Once again from the beginning.
Once again from the beginning, most probably we have been muted. So I'm doing a bit of the housekeeping before. Olaf, do you want to repeat how you're going to ask questions?
Yes. Okay. Sorry, to the audience, I think we got No problem. So we were unmute we are muted, so unmuted again. So welcome.
Just some information regarding the questions. After the presentation, I have the Christoph Klank at Nobel Broger. You have the possibility to ask questions. Please send me a very Just with the information, not with the detailed questions. And then I will hand over to you, and you can unmute your immediate line and ask question.
And if you have not the possibility to send an e mail, at the end, I will ask the complete audience again. And then you can also ask a question if you are on mobile phone. So Christoph, sorry, once again, please, Robin.
The floor is yours. Yes.
Thanks a lot, Olaf. Warm welcome to all of you. Nice to have you here for the conference call of Crohn's and we already skipped the first slide and are immediately in the highlights of the first one. Again, Norbert and myself, we are a bit more relaxed than in the past since things are going quite well. We have tailwind from the market and we have a team which is quite strong on execution and things are moving forward.
And I would say we are on the track to achieve our targets. Order intake was up by 40% in the first half of twenty twenty one, quite remarkable. We have not expected it on that level, I have to be honest. It's better than expected. We talk about that certainly later on.
And of course, we brought in now the price increase of 6% for our new machines, which we are going to deal with in the market, and we are, let me say, slightly optimistic that we get that move forward. Revenue was not so much up in the first half of twenty twenty one. Why? Because Q1 was quite strong. Last year, that's the reason for it, We picked up in the Q2 and more to come.
And of course, profitability is significantly improved. We'll talk about that later on in detail. Important message is here. EBITDA margin is at 8%, which is extremely good from our point of view after where we have been going through. And again, we have increased our guidance for 2021.
I think you all of you know the numbers, and we are going to get one deeper in detail. So we jump to the next slide and come to the, let me say, summary of what I have just said. And I don't want to comment those numbers because, Nourd will particularly go through the details. I will take the order intake for the beginning and then Nourd will take over for revenue, profitability and of course, free cash flow and working capital. So let's jump first to the order intake.
And I would say there is not much to say about the numbers itself. You have heard it's 40% up. We had a quite good order intake over the recent last three quarters, which we have reported. And
I want
to highlight a bit why, let me say, the order intake is higher than expected and where the deviation is from what we have stated previously. I mean, most of you remember that, Norbert and myself and, of course, our colleague on the board for sales, we had Many, many discussions with our customers in autumn 2020, and all of them stated that they will have cut their investment budget significantly. Now why is the order intake so high? Number 1, of course, the aftersales business is working quite well. 2nd, we have seen private owned company investing much more beyond the trend, let me say, in the last 6 months, while the big international key accounts, they are sticking In most of the cases, to their statements they have made in autumn 2020, saying they have lower budgets.
It's a very big one we have with the red color. It's one of these examples. But on the other side, this is guiding us momentum definitely for, let me say, confidence into the future because we believe they will pick up and they will go run back to old levels, which we have seen. So all in all, we are extremely happy with the order intake we have. Of course, we have to talk about pricing in that regard.
And This will reflect certainly later on when we have, I say, again, increased prices by 6% officially to the market. Of course, it will take time before we have that in the books. And this will mainly impact then the orders being executed and being in the backlog for 2022 rather than for 2021. And I think we will talk about that in detail later on. We are fully booked with that, of course.
And this will create, but Noah will talk about that, some other problems, in particular, with material supply where we'll talk later on. So that's so far for me, and I hand over to Knobel.
Okay. Thank you very much, and also a warm welcome from my side. Before I come to the next chart, talking about revenues, you can see on this chart here Also the development of order backlog, and that's basically the gap that's missing between Big increase in order intake, but year to date, hardly any increase in sales year to date. The remaining part, more than €300,000,000 is the increase in order backlog, which will materialize then in the second half of this year and also next year. So I would now go to Slide number 5.
For those of you who cannot see the slides, maybe because you're on the phone somewhere, revenue euros 1,720,000,000 which is very close to half year last year, only 1.3% above. But you can see already in Q2, it picked up. Q1 was still below last year in sales, 7.2%. Q2, 11.7% above the Q2 last year. And we expect in the second half an increase compared to the second half of last year, just for the next two quarters between 12% 17%, which will then bring us to Full year 7% to 9% increase in sales compared to last year.
When we continue and we look at how the revenues developed in the first half this year compared especially to last year. We see a positive Development in North and Central America and in China. This is not surprising to us. Similar situation in the financial crisis 2,009, 'ten. China was first to come out of the crisis then same this time and then right After North America, a little bit of a surprise for us was South America with a very good Order situation revenue situation still in the first half year.
Also the order situation was Good. In the first half, that's because there were also private owned or more independent companies. Lagging behind still Europe. Their share Our share in Europe of total sales decreased from last year almost 32% to 29.8% And Asia Pacific, still below, whereas Middle East, Africa and Eastern Europe More or less on the same level. Let me continue.
When we look at And the EBITDA results. The EBITDA result increased to almost €138,000,000 8%. So The development from 2019, 2021, 6.2%, 7%, 8%, always on the 1st 6 months. And of course, our ambition is to continue this Trend for the future. Similar on the EBT level here, Of course, we do not see the we see the impact of the impairments that we had last year that are not included in the EBITDA.
So here is a significant increase from the 1.9% last year and the 2.5 corona to the 4.4% year to date, which is a result of improved business, of course, but primarily on the structural measures that started already in 2019 and then were accelerated with corona in 2020 2021. On the next page, Page number 9, You see the development of personnel expenses and material expenses. So the personnel expenses close to last year, despite €5,000,000 onetime payment to our employees in Germany. But when you compare it to 2019, it's net €45,000,000 or 7% less for the 1st 6 months compared to 2019. On the material side, material expenses, they are going up, and the ratio is also going up from 47.7% last year to 49.2%.
Still below 2019, But the increase, of course, is a result of increased raw material prices, component prices. Also temporary labor has been increased, attempts in preparation to work off the big order backlog and increased revenues in the second half of this year. So both those impacts are shown here in the increased Material expense ratio. Okay. And this is, of course, one of the top hot topic since months, material expenses.
The challenges in the supply chains are twofold. One is price and the other one is availability. And we don't know what is more challenging. We saw significant price increases in the first half of this year beginning end of last year from raw materials, components, freight, packaging, everything. Freight costs, for example, from Europe to U.
S. I shipped it's more than double of end of last year. We have topics with simple stuff like wood, which we what we need for our packaging. Wood prices exploded. And so that's also one side of our price increase Because overall, we have around on our products, 4 Percent impact on material price increase.
Now if you're asking, okay, you announced 6% price increase. If material is 4%, what is the rest? Well, the rest is basically what we lost from before corona price levels to due to corona and shrinking demand, 1.5% to 2%. And now is the time with low good capacity load to also get the old price level back from before corona prices. So besides the price topic, The availability is also a big challenge.
All of you have read about shutdowns of primarily automotive suppliers who had to send people home or are sending people home because parts are missing and they cannot continue to produce. Now of course, we are in a different situation here. We have no assembly lines like automotive. We are in the project business, and we have much more flexibility in starting from the order intake where we, of course, have possibilities with our customers to say, okay, when the project should be executed, and we can steer that to a certain extent. And then we have a comparable big flexibility during our lead times to change things alone with our suppliers, with the customers.
And our project lead times are between, let's say, 4 months 2 years, most of the projects. And during this time, there's a lot of flexibility and options for us to substitute components, to substitute Comp suppliers who cannot temporarily deliver or not deliver enough. We also have a production network where we can insource, outsource, very flexible. And we can even change the to a certain extent our equipment and reengineer certain parts so that we can use other components or sometimes use Higher, let's say, value components because the standard ones are not available. So there's a lot of flexibility that our Team and workforce health in the supply chain.
Of course, we have longer, let's say, inventory reach compared to mass production for standard parts. And just to give you an idea, we have about 16,000 suppliers. And we saw around 450,000 active parts and components. So that's a huge variety of parts that we are always sourcing. And we always Have something coming late or coming not, and then we have to switch to get our projects together.
So This is not new to us. However, the magnitude is new to us. And It's not in a wide range. From the 450,000 parts and components we are sourcing, Around 200 are critical and around 20 are very critical. And I mean, in the end, it still comes down.
If the equipment is all built, everything is there, but 2 parts are missing, and still the equipment is not running if the 2 cars are missing. And At this point of time, it's manageable for us. So we don't have to send people out. But it's a challenge for the organization, and it comes with additional internal efforts and costs to do the workarounds. That's, I think a fair statement at this point of time.
And on the next slide, we try to make, Let's say, a little bit superficial, but still a comparison between our Projects and engineers to order business versus, let's say, a serial production with assembly lines. And starting from order intake flexibility to scheduling flexibility, what we have to the also comparable high internal value generation, what we still have. We still have around 50% in our hands. And we can Shift flexible between what we do versus what our suppliers do. Sometimes supplier cannot deliver because Some more or less easy parts are missing and he cannot source it.
And then we can produce the parts, send it to the player, and then he can finish the components for us and things like that. Plus, we increased inventory over the last 2, 3 months in very, Let's say, critical area, business critical for example, spare parts, what the customers need on short notice to prevent breakdowns of standstills. Let me add
one thing because Albert mentioned that we were even talking to our customers in order to shift some of the lines we have sold. I mean these are quite unpleasant discussions we have at the moment. But I would say there is something changing in the customer environment that they get aware of that, Number 1, they have problems themselves to keep schedules while preparing, let me say, the new facilities while our alliance is going in. So that is helping us to a certain extent. And they are more flexible in really discussing if we can adapt some of the scheduling of the line, which is new.
We have not seen that before and some of the customers So certainly not, let me say, allowing for any renegotiations, but those who are allowing for that will give us some flexibility in that as well. So something new, which we have not seen. And I think I thought it's worth to mention.
Yes. And what we see is that The availability issues for the most part, the situation will ease up by the end of this year. But one issue will remain and will remain minimum until middle of next year. That is the chip shortage worldwide because it just takes a rather long time for the chip manufacturers to ramp up capacities. And we are not purchasing chips directly, but we Our suppliers have chips in the components, electrical components, several drives and all that.
And that will remain definitely a critical issue, not only for groans, but probably for the whole machine building industry. From our expectation, definitely until the middle of next year. Okay. So that was a little slide work on the material supply chain side. Next information is about our segments.
As you know, we have 2 segments. 1 is our core segment called Filling and Decoration. Here, we still are a little bit below in sales compared to last year, 2%. And we have a slightly lower, but still Under those circumstances, decent EBITDA margin of 9.3%. Why is it slightly lower than last year?
I think there are 2 major reasons. One is that What I just said, material costs increased much faster and much stronger than what we expected and what we could covered by getting the money back from the customers because in the first half year, we primarily Recognized sales of orders from Q4 and last year and Q1 this year. And the other Reason also is that the whole COVID situation was still eating up a lot of Productivity. We had separate shift systems until June 30. Since January, We are out of corona shifts, very separated, strict shift system with very little flexibility.
Since July, we are in our normal shift system. And those two issues, little flexibility with COVID shifts, plus also still some limitations on the installations with traveling technicians plus the material cost increase It's reason for a little decline in margin. On the other hand, we have a very positive development in our 2nd segment, Beverage Production Process Technology, which includes Two segments, 1 is Process Technology, including beer and the other one is Intralogistic. And since we have a very strong turnaround, which was desperately needed also, We have a second chart that shows the breakdown and the split of the second segment into Process Technology and Intralogistics. And you can see Process Technology, Similar revenue compared to 1st 6 months last year.
But instead of €13,300,000 loss last year, This year, a positive result of €1,400,000 And okay, the Strongest loss maker last year was beer. The beer business represents around 80% of the Process Technologies 70% to 80%. It's still not yet positive, but it's on a very good way. And year to date, the loss was around €2,000,000 €2,500,000 But overall, The Process Technology, strong improvement with similar sales. A little bit different in Tralogistic.
Last year was hit hard by the shutdown in Northern Italy in the Q2 because the biggest operation of Intralogistics is in Northern Italy. So this year, significant more revenue. And instead of almost €12,000,000 loss, €2,000,000 profit. And especially in the intra logistics, due to the strong order intake situation. We see foresee and expect very positive development in the second half of this year and also for next year.
Okay. Now I would turn to working capital. Even though working capital in absolute numbers is decreasing. The ratio to sales slightly increased. So this is not satisfying for us, especially receivables went up compared to last year.
This has also something to do with almost 12% revenue increase in the second quarter this year. Payables, stable. Inventory, I mentioned already, We build up safety stock as good as we could. And on the other hand, we have some improvements in the prepayments because of the positive order situation. What also Comes into play here is that due to the COVID situation last year and still this year plus, let's say, high workload now starting and material shortages.
And sometimes the project lead times It tends to become longer to finish the project, and that also ties up the capital in longer project lead times. Okay. Next chart is employees. Do you want
to do that? Yes. I don't want to go in detail through the numbers, but you see there that we have kept our promises here to let me say to do 2 things when you look back. Number 1 was certainly a restructuring program, which was needed coming from, let's say, 2018 2019. And second, of course, the adoption of the capacity due to the COVID-nineteen situation.
And when you look overall, it was a reduction up to now of roughly 1100 FT feet feet feet
feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet
feet Es, which we have done. So I would say quite significant for our organization, a level in that magnitude before done in krones. So I would say, even if it was, of course, a critical move, but a necessary move. And Again, I want to say here that the family deck that fall up that we could execute this one. And you see that we have 2021 that there is a majority of the people in Germany was going out due to the voluntary programs we have issued in 2020.
Some are coming still from the restructuring program. And by the 30th June, we are mainly through the first program which we have. At the moment, we postponed the further execution of the restructuring and headcount reduction program. Why? Because we have
a strong
increase in order backlog and we have, of course, deal with that. So that's the second message I want to send. At the moment, we need to get resources balanced in a way that we are prepared for, let said the midterm outlook, what we do expect in revenues in comparison to the present costs we have. And 2nd, of course, we want to take momentum out of the point that we have reduced wearables here in Germany, and we have still planned growth, let me say, in the Hungarian plant and in the plant in China in order to compensate then the growth. So that's 2 factors we put in here.
And what is it's one of very important factor in here, we have not reduced wear cost in emerging markets. And this pays very much back for us since I said that in many in the user have given that we have not had any service technicians for the last 15 months in China, and we have actually installed and commissioned our lines there with the full satisfaction of our customers. And this is all done by the local team. And we have many of those examples. One point, Norbert mentioned that earlier, while let me say South America is working so well, We have finalized 2 breweries there, 2 big projects even under the COVID-nineteen situation.
And this was due to the fact that we have not reduced that. So let's say in a nutshell, what we have with our people and the employees worldwide.
Okay. And back to financials.
Okay.
Liquidity, net cash, I think very stable, not much change to previous quarters. That's how we know krones. We have only 15,000,000 €15,000,000 used credit lines, €219,000,000 net cash, Free credit lines slightly above €1,000,000,000 So no limitations here. Basically, very solid also. I mean, the increase of the business, of course, will also use and absorb some cash in the next two quarters.
Free cash flow, compared to last year, 1st 6 months, a change of €100,000,000 positive, minus €65,000,000 last year, plus €35,000,000 this year. So the debt change is roughly €100,000,000 and thereof €85,000,000 from operating activities and the remaining €15,000,000 €10,000,000 lower CapEx and €5,000,000 other. From our perspective, good development. And I look back in the last 5 years, and I have not found a positive free cash flow of the Crohn's group in the 1st 6 months in the last 5 years, 5 years. And Olaf looked back until 2,003 and couldn't find a positive cash flow in the 1st 6 months since 2003.
So I mean, The one hand side is the one side, of course, it's not good to have no free cash flow for so many years in the 1st 6 months. And we haven't looked deeper into that now on short notice. But There's more focus on cash flow and free cash flow, and we are seeing results now. Okay. And that basically finishes our presentation here, as you have all read because we had the preliminary we published preliminary results, including a changed guidance.
So our revenue growth for the full year from originally 2.5% to 3.5%, Now it's 7% to 9%, which means in the second half, anywhere between 12% 17% More revenues than the second half of last year. EBITDA margin, 7% to 8%. We are at 8% in the 1st 6 months. Now just to answer some of your Questions probably right away. We have already 8%.
Why 7% to 8% for the full year? There are several reasons. 1st, the strong increase is in new machine business and new machine A project which has lower profitability than the stable service aftermarket business, which It will run strong in the second half of the year, same as first half compared to that's our expectation. The new machine business had lower margins. The material price increase, most of it It will materialize in the second half because there's also some time delay.
And our price increase We'll have a time delay, which will primarily have the impact next year, very little, maybe the last 1 or 2 months this year. Plus, we have internal Additional costs, as I tried to describe, to manage the supply chain shortage situations. And based on that, we said, okay, guideline the guidance is 7% to 8% EBITDA for this year. And working capital, we still stay with 26% to 27% and are confident that we can achieve it even though year to date June, we are above. But with the increase in sales volume in the second half, then we have the similar technical impact we had When the business went down, just the other direction, sales and revenues will pick up faster than the development of the working capital.
So that concludes our presentation. And now we are ready to answer all questions.
Thanks to Christoph and thanks to Novak for all the information regarding our first half year figures and additional information to material costs, and to the development and so on. So once again, if you want to ask a question, send me a very short e mail and then I will hand over to you and you have to unmute your Tels the line. The first question is Sven Weier from UBS. Mr. Weier, sorry, your questions, please.
Yes. Thank you, Olaf, for taking my question. Good afternoon. Mr. Broger, you already kind of answered my first one regarding the guidance for this Maybe just a quick follow-up on this one regarding the benefit that you have in the second half from, let's say, The stoppage of this corona shift model.
I mean, what kind of a financial burden was that in the first half? Can you quantify that?
Let me quantify a bit that you have a background on how that worked. I mean, we had around a limitation of 5% to 7% of, Let me say access to performance of our people just because of the shift models. How this will exactly materialize, I would say this has a bit to do with the scheduling of the order we have in the books. So that's just for a channel observation. And then Morag can certainly take on that.
Yes. I mean, we said from experience that one portion is between 7% 10% lower productivity with the corona shifts. And there, I would estimate this is a 1 digit €1,000,000 amount for 1 year, high 1 digit, so anywhere between 7,000,000 and let's say, 10% for 1 year. The other impact, which is almost impossible to quantify, is the flexibility. We had with the shift models very little flexibility with over time, with overlapping shifts, with people moving from one shift to another shift to help and support.
And That's impossible for us to quantify, but it's desperately needed now, and it just comes to the right Going from the timing with the increased volume plus the challenges on the supply chain, Flexibility is really key for us, and that is probably the biggest asset we have now Being out of the corona shifts that we have much more flexibility to, let's say, juggle the different orders with Missing parts and components.
And what was the higher raw material prices you earmarked for the 2nd half relative to the first one?
It's overall, I mean, We have 2 issues. We have in the 1st 3 to 4 months where the capacity was still underutilized, We took orders with price levels that were not attractive looking at them from behind now. And those orders will be executed now in the second half. Plus, they come together. I mean, we have 2, let's say, 2 negative developments coming together now.
Orders from the 1st 3, 4 months with lower margins, but we were not so selective as we started to be with April, May. And the price increases that came at the same time, which will also hit those orders from the first, Let's say, 1.5 quarters being executed. Now we are some in some instances, we are renegotiating with For example, freight, which is straightforward. There are indices and we show them our card calculation and say, okay, We calculated freight 100. Here, you see it's 200 now.
And we try to get some of this increase. Sometimes we are successful because we have a long standing business relationship and the customer says, okay, understood. Let's try to find a solution and maybe share it. Other customers say, We don't care. We have a contract.
It's your problem. And here, we expect that this will have a slight negative impact for the second half, which will be overall, that is our calculation, compensated by positive fixed cost impact. So overall, we are pretty sure that we can keep our profitability Close or if it goes really well on the level as we have it in the first half. But it's difficult to calculate, yes? So we know that we have a positive fixed cost impact due to the higher volume.
And we have, On the one hand side, not so attractive orders from the 1st 4 months that we have to execute now, plus price increases plus, let's say, additional efforts and costs that we have to do to manage the supply shortage.
Yes, understood. Because the reason I'm asking is basically with your revenue guidance, you're kind of exceeding Your 2022 targets already and there you guided for an 8% to 9% margin. So I guess the delta on the margin is really from what you just described, But also means that even if revenues don't grow next year simply because of better pricing, you should already see a margin uplift then. Unless raw material prices
go even higher. Yes, correct.
Yes, correct. We agree.
Thank you. The other question I had was on the order intake because basically you're saying the order intake in the second half will be lower than in the first half Because you're becoming more selective and maybe moving 1 or the other projects. But on the other hand, you also said that we still haven't had the big projects coming. So You put that kind
of Now we couldn't hear the final part of your question, Yes. I tried to answer how we see the second half of the year in case, hopefully, you can hear all of us. I would say we are careful in terms of the second half of the year because we need to drive pricing. This is an exhausting exercise to do, and we know that from the measures we have taken 2018 2019 until we'll recognize in the market from 2 big players, number 1, the customers and second, even competition that we get impact here. And we started already working on the pricing beginning April with small movements, of course, I've never described the order intake level in terms of profitability of Q1.
And it was obvious that we had to do something. And we see that we have to deny some of the orders. Just this morning, we lost an order from a big key account, which Usually, it would be ours, but we have been quite robust on the pricing, and that's the reason why we lost that order since they've done a good job in the previous project. This is something which is unpleasant. And it would take maybe some more Here, we are going to lose until things are really recognized in the market, and that's the reason why we are careful on that.
2nd, I mean, we are fully booked and we have to be careful that we're not over digest the whole thing in the sense of we want to execute the projects to the satisfaction of our customers, of course, because this is the biggest fundament to get the pricing from the customer. So if this goes off the balance and we have to, let me say, balance that in the right way. So that's the two reasons basically why we are dealing with the lower order intake in the second half.
Yes. Thank you, Mr. Klein. I was disconnected after asking the question, so I missed the first But we'll I'll keep that for later. And maybe the final question before I get disconnected again is just basically when We think about your targets for 2023, right?
I mean, do you already see a chance for making them next year? Because When I look at the order intake, even if it's lower in the second half, you might already be, as far as the order intake is concerned, the kind of the mid Point of that range you had for 2023, so between SEK 3,740,000,000 So how would you manage our expectations on that?
Okay. I would say the first one thing Robert can add on that. We have not let me say qualified before what we say to that. So now you can challenge us, but we are saying the same thing. Number 1, I said earlier, when we look to the number of people we have on board that we have quite good feeling that we are prepared for the future in that sense.
So that means we have a positive in 2022. But I would say there are 2 factors which we see at the moment. Number 1, I would say for the next 12 months, the outlook is quite okay in terms of order intake. I would call it this way because you had an earlier saying that the key accounts have been a little bit reluctant in order placing, and we believe there is a kind of a pickup effect that they are actually coming back and doing, let me say, more investments most probably by the end of the year, maybe beginning of next year. So that gives us a kind of a momentum for the future.
2nd, and this is, I would say, a very different scenario than we had before. Our customers are acting different than a year ago. I mean, everybody is aware of COVID-nineteen and is aware of that it will not go away. But they are aware of as well that there are business opportunities. That's a big driver for the business opportunities are either new products coming into the market all and this is the bigger one, that they need to drive down costs because if the sales channels change from hotel bars restaurants to supermarkets, They are getting more under cost pressure and this gives us momentum for new orders in order to decrease their pricing of their products.
So that's the 2 things I want to add. And now Robert can elaborate on where we are exactly.
Yes. I mean, reduced on, let's say, sales and margins. We said in last year's Conference 2022, 8% to 9% EBITDA and 2023 in our midterm corridor, 9% to 12% EBITDA. Now The 8% to 9% EBITDA is kind of a promise what we gave and what we will keep for next year. However, on a, let's say, higher volume, what we expect, certainly not €3,500,000,000 to 3.6 €1,000,000,000 but 8% to 9% on we will see then.
It's closer somewhere between euros €3,700,000,000 to €4,000,000,000 maybe. Our internal ambitions, you can be sure, is different. But we are in the middle of 2021, and it's too early to give any commitments to the outside beyond the 8% to 9%, what we said end of last year.
Yes. I think that's fair enough for now. Because one thing that struck me and I wonder is, isn't that still another great streamlining potential Regarding your margin target, when I look at the number of parts that you buy, 450,000, Maybe I'm naive here, but isn't there and I know Cronos has done a lot in terms of modularization in the past, Right. But isn't there another long way to go into further simplifying that?
I would say that's a way to go. You have to do every year, every day. So that's something which is continuously going on. I would say Midterm, this digitalization is driving us certainly to a next level. Why would you ask digitalization?
As simple as that, we need to more simplify our machines that we can enter into a service level agreement supported by digitalization. And there is a big program coming up for 2022 where we are going to address that further in order to get, let me say, the product portfolio streamlined and of course getting parts out of that. But again, this is I would say, if I would come up with the point of standardization, modularization. You would say, well, that seems you have tried driven the last 10 years, and we have not seen a significant impact. I would say it's more about having dual sourcing for us and having benefits out of that.
That's one of the big points we are going to do and again to take out some of the product portfolio completely rather than redesigning. I would put it this way.
Yes. And maybe an add on. I mean, we certainly have the targets to modularize and standardize more. On the other hand, if you remember, we also have from a production perspective, let's say, a changed Strategy that we do not want to make as much in house ourselves as in the past. And let's say noncritical, easier to source parts we want to give outside.
So this will have and I think in the other way, yes? We will reduce our own production here, our investments needed. But On the other hand, we will give out things that we still do in house to suppliers that We'll not decrease the €450,000 So if we do it right, maybe internal standardization plus reducing our own added value, then it might stay at around similar levels. Yes, but I was also surprised to learn from my colleagues that, for example, just a filler, we need 80,000 parts, not meaning that we saw all those parts. Many of them are also produced here.
That just shows a little bit how many parts are used for the equipment and filler is only one part of a complete filling line.
Understood. Thank you very much, Bose.
Thank you, Mr. Meyer.
Well, the next questions are from Stefan Alberstein, M and M Barbrook. Mr. Alberstein, your questions, please.
Maybe you are still muted.
Can you hear me now?
Yes. Yes. We are now.
The question is actually on the free cash flow. You already elaborated that you usually have Outflow in the first half, now it's a positive free cash flow in the 1st 6 months. You already outlined a little bit On raw materials and some other expectations in the second half. But so far, The missing part is redundancy payments. Now you pushed out the program a little bit.
So it's the expectation that we actually should expect a decline in free cash flow for the full year versus the last year changing Because we push out the redundancies. You're getting a decent margin in the second half. There's more volume. The overall working capital balance is still lower to the first half. So all that should actually Bring me to a very decent free cash flow level.
Yes. Thank you for the question. The redundancy payments, Of course, it's something that, thank God, we do not have every year. From what we have planned and build reserves For last year, around 50% of those payments are included in the first half of this year. From the remaining 50%, around 20% will be 2022 and later.
So in the second half, it's less than in the first half cash out from redundancy payments. What has a bigger impact for us are certainly Prepayments of from customers for new orders. They play a bigger role. How much it is, when the money is arriving here, whether it comes, especially the ones for the last quarter, whether the prepayments come in December or November or maybe January, February. That has a bigger impact than the redundancy payments.
Actually, if you push out the program a little bit to this point, is there Can we come up with the idea that maybe you also need finally, you need to release provisions that had been built? So that could be an extra one off things.
We will see. I mean, we will have the discussion with the auditors. At this point of time, There are, let's say, 2 issues. First of all, is our communication. It's postponed because we have very high order intake right now.
And at least to the auditors, we will say we are not Quite sure whether this continues on this level. On the other hand, of course, we I'm thinking also about alternative measures for the next 2 years to come. When you think about reducing added value of manufacturing, when you think about strengthening our plant in Hungary and China. Those are things that where we want to use some of the provision that might be left.
Understood. Maybe the final one with respect to the cash flow. So if your profitability increases constantly, Which are targets and the free cash flow generation remains up. Could you strategically think of changing the dividend policy? Or would you if you not find And acquisition targets with the hoard the cash.
Let me say, we have not yet discussed in a deeper manner, do we change our dividend policy I mean, of course, this consideration comes up, let me say, every quarter because I would say that's a reasonable discussion. Every company of our magnitude has to have. 2nd, I would say when we compare ourselves to, let me say, the peer group, there could be a discussion, but there's not yet any decision made so far for the dividend policy. So that's the statement to the dividend policy. In terms of acquisitions.
I mean, we both have looked into that homework significantly because we believe that and we haven't touched that issue, but we have as we executed our programs to cope with the COVID-nineteen situation. At the same time, we had a lot of, let me say, look into the future. But I would say, again, even in case we have ideas and targets. We have to be realistic. The multiples paid today in the market are so high if there is a valuable target that I would say a strategic investor like we can hardly execute straightforward on that, despite it's an opportunity where all size would fit together.
So I would say, yes, we would like to do, but the question is if we really can exercise that. We have some smaller ideas related to technology, which are at the moment, from my point of view, more feasible. But they are a bit more out than, let me say, the other thoughts. So I would justify that a lot in terms of what is doable at it for the time being in acquisitions and what is, for reasonable pricing not doable. And again, we are concentrating at the moment particularly to get what we have okay, getting that to the target levels we have described, and that's where we are working on
at the moment, with the focus.
Nor do you want to add something? Because we have not spoken again about
that before.
Okay. Does that answer your question, Mr. Auguste? Yes.
That answered the question, and thanks
a lot.
Yes, thank you, Mr. Alstern.
Well, the next on my list is Richard Schram from HSBC. Mr. Schram, May you unmute and ask your questions, please?
Yes. Good afternoon. So hope you can hear me.
Yes, we can.
The question I have is referring to your Price increase, if I quickly in my mind, this was effective from July onwards. So and I would be interested to hear from you if there was a kind of Pre buying effect maybe that one of the other customer rushed to place an order and obviously you crapped it As you said to cover your capacities and that therefore we have seen A little bit of inflated order inflow in Q2, would that be a possibility?
I would if you could just say, of course, because the customer will not necessarily tell you, but there could be some of these effects because we were wondering If some of our customers were clever and said, okay, we see the material cost pricing less the point of not utilized capacities, I would have more in mind, at least the discussion I had, which was more related to rising costs at all, because they have seen that already on raw material like sugar, our customers and maybe that was a pre indication for them that we might do the same thing. So it was more coming from that side most probably. But I would say most of the projects, which where we usually know on what business case they are founded on. We have already seen without having that impact on the price and maybe Then the decision making has been accelerated by that. But I would say, let me say, the lease out for Q3 and Q4, We see still there's a lot of activities, which is certainly not based on, let me say, cost increase.
So that's the reason why I'm also careful whether this has been effects like putting the orders earlier because of either modules capacities or material cost increase. But there might be a could be an effect and I wouldn't deny that. To evaluate one thing further about pricing. They are aware of since the 1st July, once we have increased pricing. But they have certainly felt before because we have worked on pricing before already and have been in Q2 much more restrictive on pricing than before without having an official communication.
Now the official communication followed on the 1st July, which was important that the message is going through into the market. So as simple as that. And you are aware, it usually takes 3 to 6 months until we take benefit from, let me say, official price increases. Does that answer your question, Mr. Schlam?
Yes. And a follow-up on this. I mean, you mentioned that you would need about 4% to cover the higher Material prices from this price increase and the rest would be for the, let's say, gap from the Price pressure you have seen pre corona, which sounds a bit like you are optimistic to really push through The full 6%, which I wonder if that is not a bit too ambitious as usually I would assume that You could be lucky if you resulted in the answer in effective 3% hike or so. What do you think?
Yes. I mean, a good question all the time. When you work on pricing and the pricing power you have, Then of course, there remains a question mark. But if you look to the gross margins, we calculate in any order we have. So we don't take an order on board with having a clear picture on gross margins.
And it's not all reflected in the same in different orders on the same level what is related to material costs. I would say what we see right now because we're working pricing, let me say, from April onwards, We see a trend which in the industry where we can really manage better pricing. So we have already evidence that things are working. We are a bit lucky because still the volume is okay, so that's good. But with the indication we had over the last 3 months, I would say we are quite optimistic.
And why is that? Because there is a broad sense in the industry that Nobody can actually compensate the pricing with cost cutting because it's so severe and significant. And I would say some of our customers try to deny it, but those we have to walk away, I agree to say that. And by being so serious on that, I would say, there is a momentum generated in the industry, which makes us believe that we can at least manage pricing on the levels Novo described to maintain profitability on the level we actually price. That's the point we saw.
And this is well calculated in any sense. And of course, I would say, There is still a risk, but on the other side, we built in some buffer as well. So I would say that there's on both sides.
Of course, Mr. Schram, we or at least Christoph can refer to a price increase That was announced 2019 by 4%. I was not here at that point of time. But what I saw and it was that The 4% 2019 announced, most of it could be pushed through. It's difficult to measure whether 4 Percent or 3.5%, but it was significant.
And now we have a completely different situation because at that point of time, there were no material price increases. And so that's why we have definitely confidence That the 6% are not easy, but are realistically manageable and doable.
And what I can add, usually, this is you can't measure, but we are perceived from the customers really, really nicely. Why? Because Crohn's has managed in this COVID-nineteen situation very good operation. Whether it's projects to be installed in under very harsh conditions all well to maintain the service levels we are giving around the world in a very good manner. I mean, of course, we had shortcomings of that, no doubt.
But all in all, we managed it extremely well with the customers. And I would say this gives us some tailwind as well.
Okay. So if I sum it up, then this means that you expect at the end of the year that your order backlog will have clearly Better margin implied than it has, let's say, in the middle of the year.
Yes, exactly. Yes.
Yes. Thank you.
Welcome, Mr. Scham.
Thank you, Mr. Scham. Our 4th questioner is from Commerzbank. Sebastian Groweg, your questions, please.
Yes. Hi, good afternoon. Thanks for taking my questions. Hi, Olaf and Svenkaj, Mr. Groweg.
And the first one is on the volume outlook and on the comments you made on the project pipeline, especially for the big internationals. I understand from the comments that you made earlier that there hasn't been any easing, I think, pointed to end of this year or early next year, but you really would Any sort of unlocking of that kind of standstill situation. Can you just remind us of the rough dips that you are having in the order intake or Generally speaking, the revenues between what is more the small and medium sized customer base and then what is really the amount coming from the large accounts to just have an idea what The catch up effect eventually might be maybe we take the questions one over
one if I
may ask you.
Yes. And I'm Mr. Grohe. First to the volume outlook. Again, pipeline looks quite robust even if we As we said, we deal with pricing.
So there might be impact on order intake, of course, on the volume. I would say, If you look to the key accounts, that's around 30% to 35% of our revenues. I can say not all of them are, As you say, classified that they have cut their budget. Some of them, I would say, doing better than what they have said last autumn. But if I look to those, I would justify that between 25% 30%, who have at least the potential for next year to catch up with their budgets and go back to the pre crisis levels.
So then in addition, we have to be a bit careful if you look to a very, very big international one dealing a lot in Asia. All of you know them. I mean, they have been very bullish just recently, but with the latest COVID-nineteen increases They have seen in the region, I would say that has changed a bit. Why? Because they have certainly not the capacity themselves to execute bigger projects.
It's not up To us, it's more up to them. So that might be a little bit of blockage. And we are talking with them at the moment how we can manage projects with more support from Crowns that they could actually invest. So that's something positive. And if you would ask me without having me fixed on that, but I would say the project pipeline is quite robust over the next 6 months.
And the outlook, let me say for 36 months, 12 months from today because we know bigger projects have longer lead times, they are longer form negotiations. There's a lot in the market. And this does not necessarily mean we see any roadblocks at the moment because I said it earlier, customers are more optimistic and they see they can invest even under COVID-nineteen circumstances. And that's one of the reasons why I believe we can assume a quite robust pipeline for the next 12 months. Again, with all the disclaimer I can put on it because we have seen things changing in less than 4 weeks in a total business value.
But from all what we know, this would be a statement I would like to make today.
Okay. That's helpful. And the other question is just a quick follow-up on the price hike that has been discussed at length. Well, I dislike asking the very question now because it's for a monthly update. So I would be really interested how the month of July has laid out.
And The background of the question obviously is because of the 6% price hike, you might have seen a better momentum in the base order business compared to the 2nd quarter. And so the Pre buying effect as I've said before.
That's really a good question. I would say and don't miss in the potato that I explained to you. It turned out quite well. But again, this you can't do without having enough volume in the market. So as I said all the time, 2 points of the metal.
Mean, we could manage pricing quite well in July. I would say we have any range of customers complaining from Lykel and knocking with his phone every day on my phone or on the colleague's phone and up to the range that they understand the actual circumstances. But again, we were doing well in July, and that has a lot to do with the Wassa half volume that we could be as selective as we wanted to be. Does that answer your question, Mr. Boer?
Yes, it does. Thanks for that. And the second or sorry, third question we already asked for the aftermarket business. From the comments you made, it sounds a bit to me that this looks like, I can say, plateauing a bit eventually and then being back to pre COVID levels. Is that The right way of interpreting what you have been saying so far?
Is there any particular areas product wise or regions That are still trailing behind. So any color would be appreciated there.
Yes. I mean, I would say it was plateauing in the crisis. Fortunately, I would say that this did not erode as much as the new machine business. So the growth is, of course, not as as we see that in new machinery. It has been quite stable.
There is growth. But things have to come. I mean, the order intake was quite promising. Even there, we have some delays at the moment in converting order intake into revenue. But all in all, this business looks good and we see still potential for it.
And I want to do one remark. We have two reasons why we pushed even in Q1 even with big critical pricing order intake. I mean, we need installed base and we have done extremely well on that. If you look to the installed base, we have actually we are delivering out of the order intake for the next, let's say, 12 to 18 months that will support further aftermarket business as well. So I would say, all in all, we are in good shape and we have a positive perspective on that.
Okay. And then 2 housekeeping things, try to keep it quickly quick. The first one is on the closure. You talked about the Process Technologies segment and then calling it segment number 2. Are you planning to permanently provide eventually revenue and EBITDA split going forward?
Or is this just The one exception to the rule, we just wanted to increase the transparency for what's going on there.
Yes. Very clearly, we are going to to provide that for the future as well because we want to make that transparent, where we are with the 2, let me say, technologies being in our second segment into logistics and process technology because clarity, that's our point of view and let's say, a clear view on where we are and the developments we are going to manage is an important factor for us. And that's the reason why we maintain that as we had it today. We had it by the way previously, but it was shifting away a bit under the circumstances of having more hurdles and problems under COVID-nineteen than before, but we believe this is a mid- and long term I think to state that very quickly, even since the intra logistics is growing extremely well.
Okay. That's appreciated. And the last question quickly on the employee base and the restructuring program. Saborga, you said that eventually fiscal 2022 revenues could be SEK 3,740,000,000 in that You talked about the postponement of the second part of the restructuring program. So is there any sort of Change or risk, however you want to put it, of really unwinding the entire program in full?
Or how should we think about When is Hungary really taking over in order to then execute this program to the very end?
Yes. Thank you, Mr. Crowell, for this question. And that gives me a chance to clarify it a little bit. We said that we will reduce the workforce in Germany this year and it's all in the AG company by around 750, 400,000,000 from last year and 350,000,000 additional this year.
And from the 350,000,000 €100,000,000 was planned as reduced work for here with redundancy payments that is in connection with ramping up Hungary. And once and when Hungary is running full speed, we don't need those 130 actually here anymore. This was part of the layoffs. Now with the increased business and with the increased temporary labor we have, we have the option now not letting own people go with redundancy payments, but keep them, put them in different places and reduce the 10ths. So that's one part of the story.
The indirects, we said we will do. That was another 100 and well, 120,000,000 and 100,000,000 was in other direct areas. And those other 100,000,000, We can certainly and will not do because of the high shop load what we have. And what you do not see in the year to date June figures is that because we had Several, let's say, agreements that were dated on June 30. And in July, around 100 and 40 full time equivalents left, which are not yet in the June 30 figures.
So and when we look at the picture including July, then we have a reduction in 17 months of 1216 worldwide net reduction FTE and almost 1,000 to be precise, €970,000 in Germany. So $140,000,000 more than what you see on Page number 15. And with that, I think we have a very good base to, let's say, with enough pressure, get productivity results with the volume we have.
Okay. That makes sense. And just a quick follow on to the redirecting of the 130 people. Would you have to release the provision then? Or am I just on a wrong track here with asking that question?
Yes. That's absolutely right question, Chen and I'm hesitant to answer it. I mean, if we release a provision, we will certainly Show it transparently so that you know what is operational business, what is release of provision. But that is a discussion we have right now and what we have to do with the auditor. I'm a friend of if it's possible, if I have a provision for restructuring that I can keep it Even though the announced program is reduced, but if we want to do another program maybe next Here to increase efficiency, not due to capacity, but outsourcing and others.
Then it's good. It's not good to release one this year and make another new one in 1 or 1 point For 2 years.
But let me put it in this way. It's nowhere factored in. It's not at all. And second, we have more to do, maybe not directly in AG, which was up to now the point where we have concentrated on, I would say, most of the homework we have done here. But we have other areas where we look into structural changes.
They are not yet defined nor discussed on a broader sense, but they are on our agenda because we strongly believe we need further to execute a couple of things. And hopefully, we can then convert that into further programs, which are needed to get in the right direction. And
if the our guidance does not include, let's say, The possibility that the auditors forced us to release some of the provisions. So that will be on top if we have to release projects.
Okay. That's helpful. Thank you.
Thank you. Thank you, Mr. Growe. The next questioner is sorry, Daniel Klein From Stifel, Mr. Klein, your questions, please?
Now Mr. Klein, could you speak up a little, please? Yes.
I just want to repeat it and you just have to elaborate what I called it in the right manner because we are very difficult to understand. So your question was in regard of the, let's say, customer mix. Let me say private owned versus multinational and if that does that have an impact on the pricing strategy we have is that we have been more lucky at the moment managing pricing because it was more on the small let me say smaller and non multinational companies. Was that the right understanding? Okay.
Yes, I think this is really easy to answer. 2 things. A multinational company is dealing on budgets. And once budgets are fixed, and I would say free cash flows With that justified for the year and being promised to the capital markets, I would say they have hardly any chance to escape from their investment budgets they have set in, let's say, in fall of the previous years. So that's one of the reasons.
The second is that multinationals are less risk averse than, I would say, private owned companies. We have seen a couple of investments for new products where customers placed very early orders just to participate in the early stage of this trend. And second, some of them placed orders because They gained orders from bigger supermarket chains and wanted to participate in those. So I would say that's a different risk approach than the multinationals have. And these two factors, I would say, describe the let me say the situation where we are in.
Again, there are some multinationals who acted different, who increased their budget, but it was around 15% to 20% out.
Does that answer your question?
Mr. Klein, you have actually to repeat that because we're receiving you quite No
and
Okay. Another one in the meantime.
I have no one at the moment in the line on my list from the e mails. Perhaps anybody with no possibilities will send an e mail and want to
ask questions. So please, Hamid, then ask the question Mr. Klein is coming back.
Olaf here, it's Peter Rotner here from Baader Bank.
Hello, Peter. May it's
perfect. May you ask your question? Loud and clear.
Okay. Perhaps you can comment a little bit on the competitive situation. So have you heard anything about the price Reaction of your big competitors, Cadel and KHS. And what is the situation with the smaller players From Italy and China, how are they behaving in the market?
Yes. Mr. Odena, Good afternoon. Well, to be honest, we have heard a very few comments on that. I mean, Some were wondering that we had really the courage to, at the moment, the price increase.
That was one of the statements we heard. I would say, but anti competition law is working quite well amongst us. So the, let me say, comments, discussions, whatever is very, very limited in there. And in addition to that, we jumped into the holiday season. So I would say that was one other factor that the discussion was pretty low.
But I would say, let me put it in 2 categories. The 2 big ones, I would say they are taking maybe a bit momentum at the moment out of the price increase we have made. This is not unusual because I said it earlier, we have to be selective. And with that, we have to be have to allow that they can take momentum out of that. I would say for the smaller ones, it's highly appreciated.
At least this one I spoke because of other reasons. We said, well, it's the right move at the moment and we hope we can follow. The smaller ones have, by the way, a bigger issue than we have because since they have less possibilities for, let me say, bigger orders to clarify in the regions, they are, I would say not in as good shape as we are the bigger ones. And I would include for the bigger ones, Sedalia and KHS. So But I have, to be honest, heard not too much from competition that I could justify how they would react to that.
Plus maybe additional comment when we come from the supply chain. I mean, we all use more or less same similar suppliers for electrical components. And here, as you know, market power Size matters. So smaller competitors are in the list of priorities, Certainly below krones where we are with higher volumes and more market power. So that also doesn't help the smaller ones at this point of time.
Yes.
Does that answer your question?
Yes. And perhaps an additional question on the situation in the Brewery Equipment business. Can you comment on this? So you mentioned results have improved at Steineken. What is here is a competitive situation now.
Do you become more Better market situation here and what is going on then with local production in China.
Yes. When you look to processing and the brewing side, we had this carve out on the 1st April. And With that, I would say, in the Q2, the release of, let me say, 20% of the workforce was becoming Q. That was not in the Q1. Q1 was still a problem, underutilized capacities and the, let's say, release of the people not realized.
The 2nd quarter looks good in the sense of the way we want to go. So it was slightly positive. We are aware of that one quarter being positive and brewery doesn't make anything. So we have to be careful on that. But at least The order backlog we had till the end of the year and we are very, very precise with that, it's sufficient to have the capacities booked.
And second that the margins are okay to achieve the set targets. So with that, I would say, we have a good chance to get With Steininger, along the way, we predicted and we executed. The competitive landscape is as competitive as we have seen it. However, since we have reduced capacities significantly, we can be more selective on that, and this is what we Alduin. So we are very careful in terms of the size of the orders taking on board.
So For us, it's the key. We need enough small orders with enough margins to balance risk. So that's one important factor. And I would say GEA and Timna and I are still active in that field and we feel that we have just lost recently a big order to GEA. I would assume I have not full evidence on that, but I think that's the point where we stopped on pricing and said, well, this is nothing where we go further down.
In terms of Chinese business, the entity in China is the same way booked as Steineken itself. However, the order intake in China is a bit reluctant in terms of the breweries. That's surprising for us because usually the market is going well, but we know from the Chinese competition that they are doing in China as well, not very good on the brewing side. But again, that doesn't matter too much for us because the entity in China is used a lot as extended workbench for Steineken. With the order intake and the backlog we have, but this is settled so we can continue on that.
So with the brewing business, At least till the end of the year, we're quite optimistic to reach the targets we have set.
And with regard to the margins for 2023, in this respect, Process Technology and Intralogistics, What I hear your EBIT margin EBITDA margin target.
EBITDA, can I elaborate on EBT maybe because we still operate with them on the targets of EBT? So there's a clear target. We want to have them on EBT first 4% and second 6%. This is the given, let me say, numbers they are aware of. And Let us elaborate, let me say, in the second half of the year a bit on the timing.
I would say the 4% for 2022 is, Let me say more or less the range where we are heading to and where we are we try to achieve. But again, this is not yet fully calculated for 2022, nor for 2023. But I would say the clear target of 6% for those two segments or for those two technologies in segment number 2 is the target we have.
And that translates also to Definitely 9%, maybe 9% plus something, 2023 for both Segment Intralogistics and Process
Technology. Okay.
Thank you very much.
Yes. Welcome.
So thank you, Peter. Perhaps, this is the line. Are you already in the line now?
Is the connection now better? No, excellent. So the second question was a little bit on the sustainability of the order pipeline So the market momentum that you witnessed, the reason why I'm asking is that the current order intake is around €1,000,000,000 So if you Per quarter, if you analyze that we are at €4,000,000,000 And even before the multinationals are coming back where you and indicated that this could be another quarter or even 30% up on the current market momentum. So I'm just wondering how much pent up demand Do you see in these figures at the moment and how sustainable is this? So what is the history?
Were the smaller customers not investing last year as much? So the pendulum is now spinning back. I'm trying to understand a little bit what the new normal is for the beverage filling equipment market.
Again, I would say, if we put that into part 6 12 months outlook, I mean, what we see is the inquiries we have, which we call leads and they usually need between, let me say, 4 weeks 4 months to be converted into orders. If we look to that, I would say that's a very sustainable path. And again, the let's say, the Underlying subject for it, why we're a bit more careful on the second half of the year is that we want to drive pricing. This, We are aware of need to have selection, but we wouldn't drive that so strong forward in case we would be not quite sure that the pipeline is robust enough that we could price pricing. If we would sit here, we would have a big pipeline.
We wouldn't be more as self confident on the pricing as we are of today. I mean, hopefully, that gives you a bit of of a taste how we see the next 6 months. I mean, if we look down 12 months into the future, we see at the moment No reason why this should change significantly. Knowing the projects, even the bigger ones because I would say the order intake we have is 2, 3 lines at the maximum at the moment. We see bigger deals coming up, which will help the market in terms of quantities for the intake, number 1.
And secondly, I've seen with a broader split around the world where the revenues are done that some of the regions are lagging behind. So we have even some regions which might pick up and go to, let me say, precrisis levels. So if we take that all together, I would say It's still looking robust. And then one third of thing, which might be not as big as all the others, but even the product mix is changing. So into logistics It's growing significantly.
You will see that by year end when we show you the revenues at the end of the year. And even that, we believe there is a big momentum into that as well. The projects are big there. This is, of course, in terms of revenue brings at that. And those projects are running at least for 12 to 18 months before they are really closed.
And all of that gives us quite good feeling for, at the moment, a robust pipeline.
Very clear. And the last question is on the numbers you gave for the headcount reduction for this year. I understand the original plan was And you actually executed now around 600, 650.
Is that correct? Wait a minute.
I would say, yes, that's correct. 500, We have executed, you see in the numbers here on Slide 15, 140 are coming because they are realized in July. So roughly 200 have missed to fully execute the program. But this was on 2018. And again, Robert explained quite well the 2 categories of the 100 on one side and the other 100 on the other side.
Yes. Thank you very much. Thank you both.
Yes. Thank you, Mr. Klein.
Thank you, Mr. Klein. So I have no one anymore No, no one is on my list at the moment. So perhaps once again a question to the complete audience, I have to someone who has no possibility to send an e mail. Any additional questions?
Yes. And then thanks a lot for listening and taking your time. Let me do one Final remarks, which might be then a bigger point, let me say, in the Capital Markets Day where we elaborate on that. I mean, we have not lost focus on the future. I would say that's important despite all the programs we had to execute, which is digitalization, in particular, where I believe We make good progress and the importance the customer believes the same thing.
So I would say we have a life further on that once we are together. I would say our global footprint is going further ahead. Going through that crisis, we have not any millimeter stepped away from that. So this is going ahead. And the sustainability program we have in place, I would say it's even something where we are pretty proud of.
We have indicated quite strong targets. And All of those, we will elaborate together with you. And the big thing is, of course, those targets are as well very valid for our future for the intake and profitability because a lot goes into the market with our products and helping our customers to reach their sustainability targets. And last but not least, I would say a big program is to get our workforce changed to the extent that we are capable to deal with the subject of the future. And this is beyond the things I mentioned, at least what we have to do in terms of feeding, let's just say, and getting people to drink and having new products on board for the future.
So that's something we want to elaborate on in the Capital Markets Day. Thanks a lot for listening. A pleasure to have you here. And all the best for you that no COVID might be close to you. Thanks a lot.
Thank you. Bye bye. Thank you. Bye bye.