Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the R. STAHL Investor and Analyst Conference call for the full year 2023. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Judith Schäuble, Investor Relations. Please go ahead.
Thank you, Judith. Ladies and gentlemen, a welcome also from my side, and thank you for joining our today's conference call. Our prepared slides are available under the Investor Relations sections of our website, www.r-stahl.com. Shortly after we will have finished this call, a replay of the entire conference will be provided for download at the same place. Please be aware of our disclaimer statement, which you find at the beginning of the slide deck. Now I'll pass on to Dr. Mathias Hallmann, our group's CEO, who will walk you through our presentation.
Good morning. Also very welcome from my side to our 2023 Analysts and Investors Conference call. We start with a summary. We looked behind on an operationally very strong and successful 2023. We enjoyed very strong order intake, especially in the first half of the year, and ended with a 9.3% increase to a level of EUR 342.5 million. We could also improve our sales level, and that happened mainly in the second half of the year to a level of EUR 330.6 million. Both values are actually record values in the history of the company, which we have never seen before. EBITDA pre also strongly increased by 73% to EUR 38.6 million, and then EBITDA pre margin of 11.7%. Also, this EBITDA pre level we never had before. Free cash flow improved to a slightly positive number of EUR 300,000 despite another strong buildup of working capital.
Net profit decreased to EUR 200,000 from EUR 1.9 million due to the full impairment of our Russian participation in ZAVOD GORELTEX, and that then resulted in an earnings per share of EUR 3.00. If we look in the development of our sales and order entry, we see 10 consecutive quarters with order intake above sales, which peaked in Q1 and Q2 2023. And what we then see in the second half of the year is a strong increase in the operational performance and thus in sales of the company. So in both dimensions, we then reached levels which we couldn't achieve in the years before. Looking into the regions, we had another strong year in Germany. Also, Germany developed nicely during the pandemic already. We have a very nice increase in our central region of 25%.
Also, a very nice increase in Asia-Pacific with 24%, which shows the increasing impact of our internationalization strategy. America is a little behind. Nevertheless, we have to have in mind that we had almost 40% increase last year, but this reminds the region where we have to do some more work in the near future. Looking into the P&L, we start with the sales of EUR 330.6 million, year-on-year increase of 20.5%. Cost of materials went up by 16%, which indicates that we could very well manage the inflationary developments in our economy. Personnel cost increased 10%, so that shows very nice efficiency gains and thus economies of scale in the business, which then resulted in a very nice increase of our EBIT level to EUR 19.1 million, where we had EUR 3.9 million in the year before.
The negative piece is our financial result, which actually ended at a level of EUR -17.1 million. I will go into that in more detail on the next slide. Then we have a net profit of EUR 200,000, all the other numbers we already discussed. Yeah, here on slide nine, we look a little bit deeper into the effects of the impairment of our Russian subsidiary. We have a negative impact of EUR 2 million in our other operating expenses. That indicates that EBITDA and EBITDA pre would actually be EUR 2 million higher without that impairment. So that means EBITDA pre on a level beyond EUR 40 million, and EBIT would be on a level of 21. Then in our investment result, we have another impairment of EUR 10.2 million, which is the full write-off of the company value under IFRS.
And then we have two numbers in the results from companies using the equity method, which look the same but have different backgrounds. The first line is the result of the first three quarters, which we booked from ZAVOD GORELTEX. And then the second line, it's again EUR 3.2 million, but it's not the same number. You see it in the 0.1 on the top. It comes from currency translation, which is based on currency changes between the acquisition and the final write-off of the company. Our interest result went up to EUR 6.9 million, and all that then resulted in a financial result of EUR 17.1 million.
If you look back the year before, the year before, we had EUR 0 in the financial result, and the impact of this whole GORELTEX story is roughly EUR 15 million of that. Free cash flow, we start with the net profit of EUR 200,000. Then we have high depreciation.
There we again see the EUR 10.3 million of the impairment. That all then ends with some minor additions in a cash flow of EUR 33.3 million. We have another strong changes in working capital, but we had our peak already in the third quarter of the year, and we are now on our way bringing working capital again down. We stabilized supply chains all over the place. Then we had cash flow from operating activities, EUR 14 million. Some stronger investment activities of EUR 13.9 million, and that all resulted in a slightly positive free cash flow of EUR 300,000. Our net debt ratio our net debt was 38.8 without leasing. Looking in our strategy, and that already leads me to the first results of the first quarter 2024. We explained that strategy when we started with the turnaround of this company.
We started with efficiency measures, added technology pieces where we streamlined our portfolio, added initiatives where we concentrated more and more on attractive industries with underlying long-term trends like LNG or the pharmaceutical industry, or the newest is the nuclear industry where we talked about in our last calls. We work on sustainability measures, and then the newest initiatives are on digitalization and internationalization. Internationalization, we clearly indicated with our numbers that we are well on track. Digitalization takes more time. Nevertheless, we make good progress in all aspects of the business. What I want to point out is what you see in the middle, which is our Accelerate program, which is actually aiming to get much more control, real-time control on the financial and underlying strategic developments of our company. Accelerate is a performance management improvement program to enhance data-based financial steering and improve the overall finance organization performance.
Implementing the program, it will help us implement our strategy, implementing our strategy all over the place and thus increase revenue, help us to get more efficiency gains and keep our cost under control. Very quickly, I want to indicate on the next slide what it means. We started with an overall definition of our leadership claim and principle. What does it mean? It's a clear description of who is responsible for what, who is responsible for managing and controlling what, and what are the underlying KPIs to measure success. That resulted in the definition of profit and loss accounts, cost accounting methods, and value streams and cost allocation, which we standardize all over the group.
We developed new reporting guidelines and packages, completely new planning and forecasting procedures, and we find the implementation of a new tool, and it completely changes the organizational design of our finance and controlling department and clearly the underlying IT landscape and structure and support. The conceptual part of this program is widely finished, and we are now in the implementation phase, which will, on a very intensive level, last until mid of the year 2025. When we now look into the key figures, we had surprisingly good orders in the first quarter. You see the not very promising development of 2023, where we had very strong quarters in the beginning, an okay quarter in Q3, and a pretty disappointing quarter in Q4 from order entry standpoint.
Q4 was definitely very strongly influenced from destocking of our customers, destocking activities, because also our customer realized that global supply chains became more and more stable. When we talked to other industry players, all of them had the same effect in Q4 with respect to order intake. But it's also reflecting the ongoing uncertainty, especially in the European chemical industry. We all know these developments. We still have it. We still have it. We see it now again. Nevertheless, nice orders in the first quarter of the year. Some big projects came in. We got another volume from the nuclear industry. We got nice packages from the petrochemical industry. Some new greenfield investments are taking place. The general weakness of Q3 and Q4 is holding on, and we are only expecting to see a more stable trend in the standard business from Q3 onwards.
Our sales increased again by 8.5% year-over-year, so we had a good start in the year operationally. EBITDA fell to EUR 8.4 million. What we see here is some higher material expense ratios. There is increasing competition in the market, but nevertheless, we keep it well under control. We have the inflationary effects in our personal costs, which are there. And we also have the one-time effects of our Accelerate program, which come close to EUR 2 million in Q1 2024. And that clearly defines the agenda for the rest of the year. Margin control and cost control will be in the focus of our management team in the coming weeks and months. The outlook, yeah, based on the good order entry in Q1 and the good order book we already brought in, we expect further growth to a level between EUR 335 million and EUR 350 million.
EBITDA pre-range is a little bit open at this point of time as we see quite some uncertainty in the market. Nevertheless, I'm optimistic that the second half of the year might positively surprise. Free cash flow will definitely move into the positive range, and our equity ratios will further improve. I mean, the risks we all know, the ongoing crisis and general economy, and yeah, especially the general economy is probably what we are looking at because you don't move, we don't move market share quickly in this industry. And that means a soft economy is holding us back, and a strong economy is pushing us. And this is the truth we have to face, especially in the short term. Mid and long term, I'm extremely positive that with our strategy, we are well on track and will see nice developments in the future. That's from my side.
Thank you very much, and I'm open for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from the line of Konstantin Völk with NuWays. Please go ahead.
Hey, good morning. Here's Constantin Volk from NuWays. Can you hear me well?
Yes.
Yes, we can hear you.
Okay. Perfect. Thank you for taking my questions. I have three. My first question is about the working capital. So your working capital increased quite a bit during the last year. Could you give a little bit more color on that and your expectations for 2024?
Yep, I can give that. Should I do it directly? Yep. The working capital actually was mainly driven by a strong increase in our stocks for electronic materials. We had, over the last two years, severe delivery issues in almost all electronic components. We had to buy some critical components on the gray market. We were facing sometimes price increases of 3,000%-4,000%. And we were facing the situation that deliveries, which were guaranteed, never showed up. And so we had to make a decision between coming to a situation where we couldn't deliver or investing in working capital and taking some risk. And this is, at the end of the day, the result of it.
This development peaked in the third quarter, and we are now in the phase where we started to bring it down, and I see a significant reduction of working capital latest in the starting in the second quarter, meaning starting now.
Yes, that sounds good. I understood. And my second question is about the LNG business. So the German LNG business looks quite promising, but I think you mentioned once that the shipbuilding is a bottleneck now for LNG. How strongly is this bottleneck restricting your growth in the LNG sector, and how is your expectation for the current year?
We don't have a bottleneck anymore. We fully worked down our backlog. And talking to our big customers, they are extremely positive that this very strong market will continue at least until 2026. And honestly, I can't see that it's breaking then because the only reason to break would be a strong hydrogen economy, and that takes much more time.
Okay. Understood. And about your personal costs, would you say that a 4% increase in personal costs due to the collective bargaining agreements is reasonable? That would apply something like EUR 140 million in personal costs.
Globally, we see I mean, if you compare it year-on-year, we have an increase of 10%, roughly. And 2/3 of this is tariff increases, and 1/3 of it is new people.
Okay. Understood. Thank you. That's from my side.
Welcome.
The next question comes from the line of Klaus Schlote with Solventis AG. Please go ahead.
Yes, good morning. I've got a couple of questions. We could start with personal costs. You just mentioned 10% year-on-year. That was starting the second half of last year and will carry into first half of this year, and second half of this year should look better then, right?
It should look a little bit better because some increases we already had in the second quarter of last year. But it's not going to go down. But the year-on-year comparison might look better. Nevertheless, I mean, we look into the ongoing discussions and what I, for example, hear from the Netherlands and what I hear from Norway, but also from some parts of Germany, and we all see what the tariffs do in some industries. I expect further increases during the year. And as I said, it's now the time for performance management again.
Then regarding the Goreltex issue, you provided the figures on the different levels. If we would take ZAVOD GORELTEX in total as a pre, where would we end then in terms of net profit? We are now at EUR 200,000 reported net profits. Could we add EUR 50 million back on that, or is there also a tax issue?
No, no. We needed to take out the profits from the first three quarters. Then we could add the EUR 1.9 million in dividends, and then we would add the impairment of EUR 10.3 million. And then we would add, again, this currency translation so that the net profit effect without tax would be roughly EUR 12.2 million. As I calculated, yeah, 10.3 plus 1.9 or 2, 12.2, 12.3 million. That would probably not drive a big tax effect as we have the tax shields from accumulated losses from the past. But I'm looking at my tax expert now. Yes, no. He said there's no effect. So we would end in a net profit of EUR 12.5 million, roughly.
12.5. That would be almost EUR 2 per share.
Yeah, that would be close to EUR 2 per share. 190, 190.
Yes. Okay. That sounds good.
Yeah, it would have been good, but.
Yeah, sometimes I mean, it's accounting. No, but it's more.
Vladimir, not accounting.
No. No, because in 2024, the profit from Gore-Tex will be missing, right? And which was quite strong in the first three quarters of 2023 with the EUR 3.2 million. And also what will be missing is the dividend paid. For how many months was dividend paid by Gore-Tex last year? Do you know? 10. 10 months.
11. 11. 10, 11.
That was more than a million, right?
Yeah, that was more than EUR 1 million. But that was not additional profit. That was cash flow then.
Okay. Then, regarding you mentioned Americas. That was, in the context of the other regions, a little bit disappointing with the good increase with 8.6%. But you said you have some more work to do. What do you mean by that in the Americas?
I mean, it goes into this what we call internationalization. I mean, we drove a very clear strategy over the last couple of years with structural changes, with process improvements. We implemented SAP. We implemented new engineering tools, new configurator, new sales processes, new production processes, and so on and so forth. And we have some issues in our internal organization in the U.S. with really driving performance. And yeah, we now concentrated in the last months on Asia-Pacific and made significant progress there, and we will be addressing the U.S. this year.
Okay. And the Asia-Pacific, it's mainly LNG business. Is that right perception?
No, no, no, no. No, no. The LNG business is mainly coming from Europe. I mean, the strong players in the world are well known. It's Kongsberg. It's the number one in Norway for ships. And then we have multiple players for the plants. But we do have also strong LNG business or good LNG business out of the US, mainly for Australia and the US. But Asia, it's a couple of FPSOs, floating production units for the oil and gas. It's standard lighting for the petrochemical and the chemical industry. It's some pharmaceutical business. It's some LNG, but the LNG boom is not really taking for us, it's not taking place in Asia or to the customers, though.
I thought these ships are built there. In Asia, the ships are built there, aren't they?
No, no. The ships are built in Asia, but not the critical components where we are delivering to.
Okay. And what is this Modulbau in Asia-Pacific? You mentioned ships and Modulbau, which helped to increase Modulbau.
Where did we do that?
It's in the press information on the second page where you discuss the issues.
Let me let you, you are surprising me a little bit, also.
Sorry. I was reading it, and I thought, "Oh, what is this? Modulbau, yeah?"
I'm just looking into it. Ships on Modulbau. I think it's not a very good formulation. Sorry for that. I think it's these FPSOs, these floating production. It's actually platforms which are mobile, production platforms which are mobile, and you move it from one place to the other for smaller oil wells or smaller gas wells. And when you build that up, that's built in modules. Yeah, we have to improve that wording.
I'm sorry. This Accelerate, you mentioned it's EUR 2 million in Q1. Is that a pre-item?
No, we don't put it under the pre as we never defined that in that way. One could do it, but we discussed it, but we said we are not going to change the rules just to pimp the numbers.
Okay. And dividend will not be paid. That's quite sure, I think. But the discussion, of course, might take up speed again when we talk about result 2024, but that is a year off.
Yeah, yeah. I don't want to, we don't want to speculate on that. The dividend is being—I mean, you know that it's being paid out of the AG under the HGB. We have to look at the quality of our balance sheet, and then there are also rules and procedures, what you can pay, when you can pay, and those we have to follow.
The equity ratio still, you are aiming at 30%, right?
I think we are above 30% at this point of time. And I have no problem if it's going higher.
I mean, on the group level, it's 25%. It was 25% end of 2023. And the HGB level might be higher, yes. I think that's right.
No, no. HGB level is lower. On group level, we are definitely aiming beyond 30%.
Okay. Okay. Well, that's it from my side. Thank you very much.
Thank you.
Ladies and gentlemen, if you would like to ask a question, please press the star followed by one on your telephone. Once again, to register for a question, please press star followed by one on your telephone. There are no further questions at this time. I hand back to Dr. Mathias Hallmann for closing comments.
Yeah. Thank you, ladies and gentlemen, for participating in this analysts and investors conference. There will be no call for the final first quarter results, which we publish in May. So the next call will then for the first half year in early August on the 8th of August. And yeah, thank you for listening again and have a good time. Until then, bye.