Good afternoon to everybody, and hello. If there's hopefully no interruption, it might be due to the fact that I'm presently with customers in Southeast Asia. Let me guide you through our presentation as usual. The Q3 numbers have been published, and all in all, you see two things. You see a mixed picture. You see an improvement, which we're aiming for in this year as compared to last year, but not as good as we had initially planned for. It's a mixed picture. Let's start with the business performance at a glance. First of all, I think that it's very important news. We have successfully completed our EUR 500 million refinancing round, and therefore, we have certain consequences out of that. Mr. Kimmich will go in greater detail. We have also reported a weaker business performance in 2023. We have high inflationary pressure continuously.
The temporary increase in material costs gradually decreases. That is merging, as we had predicted it. Highlights for the first nine months in Q3 2023. First of all, there's some good news about the corrugated board market, which is growing, and we have had a very unique chance to sell several machines to one of the largest corrugated board manufacturers, which is also a good stamp of approval for our methodology, for our machines, and for our business concept. More to that later. Something which we consider to be very important, our vocational school is one of the Bavarian Climate Schools of the Future. That is important because attracting young apprentices is our key against the lack of skilled workers. Everything which makes us and also our vocational school more attractive is very helpful. In Radebeul and in Mödling, we have had anniversaries.
The nine-month figures. The revenue grew 10.6% after nine months in all segments, but the Q3 revenue is down by 6.3%. More details from Stephen Kimmich. The EBIT improved by 30% after nine months. Unfortunately, to again, EUR -2 million instead of a positive agreement. Compared to the last year, it has slightly improved. The EBIT decline in Q3 went from EUR 10.8 million to EUR 3.3 million. That is where we are. The segments in the nine months. In the Sheetfed segments, we see a decline in customer demand in Q3. In contrast, we see a significant increase in order intake in the Digital & Web segment. The Special segment is, as we pointed out many times, good and robust, but we have governmental delays in actually ordering machines. We'll come to that later. Outlook.
For 2023, we project a revenue of roughly EUR 1.3 billion, which is in line with our guidance, accompanied by an EBIT between EUR 25 million and EUR 35 million, and confirm our medium-term guidance. The guidance for 2024 and 2025 will be specified in greater detail when we have the full-year figures for 2023. Now, let's break down these numbers in greater detail. I hand over to Stephen Kimmich, our CFO.
Thank you very much, Andreas, and also welcome to the conference call from my side. Thank you very much for joining. On page three, you see just at a very high level, the overall trends of the business. We had, again, a strong revenue period with EUR 294 million, but that was combined with a mixed picture on order intake. We still continue to have a strong order backlog, with a book-to-bill just under one for the third quarter. Within that order backlog we had, and you will see later, a very strong performance in Digital & Web with our new businesses and a weaker performance in our Sheetfed business for that segment. Our EBIT, which was also disclosed as part of our ad hoc communication last week, at EUR 3.3 million, for the single quarter, below what we had initially expected for the business.
That I will go into in more detail later. Overall, for the full year, after nine months, we are slightly ahead of the prior year. Based on our new guidance, you can still expect a strong Q4 from Koenig & Bauer. More on the figures later in the presentation. On page four, if we move into the first highlights, as a CFO, it is always pleasant to announce that we successfully completed our refinancing. As many of you may be aware, the financing of our revolving credit facility was due to end at the end of 2024. We had decided earlier this year to target a refinancing before the end of 2023, so that we, of course, had long-term liabilities in our books at year end and are able to secure the financial future of the company.
We have successfully done that, and the new revolving credit facility of EUR 300 million in a revolving cash facility and EUR 200 million in a guaranteed facility is now finished and has a runtime of five years. We have the option in year one and year two to extend for an additional sixth and seventh year, that we, of course, will aim to do, assuming the business continues as we are currently on track, and therefore we have a financing plan through 2030. The good news for the capital markets and for our shareholders is that the restrictions that have been in place since 2020, due to the participation of the German KfW Bank, which is a state support of the business during COVID, those restrictions on things like dividends and share buybacks and other topics are now completely released.
We are back to the freedom to operate that we had prior to 2020. Therefore, also you can be expecting, in the future, a return to a dividend policy, that we will also communicate at an appropriate time. Overall, we are very happy with this step and with the support of our banks that we had over the last six months, and look forward to then financing the future growth. That being said, I will hand back over to Andreas Pleßke for the remaining highlights before we move into the financial figures.
First highlight, Saica, one of the biggest and most important corrugated converter, purchased six machines from Koenig & Bauer Celmacch and Koenig & Bauer U.S. this year. These six new lines will go into operation in summer 2024, and then progressively after that. It will be four ChromaCUT X Pro and two ChromaCUT High Tech. The real important thing about that is why did this customer select these machines? Because of the technology. It is, first of all, the latest technology which we can offer inside-outside printing in a single pass, this dual side printing allows a significant increase in efficiency and a significant reduction in production cost. Also, they find it, the right decision for a big group to have the same technology in their several factories for a combination of knowhow, of education, of spare parts, of operating.
That is something which we expected from big groups. If they decide our technology is good, then they roll it out through several plants. Especially in the corrugated world, that is a very, very good sign of approval to have this big order from one of the most important worldwide players. On the next page, we see that we have been awarded as vocational school as a Climate School. You see our minister in Bavaria, together with the head of the school and other people. This Climate School is awarded if we internally make steps to reduce CO2 savings and internally organize our school, but also, if we provide our students with the skills which they need to shape the future sustainable and make climate friendly actions.
We basically, it is also about giving our apprentices the skill set, which they later on in our factories need, to push our sustainability agenda. This was quite a big step, first for the existing apprentices, which are very proud that they are there now, but also as a matter of attractiveness, for the next round of hiring young people. Being a Climate School has an extremely high attraction, especially, among the very young generation which we address here. The next highlight would be that we have two anniversaries, one anniversary of 175 years in Mödling, and one of 125 years in Radebeul. Besides that, these anniversaries prove that, a company like ours, has the power and the management skills for constant metamorphosis as we may, again, use our buzzword, otherwise you are not around for that period of time. There is also something else behind that.
Mödling, we constantly evolved into the center of banknote machine printing, whereas before, that was in three locations, more or less, in Würzburg, at Mödling and in Lausanne. We now focus to have that eventually concentrated in two locations. That again has mainly to do with synergies and cost saving and also to have the knowhow in one place. This is also why everybody is beaming, in Mödling because everybody is quite happy to be with us in the future of this special banknote business. Koenig & Bauer in Radebeul has had its 125th anniversary, and it is amazing what this company went through, from before the First World War, through the First World War, through a horrid time in Germany after the war, and then, again in the split Germany and being acquired by us in the 1990s. It is something which makes also the people there quite proud.
Why do we make these celebrations? Basically, also to be an attractive employer, to give our employees a good identity with the company and to give our employees the confirmation and the stability that this company is in for the long run. That's why we always make a bit of a hullabaloo around it, which makes everybody proud and happy. From proud and happy, which are nice words. Back to the mixed message. That's the nine months in Q3 2023, with highlights and medium lights, I would call it, and not so medium lights, and I hand back to Stephen Kimmich.
Thank you. On page eight, we dive now into the first figures at the group level. On the top line, on order intake, we see a continued reduction year-on-year at EUR 831 million of total order intake compared to prior year. That being said, we did have an uptick overall in the group in Q3 at EUR 278.4 million. At a group level it was strong, but when we look in the individual segments, we see it, of course, it's a very different picture among the various businesses. Overall, the downward trend of order intake that we have been seeing the last few quarters continued across various businesses, and we'll talk more about that a little bit later. On the sales side, we see the expected increase. Sales revenues are up for the full year now by 10.6% at EUR 891 million.
For the Q3 itself, we actually had a slight decrease in revenue compared to the same quarter last year from EUR 314 million down to EUR 295 million. This is important to understand because the downward term is coming from two segments, whereas one is showing revenue growth. I will get into more detail a little bit later. Order backlog, as mentioned, in our opinion, still strong at EUR 891 million. We will be starting Q4 with a higher order backlog than two years ago, 2021, for example. Of course, we expected a book-to-bill under one for this year. We've announced that many times in the past that a book-to-bill under one should be expected, and that's what we're seeing. But at EUR 891 million, still a robust order backlog in the various businesses. That's the top line.
On page nine, you see that on the bottom line, it's a very different and mixed picture. We see despite the increase in sales of roughly up to EUR 891 million, we see only a slight increase in our operating performance or operational EBIT at EUR -2.1 million after nine months. Of course, and we've talked about this last week in our ad hoc, that we were expecting to have a stronger Q3 than what we did have. That was also connected with our expectation for Q4, one of the main drivers for our downward revision of our earnings expectations for the full year. Why is this happening? We still see, of course, a positive effect from our volume and sales revenue, roughly EUR 10 million. Price increases, as we had expected, are roughly compensating all of the inflationary effects.
This is a picture that we have also been expecting to see over the last quarters, more or less in line, EUR 19 million of price increases, covering EUR 20 million of inflationary impacts, whether that is material or energy or personnel costs. The main challenge that we had in the first nine months, and particularly in Q3, was that, as we will show in a second, as we begin to execute more orders in Digital & Web across the four different product groups, so RotaJET, HP, corrugated, and Flexo, we now have more orders now in execution and have startup costs and ramp-up costs associated with those that were not planned and are now having to be managed so that going forward, we get the product costs or the manufacturing costs where they were intended to be.
This was an unexpected negative impact on our P&L in this year and one of the main drivers for our downward revision of the full-year guidance. Also, here we can discuss more later. If we look at more detail on the income statement on page 10, we see again the increase in revenue. We see also a corresponding increase in gross profit, although this EUR 22 million of gross profit improvement is also slightly less than what we were originally expected. On the R&D side, and distribution cost side, we see, of course, on the amortization of our capitalized R&D costs, which were capitalized in prior years, are now in amortization, which is the same picture we saw in Q2 and Q1. Distribution costs under IFRS, of course, also have a strong variable component with sales provisions and outbound freight that is linked also to the higher sales.
In addition, across all three posts, so R&D, distribution, and administrative costs, we have the annual salary increases for staff in those areas that are now having a full-year impact, roughly in line with what the tariff increase was from the labor unions. Otherwise, the main topic, at the EBIT level, at EUR -2.1 million compared to EUR -3 million last year, showing only a minor increase and certainly less than what we had expected, but still roughly EUR 1 million better than the prior year. Of course, interest rates have increased. We are all aware, with similar net financial positions that we saw in the previous quarters. We now have EUR 13.1 million of interest rates on our bank debt, income tax expense, of course, with losses, and driving overall net loss for the period of EUR -12.2 million.
If we move to page 11, a high-level picture on cash flow also here is a similar picture to what we have shown in the previous quarters. Our net working capital reduction plans are fully started and showing the first impacts. Still a lot of work to be done on net working capital in the coming quarters, moving also into next year. We did, compared to Q2, have a sequential improvement in net financial position. When we published the figures three months ago, we had a net financial position of EUR -135 million, now at EUR -119 million. A slight uptick, which is also something that we had predicted when talking to you last quarter. Overall, due to the losses, and we had a slight reduction in our equity position at 27.2% compared to 29.2% last year.
On page 12, you see that net financial position reduction in our cash flow statement. The good news is also on our gross cash flow, so cash flow from operations, we did see a EUR 7 million uptick from EUR 23.6 million to EUR 30.5 million at the same time last year. This is good news, again, showing that we are heading in the right direction, even if the step up is not as high as we would have hoped for. The main factors driving our cash flow is net working capital and investments at EUR -34.5 million are actually as planned, roughly in line with depreciation. The main topic we have here is our net working capital management and then, of course, the change in financing and interest rates that are continuing to put pressure on cash flow.
Overall, a slight increase in our operational performance at cost cash flow level.
On page 13, you see on the balance sheet, there is no major highlights to point out. You see, as shown also in prior quarters, the strong increase in inventories from EUR 426 million at the end of 2022 to EUR 537 million at the end of September 2023. This is one of our major tasks now is to reduce inventories as we react to the market downturn and execute the orders in our order backlog. We expect these numbers to come down, and that is something that we have been working on throughout the summer months and in Q3. You can expect to see the improvements in future quarters. Otherwise, there is no major highlights to discuss on the balance sheet. You continue to see the strong equity at EUR 309 million, even if it is slightly down compared to the end of last year.
Page 14 is perhaps the most interesting one then to present because it shows the very different picture that you see across the three segments. Sheetfed with a revenue increase of nearly EUR 80 million compared to the same time last year. EBIT improving by EUR 8 million, which is a strong step in the right direction for Sheetfed. Looking only at the first nine months shows improvement. I think the key figure that has received a lot of attention and is the order intake in Sheetfed in Q3 was weaker at EUR 112.3 million. You see on the right part of that graph, a disappointing quarter on order intake. We are seeing a softening in, particularly in the packaging markets in some of our products, and you see this in our order intake. What this means for next year, we will also discuss later.
Overall, EUR 505.9 million of order backlog is clearly a negative development in that segment looking forward to next year. Operating performance this year, still showing a step improvement compared to last year. Digital & Web, also a very mixed picture. We, on the one side, have these large cost issues that we just showed in the EBIT bridge. We had announced already in Q2 that we were fighting with increased startup costs and ramp-up costs on some products. This continued in Q3 to an order of magnitude that we now pointed out specifically in our EBIT bridge. On the cost side, in the ramp-up of the products currently in execution, we are having to manage it and work to bring our product execution back down to the levels that we expect it to be at. That is the bad news on the one side.
The good news on the other side is that we're starting to see clear improvements in order intake. The trend of improved order intake on those products continued. We had a very strong order intake quarter in Digital and Web at nearly EUR 60 million. We now have an order backlog of EUR 143 million at the end of September, which is nearly 80% higher than what it was at the same time last year. Order backlog, order intake continues to move absolutely in the direction that Koenig & Bauer has been working so hard for the last years, and that we've been talking about with the capital markets the last really several years. Order intake Digital and Web is one of the key success factors for the future of the company. This is definitely heading in the right direction.
The flip side is that the orders that we're executing are not being executed as efficiently as we had hoped. We can certainly talk about this more, but the short answer is that we are simply working on four different products, RotaJET, HP, Flexotecnica, and corrugated, bringing in new versions, new technologies. This is not yet in a serial production where we are as efficient as we need to be. Even the RotaJET that has been talked about for, of course, several years, particularly in the decor segment. We're in the middle of implementing RotaJET in three or four new business segments, which are different versions of the machine, different adaptations, and simply require more efforts at the startup phase than what we anticipated. Again, Digital and Web, on the other side, clearly headed in the right direction. The products are being received well by the market.
You saw it in our corrugated Saica order that was in the highlights. On top of that, also several RotaJETs, several HPs, several Flexo machines making up this order backlog at the end of Q3. Special, also a mixed picture. We clearly still see a slow development on order intake. Here we can talk about more during the Q&A sessions. The order intake in banknote is slower than what we had expected during the middle of the year or even at the beginning of the year. Those are not orders that we've lost. They've simply been pushed back. The decisions have not been finalized or the contracts have not been finalized. The down payments have not yet been received that we can execute them and bring them into sales and generate EBIT.
Overall, we're still confident the business is heading in the right direction. We're unfortunately, however, not better than last year. We're roughly in line with our last year performance in Special segment, whereas we would've expected to show a year-on-year improvement at the end of Q3 that is just a slight EUR 300,000 improvement driving earnings in that segment. That's a very high level summary of the various segments. A mixed picture. The overall mixed picture when we reviewed our Q3 preliminary results and based on the Q3 preliminary results, discussed our forecasting with our business units for a full year. We arrived at the clear conclusion that the original guidance of EUR 39 million or 3% on EUR 1.3 billion EBIT was not going to be met. We see our full year EBIT slightly lower in a corridor between EUR 25 million and EUR 35 million.
The corridor as mentioned on our ad hoc is because some of that EUR 10 million range is dependent on specific order intake that we expect to receive through year's end. If the order intake comes or doesn't come, we'll move the needle more towards the lower end or the higher end of that corridor. Overall, this mixed picture led us to the conclusion that we had to slightly revise downwards our EBIT corridor, which is of course, always disappointing for a company or for the capital markets. Even if we take the middle of this range of EUR 30 million, we talk about a roughly EUR 9 million reduction in our earnings outlook for the full year. What that means for 2024 and our 2025 guidance is something we're not going to comment on today.
Clearly, the macroeconomic environment has gotten more difficult in the last six months instead of easier. We are in the middle of our planning process for the next several years and will, as typical, when we publish our full year figures for 2023, either in February with preliminary figures or no later than the balance, the disclosure of our full year results, we will update our guidance for 2024 and 2025. The third comment on this slide is that we confirm the midterm guidance even if we fully understand the gap between where we are now and where we expect to be in the midterm is a large gap.
The underlying business development and market development, if you ignore the temporary downturn that we're currently seeing, we're still convinced that the markets we're addressing, the products we're bringing to the market and the businesses we're developing are heading in the right direction and will bring us to this midterm guidance. We're just going through a very difficult storm at the current time and need to get through it and get back on track towards this midterm goal. That was all from my side. A quick walk through the Q3 financial figures, and I would hand back over to Andreas for some closing comments before we move to Q&A.
Yeah. The closing comment would be yes, we have a mixed picture, but yes, our strategy, especially in the growth market, works. There is growth. We're hit in other areas, what we now will do and need is of course a strict cost management to achieve improvement. The general course of our business models is something which we will push combined with good cost management. We just have to deal with that situation, and we will deal with that situation. That was the presentation, and I think I hand over back to the operator now.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star one at this time. Our first question comes from Stefan Augustin from Warburg Research. Please go ahead.
Yes. Hello, gentlemen. I start with two questions. The first is actually on the refinancing. I would be interested if the refinancing has covenants, if there is any one-off costs due to the refinancing to expect in Q4? And if the run rate, let's say, or the implicit running cost of the financing, is it fair to extrapolate Q3 times 4 in thinking this might be the right terms in looking for the financial result?
Sure. I take that question. First of all, covenants, of course, we have covenants. They're typical covenants similar to what we've had in the past for debt capacity and equity ratio, et cetera. Nothing dramatic. It's a similar, I'd say, market standard for this type of facility that of course you have covenants that you have to keep. The second part of the question was on one-off costs. You can't expect a significant charge in Q4 that will be part of the large part in the financial result in Q3. The refinancing was also done at a market condition. We never disclosed the interest rates or the margin grid of our previous facilities, and we're not going to start now. We're very happy with the conditions. We have basically stayed at the similar levels to what we've had in the past.
A EURIBOR plus X, and the X is just simple risk premiums for our industry. We're happy with the conditions, and they're similar to what you've seen in the past. Any assumptions you would have made in the past on financing, they're absolutely still valid with the new financing. There's no major shift. Which is good news. There's also maintaining risk premiums as we've had in the past, despite the clear increase in geopolitical, macroeconomic, and market risks, is something that we're quite happy that we've been able to achieve. Again, summary is, without getting into too much detail on the conditions, similar to what we've had over the previous years at Koenig & Bauer. No major changes.
Okay. The next one would be, you outlined a little bit on the order intake Q3 in Sheetfed. You see some softening in some products. I would be interested in what is the analysis on the Q3 order intake. Is that a little bit an outlier? Is it really something that you would see to continue around that level? Is that a Q4 pickup? How do you see the world, and where have you seen the softenings?
Perhaps I can start, Andreas can expand on my answer if he'd like. We don't have a crystal ball, nor does anybody. The markets are clearly softened. Whether Q3 is the absolute bottoming out of that weaker order intake, we won't know until the quarter's over. We see it's a different picture throughout the world. We see America is different than China, is different than Europe. It continues that Europe, particularly Germany, is the weakest of our markets. When you head into other regions, the uptick seems to be either earlier or faster. We see differences among our businesses. As you know, we are very strong in large format and not just in medium format. We do see that the higher capacity increases, which a large format decision is, to increase capacity significantly, not just moderately to a medium format machine.
We do see that the trend in large format is more down in Q3 than in the medium format side. It's a different picture across our products and across the businesses. Of course, we expect an uptick in the near term, whether that's Q4, Q1 or Q2, nobody knows. It's a very volatile market. Andreas, if you want to expand on that or?
I think I would expand on that. Well, for Digital & Web, you have said it, we don't have a downswing, we have an upswing. For Special, which includes as a driving factor, banknote. I would not think that there is a swing in the economy. What we have here is one of these awful banknote things where you have to keep your nerves, where many of these orders, which we expect in Q4, which we would then immediately park, which would lead to a sizable EBIT proportion. These orders, many of them, it's quite clear that they'll be placed, it's quite clear who they are placed with, it just sometimes takes countries a while, to execute on the implementation, therefore they shift. I wouldn't call that the pipeline has changed.
It's things which are at the very top of the pipeline, which have shifted for so-called in-country reasons, is not that these things will be canceled or don't take place or that there are political situations where they fall out. We don't expect that. We expect more or less, in general, a shift in months. That is not in years. That is especially harmful if it is at the end of the year and you have to make a forecast. That's where we are there. There, I would say that the business model and the so-called, what I always call the robust order pipeline is not affected. It's just the good old banknote.
Thank you for these explanations. I think, or I can answer myself the question at least half. A lot of the orders we see in Digital & Web obviously could not really be substituted by Sheetfed orders. For the portion where this might be possible, I just wanted to confirm that you do not see any, let's say, cannibalization effects on the Digital & Web side, on the Sheetfed side.
That's right.
No.
No.
Okay. It's different markets. [crosstalk]
The customers which we have these days for the digital machines or for flexo, are not cannibalizing on our digital strategy for Sheetfed or Flexo, and corrugated is its own planet, and there is, as today, not a big cannibalization between the corrugated and the cardboard market, as in the substrate with which you make boxes. That is not visible, I would say it that way.
The last question from my side would be, can you outline more or less in more detail what exactly you are planning to do to reduce the costs on the Digital & Web side?
You're raising your finger, Stephen. Please go ahead, by all means.
No, no. Go ahead, Andreas. It's okay.
Let's say there is short-term swings, short-term swings affect flexible costs or variable costs, which are material and personal. Material is one thing. Of course, we reduce that according to order entry. Personal, we have several instruments to swing that. Some of these instruments are instruments which everybody has, like short-term work, if that needs to be. Some other instruments are instruments which we have negotiated after the COVID crisis. That means that we have some flexibility to reduce the labor hours in our factories according to demand, over and beyond whatever government programs we might have. To counterbalance swings in variable costs on material and personal, we believe we have the instrument at hand.
If it comes to cost management, as in the cost overruns, which we had in the runoff of many of the new digital web products, I think Stephen mainly answered that. We have products out there which we have repetitively sold, where we do not have the issue of runoff overruns. We have many new products in film, in book, in folding carton, liquid packaging, with different adaption to customers, where we are not yet in the kind of a small series level where we have these cost overruns. We will manage that so that once we come into a small series level, these costs will become more predictable and fall. If it comes to any other costs, there is the, let's say, the typical set of what management can do. In the past, what we had announced is major programs like P24x.
Any programs which are not large, we so far have not publicly announced.
I would just reinforce what you said, Andreas, on Digital & Web, that the key challenge that we have been facing the last six months, as mentioned in Q2, we already had mentioned that we were struggling with higher costs. The key challenges is that we are bringing a lot of new products into the market, and we have five different product groups in Digital & Web, but it is really three new ones. The RotaJET, the corrugated family, and the flexible packaging machines. Flexible packaging machine is also new because we just finished transferring to Würzburg from our plant in Italy. The first machines coming out of the factory were kind of mixed machines between Italy, half Italy, half Germany. We started doing more in our German factory and started doing more. But the machines that we have been bringing into revenue were simply not efficiently manufactured.
We already see that we are seeing improvements as we now move into the next machine, the next machine, that the supply chain gets now fully moved to the plant here in Würzburg. That we are already seeing improvements. We just have to keep pushing. That product group has simply been in a volatile situation during this transfer, and it has to settle down. For corrugated and for RotaJET, it is similar to what Andreas just mentioned. It is not about just selling the next, and the next, and next machine. We are selling new versions. We are selling new applications. RotaJET has been successful in the decor market, but now it needs to be successful also in these other markets we have introduced it to for book printing, for film, for liquid packaging. We are always better on the second and third machine than on the first.
Right now, we just installed the first machine for folding carton. We just installed the first machine for film. We're just in the process of installing the second one for liquid packaging, but also that second machine is completely different than the first machine from liquid packaging. We're still on this startup. Call it the startup learning curve that will have an end, because the amount of new applications is finite. As we move into a more serial production, we will bring costs down. The question, of course, that you'll ask is when, and that's something we're working on every day to make sure it happens as fast as possible. It's a big task, and we're managing it.
Maybe a little bit on Q4 and Q3, the consistency of the Digital & Web order backlog. Are there a couple of RotaJETs in there, and how would you see that Q4 demand for Digital & Web orders is going on? Have you already seen quite nice elements, say up to date in the quarter, in October?
What I can confirm is that Q3 had products from all of our product groups. We had HPs, RotaJETs, corrugated, and Flexos. We sold everything in Q3 except for newspaper, which is good. That's the good news. We've now had several quarters of Digital & Web where all of our products are being sold to customers. Will it happen again in Q4? Again, I don't have a crystal ball. The clear trend is, yes, we're heading in that direction, that we can expect order intake in all of our core products in every quarter. That's why we said we're heading in the right direction. Again, I won't comment on the details of Q4. I will say that in October, we've again had order intake in multiple product groups.
Okay.
It's heading in the right direction.
Right. Thank you very much.
Our next question comes from Florian Sager from Stifel. Please go ahead.
Hello. Good afternoon. Can you hear me?
Yes.
Yes. Perfect.
Yes. Okay, perfect. I have three questions. Two are on Digital & Web. The last one is on the medium-term targets. Maybe on Digital & Web, could you maybe give us some more color on when you intend to break even? I know it's been difficult to paint a picture here in the past, maybe there's something new you could tell us?
[crosstalk] We have clearly announced that the 2025 guidance that we had previously published, 6%-7% EBIT in 2025, was only possible in connection with the break-even Digital & Web. That was our target, was achieving break-even for Digital & Web in 2025. Whether that's still possible is something, again, we're going to announce in February. It's a mix of market effects and these cost topics we just talked about. We're on path to break even at Digital & Web.
Okay. Thanks. You currently do have higher costs, particularly for startup costs for your new machines.
Yeah.
I would assume that these will just go away as order of things.
If you leave.
My concern is that may. Yeah, go ahead. Sorry.
Sorry, I didn't want to interrupt you. Your concern was?
No. My concern was that maybe competitors that also invest in digital printing may force you to continue to invest in new digital printing machines, prompting constantly higher costs. Does that feel justified, or should that be of concern?
The first question I would like to answer. You say they will just go away. The just includes a lot of management, but the real point is the pricing okay? Do we overshoot our production cost in series and therefore we don't have proper pricing in the market? Do we overshoot our costs because of this many new adaptations of the machines are number one or number two, and we don't have a serious process yet, and we don't have stable costs yet? If that is the case, which is our analysis and which we see, yes, these initial costs will go away, and therefore, generally the pricing and the expected gross margins are okay. Secondly, since that is the case, we keep selling these machines at, let's say, a price level.
It is not exactly a market price level because in many markets there is today, no real comparable competition. It's not like a medium format offset machine. There's a lot to be discussed between machine one and two, I do not see massive market entry in our industrial digital business models in the near future. It's the same old. We have one company which has left the industrial size digital machines some time ago for strategic reasons. I'm talking about our size, industrial size. There's another company which is a profitable company, which is not yet, let's say, in, but they're working on it. It's a small world. I do not see any other major market entries in the near horizon. When we speak to our customers, our position is either quite good or, with the RotaJET if the application is right, is quite unique.
Okay, thanks. The last question would be on your medium-term targets of EUR 1.8 billion in sales and your margin of 8%-9%. I understood it that way that you didn't really clarify a timeframe for that. It's post 2026, I assume. How do you intend to achieve this? Could you give us more color on this? I'm just looking at the performance over the past couple of months and just trying to wrap my head around the numbers.
Sure. It's something we clearly have to committed to this or we reconfirmed our mid-term guidance and, of course, we understand there's some skepticism on how do you get from 0% to 8%-9%. In mid-term, we never put a year on, but typically four or five years in the future. The answer is always the same. The 6%-7%, what we need to achieve 6%-7% is break-even Digital & Web, and our banknote business and Sheetfed business at historical levels they were pre-COVID, and then we'll be a 6%-7% company. The difference between 6%-7% and the 8%-9% is our new business models, which we've talked about in the past.
We are expecting digitalization efforts and consumables in the ink business, et cetera, to help drive higher margin quality going forward at the end of that five-year timeframe. That ink consumables on digital printing and digital business models will contribute to that gap between the 6%-7% and the 8%-9%. That's the background of our assumptions, and of course, there's also a slight uptick in volume up to EUR 1.8 billion. There's also a margin effect from the core business on top of those margin quality improvements in the new business areas. That's the answer, and we'll continue to communicate that as transparently as possible.
Okay. Thank you. Makes sense.
The next question comes from Jorge González from HAIB. Please go ahead.
Hello. Good morning. Thank you, Dr. Kimmich and Dr. Pleßke, for taking my questions. I would like to start with two clarifications, please. Regarding the financial course of the third quarter that my colleague already asked, but I'm not sure if I get it right. You already had the extraordinary cost for the refinancing during Q3? That was your answer?
There won't be any material effect in Q4. That was the answer. Yeah.
Okay. If the assumption was that the debt was flat, that obviously it's not, but these levels could be the run rate with fixed interest rates, with fixed debt. I mean, it's nothing extraordinary in Q3?
No.
Okay. Regarding the order intake, there were some interesting comments, and also putting those comments in context with the range of the guidance. This almost EUR 10 million difference between the low end and the high end, I assume is all explained by the banknotes order intake for the fourth quarter. Making a quick number, it looks to me that it could be a big order now that we are talking here of more than EUR 40 million or even EUR 60 million, something like that. Is this correct? You are waiting for being able to book a very large order, or not necessarily is the case for the fourth quarter?
I think the answer is that very large is a question of definition. Every banknote order is easily in the higher one million digit figures. Occasionally in the lower two digit million figures, even if it is not a large order, as you might have remembered from Egypt, which was a very large order. If a normal banknote order, which by definition is a large order as compared to all the other machines which we sell, which are not in that region. If a banknote large normal order, which is large, gets delayed and has a certain level of, let's say, already existing components and groups, and we cannot POC that, then the EBIT swing is significant. Since we POC, the EBIT swing comes with order entry, not as in Sheetfed, let's say eight or nine months later.
If one or two, or two and a half or something, normal banknote machines are ordered a few weeks later or a few weeks earlier over the end of the year, that is already the possibility that the EBIT swings several million back and forth. It is not limited to banknote. It's a general assessment that we have in taking all the risk and chances. The wide swing has a lot to do with that. Stephen, do you want to add something to that?
No, it's okay. I think you answered correctly. One banknote order will always have an impact on profitability immediately, and that's the main explanation for the large range we continue to have on the EUR 25 million-EUR 35 million. Your assessment is correct, with the exception of the EUR 40 million, we don't confirm. It can be a much smaller order that would still, in our world, be a large order, but not EUR 40 million. Could still have an impact that's relevant in that range.
Okay, I see. I understand. Sorry, Dr. Pleßke.
No, go ahead. I didn't say something.
Okay. No, because I see that the order backlog for Special this quarter is below the last four or five years for this time of the year. Obviously, after your comments, it could be in part or completely related to this situation. Is this, in any case, creating some kind of concerns from next year for the Special or with the backlog you still have, this will not be a great change in terms of what you are planning to book in the following quarters. I mean, it's going to be much difference, these orders that you are expecting to come at some point? With the backlog at this point, you still have good visibility for next year? In Special, I mean.
Let's, for a moment, assume that the largest business in Special is banknote and not talk about the three others. That's dominating by clearly. In banknote, it is very, very difficult up to impossible to make projections of order entry per quarter, not even to talk about per month. The orders which we now look at, and some of that are the reason behind the spread of EUR 10 million. These orders, as I said before, are not orders which are normal pipeline orders, where we have great hopes and we want to speak with the customer soon, and we think he will like our machines, but they are very much at the top of the pipeline, but they are not yet legally an order entry. They are very much at the top of the heap. There are some decisions outstanding to implement a legally valid order.
That in governments is unpredictable if that takes months back or forth. Therefore, the swing over the year-end date can cause this spread of EBIT forecast which we have.
Okay. Finally, from my side, Dr. Kimmich commented that Q4 is expected to be robust. In this regard, you are expecting, taking a Special amount out of the picture, you are expecting a quarter very similar to last year, maybe slightly above. That was obviously last year was a strong end of the year. You are expecting something different, even much better? Looking into the end of the year, I think you will need Digital to deliver more units in the last part of the year. This is an assumption that is maybe valid, that you are going to be able to clearly push forward the delivery of more Digital units in the last part of the year. Is it still going to be the engine of the results for the last part of the year?
I understand the question, as you know, we don't give segment guidance. The short answer to your question is our guidance corridor implies a Q4 between EUR 27 million and EUR 37 million of profit. That's slightly better than the Q4 last year and implies also a strong quarter across all businesses. That's what you can expect.
Okay.
I'm not going to go into details on specific segments.
Okay.
I think we only have one minute left, there's one more question in the pipeline, if that's okay?
Thank you very much. I go back to the line.
Thank you.
Our next question comes from Patrick Speck from Montega. Please go ahead.
Yes, good afternoon, gentlemen. Thank you for taking my question as well. Maybe a quick one to follow up on your comment on the cost-saving measures you already made. Could you quantify the effect you expect coming from it for Q4 already maybe, or at least the upcoming quarters?
No. I understand the question, but again, that goes into too much detail, the measures, of course, now being implemented. We have predictions, we have assumptions, but we're not going to put a number on that for Q4.
Would it be more a headwind or a tailwind for Q4 already when you implement these measures?
Of course. No, it's certainly more of a tailwind. The measures we're implementing will help Q4 and not hurt Q4.
Yeah, okay. Maybe in the short term it might run. Oh, okay. Another one, a quick one, if I may. Your development against the market in terms of orders, despite the strong increase in Digital & Web press, There was a slight underperformance against the market. Despite your state-of-the-art technology. Is it more a base effect or do you see any other structural reasons for that?
Not really. I think we can mostly comment on our company. Comparing things is sometimes difficult. We see the weakness of our order entry in Q3. That is a clear situation. Comparing things is very difficult. The split up of segments which we have is different than other companies might have, but the business model, the products might be different. It's difficult. We analyzed that we had a weakness in order entry in Q3. I think we said a lot about that, and that's besides in the world of mixed message, the bad of the mixed messages. It is very difficult to flatly compare, as we have to do our own homework.
Okay. Understood. Thank you.
I would add one small comment. If you look back over the last two years, we outperformed our many peers and the VDMA benchmarks throughout most of 2022. Our starting point in the year-on-year comparison was also higher. If we look at just VDMA benchmark for printing industry, the overall market was at - 19% Q3, and we were at - 16%. Sorry, vice versa. The overall market was at - 16% and we were at - 19%. Slightly worse than the market. If you look at the VDMA benchmark, you're accurate. Again, if you look back 12 months ago, we were outperforming the market. The drop in a percentage is, of course, higher. Overall, it's just one example, one benchmark. Looking at our total order backlog, we're not dropping into the deepest valley of everybody.
It's just a negative trend.
Understood. Thank you, Mr. Kimmich.
Gentlemen, this was our last question.
Next question will come from Mr. Reeves. On telephone.
I'm sorry, we don't have Mr. Reeves on the line. His line.
Okay.
Has dropped off.
Okay. I think we.
Any closing comments?
Andreas?
We're through? Okay. Closing comment. Right. The business model, the strategy is the right one. We have homework to do. We have mixed messages. Some things work well, some things we have to get things in better shape. Stay with us. We're looking forward to our next conversation.
Thank you very much.