhein-Plast, are contributing positively to the performance of the group.
On the profitability side, we participate a lot from our newly introduced pricing mechanisms, cost reduction plans, and focus on optimized productivity. Finally, our EBITDA was boosted by a bargain purchase effect of EUR 1.2 million in conjunction with our latest acquisition of Rhein-Plast. The key growth drivers on the top line are again high raw material prices, and with it, the ongoing inflation recovery through strategic pricing actions by Ringmetall. The effects from raw material and energy price forwarding stand for 29.2%. Our two latest acquisitions, Hosto and Rhein-Plast, contribute an impressive 17.5% to the increase in group revenues. With this, we are significantly ahead of budget. The organic growth in the Industrial Packaging segment is 2% in total.
While the Industrial Packaging Rings business units are only stable to slightly decreasing in volumes, we see a substantial upbeat in the Industrial Packaging Liners business unit as forecasted already four months ago. While the broader chemical industry shows signs of slowdowns, we see food and beverage especially, but also pharmaceutical on the rise. In Industrial Handling, we see the ongoing trend of nearshoring by our core customers on the one hand side, but also breakthroughs of our restraining systems with newly acquired customers on the other side. Hence, the volumes in this segment are
It looks like we've lost the connection here to our CEO. Let's just wait a second. Otherwise, I'm gonna lead you through this call today. He seems to be back.
Sorry, where was I cut out, Ingo?
Actually, just at the beginning of the segment analysis.
Looking into the different segments, we see that Industrial Packaging is soaring again on revenue and EBITDA basis. While the rings business faces flat volume development due to the higher exposure in the chemical industry, the liner business was able to deliver higher volume figures. Broken down into the regions, we see volume increase in the US and slight increase in Southern Europe, while especially the German rings market was very weak. Within Industrial Packaging Liners, we see volume increases, especially in the bag-in-box segments, the beer tank liners and specialty food and pharma packaging, while the normal drum liners for the chemical and the glue industry are softer in demand. The EBITDA of the Industrial Packaging segment is up 40%.
However, it is impacted by a one-time effect of EUR 1.2 million as a bargain purchase in relation to the Rhein-Plast acquisition. EBITDA margin normalized due to the mathematical effect from raw material price changes. In Industrial Handling, we finally solved the capacity issues which we were facing from sudden order increases in Q1 and Q2. We see positive developments on both product groups, OEM supplies and own products, especially restraining systems. The balance sheet development is also heavily influenced by current raw material and supply chain situation, and also by our acquisitions. Safety stock and high raw material prices have boosted our inventory and receivables by EUR 60 million, which in effect increased our total balance sheet to EUR 143 million. With this, our equity ratio has dropped only slightly to a still very comfortable 51%.
Liabilities rose slightly due to the acquisition and the pre-financing of the working capital of Rhein-Plast. The cash flow is impacted by the high inventory and receivables levels and the latest Rhein-Plast acquisition. We were still able to increase our operational cash flow by 16% to EUR 4.3 million. The free cash flow situation will be tense until the end of this year, maybe even in Q1. Once volumes and prices stabilize, we will see a significant monetization of our current asset levels. As you might have noticed, Ringmetall has yesterday raised the fiscal 2022 guidance range for both revenues and EBITDA. On the revenue side, we have lifted the guidance range to EUR 205 million-EUR 225 million, and on EBITDA we have increased to EUR 26 million-EUR 32 million.
Softer demand in rings will be partially offset by a strong liner and Industrial Handling business. The revised guidance range is always based on current raw material prices and current exchange rates, especially on the US dollar. It does factor in a certain recessionary development in the second half of the fiscal year. However, it does not factor in a total breakdown of the European chemical industry due to any unforeseeable circumstances like gas restrictions or similar. Also not included in this guidance is any kind of potentially upcoming M&A activities. Thank you for your attention so far, and I will hand over to Ingo now for Q&A.
Great. Thanks, Christoph. To everybody, as usual, please just ask your questions by raising the hand or unmuting yourself or via the chat. We have a first question here from Christian Sandherr, from Hauck & Aufhäuser . Christian, please go ahead.
Hi, everyone. First question would be on Industrial Handling. I remember from the past few quarters you always said that you would theoretically consider divesting it if the operational performance would improve, in order to attract some buyers. How does the recent development suit that idea to sell it? Is it a topic? Would you think it has become easier to attract potential buyers now?
Well, it is definitely on the agenda. I think that's not a big secret. We are looking at it. We have started a process in that respect, and, of course, the good performance helps or supports the idea of selling the business. Obviously it raises certain ideas about purchase prices as well.
You've just said you've already started a sales process?
We've started the process of selling the business. We haven't started the process to the effect that we are in negotiations. No.
No.
It's not there.
Okay. Thanks. Second question would be on CapEx, and should we expect something similar to last year, i.e. the second half you spend a little bit more or significantly more than you did in the first half? Because that was, yeah, quite low in H1.
Well, we are stuck with supply chain issues in that respect as well. We have actually ordered significantly more, and CapEx will rise in the second half, yes. However, we still have to wait for some machines, even until the next year. The original CapEx planning of spending roughly EUR 3.5 million this year will not be possible. We have to postpone some of the investments to the next year because we just don't get the machines in time. Roughly EUR 2 million, maybe EUR 2.5 million, will be the value for this year.
Looking a bit more on the quarter. The U.S. has been quite strong also in the ring business. You've seen weakness in Germany. Why do you think the U.S. business was so much stronger than it was in Germany or particularly in Europe?
First of all, obviously it's a currency exchange effect which comes with it, and that's roughly a 15% increase already. Just looking into the volumes, what we are seeing is slightly increased volumes in the U.S. while we were significantly then decreasing in Germany. The reason for that, to be very honest, I can only speculate on that, is obviously regarding the situation with Ukraine and with gas prices, energy prices, and in the end, of course, with the competitiveness of the location in the U.S. compared to Germany.
Mm-hmm. Okay. Thank you. That's it for now.
Great. Thank you, Christian Sandherr. The next question comes from our analyst from SMC Research, Holger Steffen. Holger, go ahead.
Hello, everybody. I've only a few additional questions. After the results in the first six months, your EBITDA forecast seems to be very cautious at the lower end. What scenario you have supposed for this figure?
Yes, that, from the first look, might be right. However, we see clear signs of slowdown, at least in September, slightly already in August, and therefore, we are actually quite cautious. The lower end of the guidance range will have or considers roughly a reduction in revenues and EBITDA of 20% in the ring business, and more or less stable business compared to 2021 in the liner business. 20% reduction with rings and a stable business compared to 2021 in the liner business.
This as the worst case, actually.
Okay.
That's for the 2022 season.
I think so.
Yeah.
That's not indicated by your last figures, I think no?
That's a speculation. I mean, our visibility is quite poor as always. We can see how September develops. September is a bad month, we know already. It could be that it is a one-time effect. We see some destocking with our customer's customer, with the end users. That could be the case, but it could also be the case that we see recessionary movements developing.
I think at the moment, Corona is not a big problem. What are your expectations for the inliner business in the next months? Could it be affected if Corona is again a problem in Europe?
Well, I would divide it first of all into our direct impact from Corona, which we see through our own employees. I would say Corona still is an issue because we still see some people being sick or in quarantine for Corona reasons. Obviously, this harms our production and production capacities. Actually, this is an impact currently in our bag-in-box lines, for example, where we could increase the capacity or where we could increase the turnover and the output. However, we have, I think, roughly 17% sickness rate there, especially due to Corona. That's of course something which is manageable, but we are impacted by Corona. The second effect, of course, is on the volumes.
It's difficult to really forecast it, because no one knows if we see a situation once again where bars and restaurants are being closed, and which would definitely impact our beer tank liners business. Overall, the inliner business did not suffer too much from the Corona crisis, apart from the beer tank liners. Now, with the acquisition of Rhein-Plast, we are more focused on the pharmaceutical industry as well. We should see a more leveled and broader customer base there. The impact should not be as big.
Okay. I see. You've mentioned the problems getting the machines you need at the moment. Could it be difficult at the beginning of the next year then to fulfill the demand, or is it not a real problem at the moment?
Well, we already are waiting for certain machines in the inliner segment. Some of them were postponed for more than nine months already. We adapted our production capacities to that. We have shifted to more manual work, which we have done so in the past. Basically, what happens is, we are limited in our capacities still until these machines come. Additionally to that, obviously we don't see the positive effects from these machines yet, as they are not installed, which would mean, we have a higher turnout, turnover and output, with the same employment team.
In the future, once these machines are being installed, we will see positive effects on the bottom line especially, and on the top line, from these machines. It will harm our capacity, until then, but it did so for the last 36 months already.
Maybe it's also a good idea in this relationship to keep in mind the CapEx that we have yearly in contrast to our revenues. Machines, new machines are being implemented constantly, but our CapEx budget is usually in a normal year around EUR 3 million. The effects are not decisive for the company. It would, of course, be good if we get these machines, but they will not dramatically harm our business if this postpones by six to 12 months. Is that correct, Christoph?
Yeah. I mean, we are talking about the investments, which are still pending, are machines we are getting for the inliner segment. Most of the machines which are designated for the main business, we have installed already in the first half. This is done, because most of them we build ourselves anyway, so we are not so much dependent on the outside vendors. The machines for the inliners, that's the area where we are waiting.
Okay. Thank you very much for taking my questions.
Thank you, Mr. Steffen. Are there any further questions? Please raise your hand or just ask the question in the chat and I will ask them for you.
Yeah, I have a question, Ingo. It's Philip.
Hi, Philip.
I don't know how to raise my hand here.
I saw you raise it.
Good afternoon, everybody. I have a question on the acquisition of Rhein-Plast, which seems to be doing quite well, if not very well. Can you talk a bit about what happens there and maybe why it is doing quite well? I have a pretty specific question. In the half year report, you say there's a profit of EUR 0.3. Is that a net profit? Is that an EBITDA profit? What line in the P&L are we then talking about? Also relates to the first part of the question, how did you do that and why is it doing so well, actually?
Well, the Rhein-Plast acquisition actually is turning out to be a very, very fortunate acquisition and a very boosting acquisition for the whole group. In the meantime, we are much further advanced in the integration process. What we have done is, first of all, we have stabilized the top line, and we have done so by really approaching all of the significant and important customers and assuring them that Ringmetall is now the safe haven for Rhein-Plast. Remember, Rhein-Plast was in insolvency, so many of the customers were actually really frightened that Rhein-Plast would not be able to supply them anymore. We gave them the assurance that Rhein-Plast is now safe and is now financially strong.
What we have done as well is we have actually increased prices accordingly to the indices, which was necessary to come back to a normal level. That was another part of the story. What we have done as well is we have spent roughly, I think up to now it is close to EUR 500 thousand-EUR 600 thousand in investments into Rhein-Plast for refurbishing and renewing, especially the extrusion lines, that was the bottleneck in the past. Now we are able to produce much faster and more volumes in these extrusion lines. So the production of the assembly of the bags now is the next step. Yeah, we are able to increase the output significantly with this already.
Basically, Rhein-Plast is contributing much higher than we have budgeted. We are currently at a run rate of close to EUR 1.2 million-EUR 1.5 million in revenues per month. We are slowly heading towards the 10% EBITDA margin, which is very good, actually. I have to say that's far better than we have planned. The EUR 0.3 million, which you have mentioned, for the half year, I have to say I'm not 100% sure about that, but I would consider this as the net profit for the actually five months then.
I think so too. Yeah.
Yeah. That is not including the EUR 1.2 bargain purchase.
No.
No.
No, because this is done as a PPA on the holding net.
Yeah, exactly. That is also excluding the transaction costs or the transaction costs.
The transaction costs were partially in 2021 and partially in 2022.
Yeah. Right. Yeah. Well, it seems like it has been a great deal indeed. All right. On the raised outlook, you seem to be very explicit in stating it excludes further M&A or transaction costs. That's no secret that you are looking at further M&A, but it also sounds like there's still something in the cards for the remainder of this year.
I don't wanna be too pushy on that, and I've learned my lesson in the past. It's very, very difficult to predict when M&A transactions will be finalized. We are working on several issues. We are working on something which is slightly bigger. We are working on smaller acquisitions. Yes, that's the only thing I can comment on in that respect. I wouldn't necessarily think that there has to be an acquisition within the remaining of the year. On the other hand, it also could be.
Yeah. Yeah, yeah.
We basically always have something in the cards, and we talk to so many companies. We're in constant contact to basically everybody we know in the industry. It just depends on when a seller is really ready to sell. In the past, they always told us, in good years, "Well, actually I wanted to sell this year, but maybe I'm gonna do it for another two years." That's the interesting thing that we're seeing right now that the environment is changing dramatically, and if you don't sell now, you might have to stick to your business for another three, four, five years. Who knows? That puts a bit more pressure on the seller.
At the same time, they're still not willing to go down with prices decisively, and then it might just happen from one week to another that they say, "We're ready to sell," or it just takes another couple of weeks. We can't really push the last mile in this process. If a seller is willing, we're there, and we would be able to directly close the deal. We're well-financed. Our teams are set up well, so it's not our fault if the closing doesn't come. It just depends on the seller, actually.
Yes. Maybe what I can comment in that respect as well is, as Ingo said, we are in a very fortunate situation now, since many financial investors, private equities are stepping back a little bit and pushing the foot on the brake now, with rising interest rates. Therefore, our situation gets better and better every day. We are here. We are ready. I would say the team is ready for the next big step. I mean, the funding we have anyway, huh? We are fine.
Yeah. Yeah. Yeah, exactly. Right. Then lastly, maybe the prices of especially steel. What is your reasoned view on that? Because we, in the financial market, of course, we look at the sort of the very, very spot market. Sometimes I have the idea that there's a big difference between the real world and what we financial guys are looking at. I was wondering what your reasoned view. Are things coming down a bit, or is it still very tight and inflationary?
Welcome to our world of steel prices and reflecting not the real world, maybe. What we have seen is Q3 marked, up to now, the peak. Prices in Q4 will slightly come down. Looking a little bit into Q1, we believe that Q1 maybe will be the, well, the lowest point then again, and from there on, prices will be on the rise. I mean, what we see, some of the steel producers are throttling down their capacities and reducing volumes maybe artificially. I mean, it's quite obvious with this level of energy prices. I don't really see that steel prices can come down furthermore. I think it's not really possible.
Actually, I've just heard it today from our guy running the business unit of Southern Europe for the rings. He explained to me that, for example, in Turkey, steel prices are slowly on the rise again. We will see if that's really the breakthrough for the whole industry. I mean, we have contrary movements. One is rising energy prices, the other is softer demand. We will see where this will end in Q1. In Q4, I can assure you already our prices will be a little bit softer.
Yeah. It's not like because I think if you look at iron ore, that's actually down quite a lot, but that's not what you're really seeing in steel prices itself.
Not yet, at least. Yes.
Yeah. Right. Okay. Thanks, guys.
Great. Thank you, Philip. Are there further questions? Please unmute your phone line or raise your hand or place the question in the chat. It doesn't look this way. Is there anything more you would like to add, Christoph?
No, nothing from my side. I think that's it. Thank you very much for your attention, everyone.
Also, that's from my side.
I think the next appointment is the German Equity Forum then in November, is it right?
Correct. Although it might be, I'm not quite sure with the date. I think that's at the end of November this year.
I will have our- [crosstalk]
Q3. We'll have Q3 results before that. Again, thank you very much for participating in this call. If you have any further questions, please don't hesitate to call me or Christoph, or just drop us an email, and we'll get back to you as soon as possible, quickly. Thank you very much for attending.
Thank you.