Dear ladies and gentlemen, welcome to the conference call of WashTec AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. I now hand you over to Dr. Ralf Kope , CEO, who will lead you through this conference. Please go ahead.
Thank you. Ladies and gentlemen, on behalf of the WashTec board with my colleagues, CFO Dr. Kerstin Reden and CSO Stephan Weber, who are attending with me the call. I would like to welcome you to the earnings call and presentation of the WashTec's group financial year 2021. Due to the pandemic situation, we are still not able to meet personally to our annual press conference. Therefore, we combine the annual press conference and the analyst telephone call in one conference call. Next slide, please. Before my colleague, Kerstin Reden, will present the figures of the business year 2021 and the outlook for 2022, I will give you some update on WashTec, present some achievements of the last year, including our digital journey. Stephan Weber will provide you with some customer project examples. Finally, we will have the Q&A session with the WashTec board.
Let me summarize our business model to take everybody on board. WashTec is the leading provider for innovative solutions for car wash worldwide. Our product range comprises all types of vehicle wash equipment, as well as the associated peripheral devices, wash chemicals, and water reclaim systems. As specialists in environment-friendly vehicle wash systems, we work continuously on innovations that contribute to sustainable mobility for today and tomorrow. WashTec also offers comprehensive servicing packages and digital smart service solutions spanning the entire product life cycle, including equipment maintenance, chemicals, equipment take back, financing arrangements, and operator management. Slide three, please. Certainly, you are interested in potential impacts of the war on WashTec. Let me put this topic first. We are following the war in Ukraine with great concern.
As an international company with roots in Augsburg, the city of peace, we condemn the war, and our solidarity is with all the people who suffer from this war and whose personal fate is affected in the most terrible way. Families of WashTec employees, like many others, are providing shelter to Ukrainian refugees. We have decided to stop business relations with Belarus and Russia until further notice. The business volume with Russia, Belarus, and Ukraine is below 1% of the revenue. We don't have own operations in these countries, and with the current sanctions on the Russian banking and currency system, all projects have come to a standstill. Summarized, the direct impact is rather small. Supply chains may be indirectly affected as indicated in the daily news.
Our task force continues to act proactive and will secure the supply chain with highest priority as already done successfully in 2021. Slide four, please. We can look back on a successful fiscal year. Our company generated revenue of EUR 430.5 million, with an EBIT margin of 10.66%. The return on capital employed is 25.8%. These figures are an impressive confirmation of our efforts to bring the company forward with processes and operational excellence as well as innovation. On behalf of the entire Management Board, we would like to thank all the employees for their dedicated hard work. We have surmounted these challenging times together as a team. The fact that the strong demand recovery would lead to supply shortages across all material categories in all industries was already expected from past economic cycles.
We were already prepared for this at the end of 2020 when we set up a task force to work with our suppliers and safeguard delivery schedules for our customers. This required us to invest considerable resources in procurement, commissioning, and development. A huge effort, but one that was necessary and largely successful. Part planning enabled us to deliver an installed system at our customers in Europe and Asia with the usual lead time. However, customers in the U.S. had to accept extended delivery times. Another area of increasing importance for our industry is sustainability. Our customers want future car washes to be environmentally friendly. With our automated car wash systems, water treatment, and Green Car Care chemicals, we already have the products for this today. We see it is our corporate responsibility to constantly improve this and to develop the market in this direction.
In the second quarter this year, we are going to publish our first standalone sustainability report. We present information about our activities and goals in terms of economic, environmental, and social sustainability. Slide five, please. We have also made great progress in the development of digital services. These smart services are based on our digital platform, mywashtec.com. We succeeded in both further improving existing services and implementing new ones. From people working successfully in the digital domain, we get the confirmation that our digital platform is a leading best practice example in industry. Digitalization also requires new business models. These are being worked on by top qualified employees at WashTec to identify the future potential of digital services. In the journal section of our annual report, we showcase a cross-section of our digital offerings, which are closely integrated with our digital machines and sustainable chemicals.
We have brought out new products for customers. These include our premium SmartCare product, which we launched on additional European markets. We have also fine-tuned our product strategy for North America. Based on the SmartCare platform, for instance, we delivered first machines for the North American market. These are currently being tested at our U.S. factory and with initial pilot customers. For the SmartCare platform North America, we have implemented new processes to achieve conformity with the American UL standards. With these processes in place, we can certify other products for the U.S. market more quickly. The market introduction of our Green Car Care wash chemicals has been very successful and well received by our customers. Today, more than ever, customers expect sustainable, environmentally friendly choices when it comes to car washing. In 2021, we continued the transformation of these recipes of our wash chemicals.
90% are engineered to meet the Green Car Care standard that satisfy the strictest green criteria and well above the legal requirements. The standard is continuously checked by the institute SGS procedures for compliance. Slide 6, please. As a company, we use data in many applications to drive process excellence. Here, an example of the Sahara dust cloud that emerged this month in Europe. In this example, you can see the correlation of the weather forecast of 15 March and the resulting wash figures for Germany. Our customers, the wash business operators, saw record wash figures in the regions for zip code 6, 7 and 8. The short-term orders were covered by our inventory and the production forecast was adapted. We had a weekly all-time high order intake in Germany and other countries affected. I now hand over to Stephan.
Yeah. Slide seven, please. At this place, this time around, we like to introduce you a little bit to our activities in the segment of car wash tunnels. Usually, we are predominantly known for rollover car washes. However, car wash tunnels has always been a part of our business field, but is gaining increasing importance in our portfolio, and we have, in the last year, managed to have record order intakes and order backlog, and car wash tunnels are a significant part of our current, all-time high in order backlog. On the left-hand side, you see a nice reference out of the U.S., an interesting project where there is a rollover next to a tunnel. In other words, both pieces of equipment from WashTec at a gas station.
Here, in particular, the SL1 is in use, which is a machine built in the U.S. and predominantly for the U.S. market. We call it the workhorse, a machine that can wash high volumes and is very reliable in its features and simple to handle. On the other side, on the top, you see a Waschpark, an excellent reference from Germany. Very interesting project as well. It's called IKL. It's based in Kaiserslautern, and this is the first time where car wash has been in combination with an inclusion project. In other words, in this car wash factory, let's put it this way, there is not only exterior cleaning, there's also interior cleaning, and we have been deeply involved in laying this Waschpark out.
There is also a nice testimonial video that you can find on our YouTube page about this, where the customer explains the experience that he has with WashTec over the entire project. Like I said, it's an inclusion project. There is quite a number of handicapped people working there in this wash park. On the bottom left, you can see that is our display at the November show, the ICA show, the largest car wash show in the world in Las Vegas, where we also had this time around high focus on wash tunnel equipment here.
In particular, we showed the SL-1, whereby we sold, sell both types of machines, the SL-1 and the SL-2, where the SL-2 is made in Augsburg and exclusively the SL-1 in the U.S., like I mentioned before. In the middle, you can see the TunnelTec. That is, it's another product of our range that is particularly designed for the automotive industry, in particular car dealers and car rental companies with a huge throughput. In this case, the cars are not pulled through. The cars are driven through this by specified operators in order to have short washing cycles and the maximum throughput of cars in these installations.
Also there we have, in the meantime, quite a number of orders in the U.S. in our backlog and already delivered quite a number of these machines. You can see in the meantime, with SL 1, SL 2 and Drive-Thru, we have a comprehensive range, and also wash tunnels are gaining importance in the portfolio of WashTec and Mark VII in the U.S. With this, I'd like to hand back to Dr. Ralf Koepe.
I hand over to Kerstin, who will present to us the 2021 figures and the outlook 2022.
Yes. Thank you. Hello, everyone. Let's go now into the numbers. Looking at the big picture, 2021 in all respects was a successful year. Firstly, in terms of revenue development, we bounced back from a COVID year, 2020, with a revenue increase of 14% up to a pre-crisis level of EUR 431 million. We have delivered in line with our ambition, a double digits adjusted EBIT margin that excludes a one-off gain of EUR 2.7 million from a waiver of a loan in the U.S. as a kind of COVID subsidy. Including the one-off gain, EBIT was EUR 45.7 million, more than double the EBIT we delivered last year. Adjusted EBIT was EUR 43 million, up nearly 70% compared to prior year.
Importantly as well, in terms of cash flow generation, we delivered a free cash flow close to EUR 35 million despite the volume increase in our business. Coming to the next slide to the revenue development by quarter. We started relatively soft into the year as a result of harsh weather conditions and continuing COVID constraints. Towards the end of the first quarter, we saw a significant order intake also coming from key accounts and decided to update our guidance from stable revenue development up to growth of over 9%. As I just mentioned, we actually exceeded the 9%. We had a step up in revenue of 14%. Looking at Q4, you can see a strong revenue performance. We had a very good business momentum across all segments and service and chemicals performed particularly well towards the end of the year.
In numbers, Q4 revenue was EUR 124 million, up 14% year-on-year. This is the second-best Q4 in WashTec history from a revenue perspective after Q4 2019. On the next page, we will find the EBIT development by quarter. We delivered in Q4 an EBIT of EUR 13 million, representing an EBIT margin of 10%. This is not the EBIT level we would like to see at such a high revenue level. However, we had to navigate through disrupted and challenging supply chains and did all we could to secure delivery to our customers. As a result, we faced not only higher material costs, but also some inefficiency, which then obviously impacted our margins. With regards to our own pricing, we have reacted quickly to offset inflation. The first pricing adjustment occurred in May last year.
The last pricing adjustment was in January this year. However, there's a time lag between higher costs hitting the P&L and higher sales prices reflected in revenue. This time lag is caused by three factors. By a significant backlog, then the gradual approach that we took with regards to our own pricing and contractual obligations. Until recently, before the war in Ukraine, we were quite confident that our pricing increases offset the cost increase. However, in view of the sharp increases in energy costs and also transportation, we have started to take further action. Moving on to the next slide. The product performance. We had a strong momentum in assistance sales and services, but as well in chemicals. In chemicals, we saw a step up and increase of 9%, and this despite the stable development last year.
In machine sales, including services, we grew 15% and are close to the pre-crisis levels. To summarize the main drivers of the good EBIT performance, please go to the next slide where we added EBITDA and EBIT bridge.
We have a problem. Can we just have a one-minute break, please?
Yes, of course. We will briefly pause this conference call. Ladies and gentlemen, please stay on the line. We will resume the conference shortly. Ladies and gentlemen, thank you for standing by. We will now resume the conference call.
Thank you, ladies and gentlemen. We had a technical problem. Now we continue. Kerstin, please.
Yeah, sorry. I was explaining the EBIT bridge. The EBIT bridge summarizes the main drivers of the EBIT performance. Please refer to the respective slide. The main driver, of course, was the revenue step up and also a better gross profit, which was mostly volume-driven. Selling cost increased, mainly because of higher freight. Expenses also in line with the volume increase. We spent more on R&D and worked in particular on platform optimization to use SmartCare and digitization. On the positive side, we could release a EUR 2 million bad debt allowance. We implemented a global action plan to improve collection of receivables. For completeness' sake, I added on the following slide an explanation, overview of one-off items, of the non-recurring items. In 2021, we realized a gain of EUR 2.7 million relating to subsidies.
In 2020, we incurred an expense, a one-off expense of EUR 4.6 million, mostly driven by an impairment. Now, I would like to continue with the performance by region. Going down that slide, we saw a strong recovery in Europe and North America. Asia-Pacific delivered moderate growth as they continued to suffer from lockdowns. In Europe, we saw a step up of 14% and in North America of 17%. In Europe, the recovery was driven by both direct business and key account business. A very pleasant development was here that direct business in Europe reached to pre-crisis level. In North America, the recovery of key account business mainly contributed to the strong performance. Including EBIT, please move on to the next slide. From a regional perspective, very strong performance coming from Europe, a plus of 15%.
Looking at the development in North America, we see a significant improvement compared to prior year. However, in terms of EBIT margin, the performance was not as expected. The company suffered heavily from the high inflation, disrupted supply chains, and had to deal with long-term contracts, which are harder to negotiate to update our own pricing. Asia-Pacific was finally back in the black numbers, and this without subsidies, thanks to, in particular, the good performance in Australia. A few words on the cash flow and net debt development. Please go to the next slide. Net debt at the end of the year was a positive EUR 4.6 million, meaning that the cash funds our bank liabilities is quickly achieved by a strong cash flow generation despite the business expansion.
Our free cash flow was EUR 35 million and close to the very good performance in 2020. On the next slide, the net debt bridge explains how we managed to do so. The increase in inventories and accounts receivables could be nearly offset by higher liabilities and mostly by higher down payments. In addition, investment was low, lower than we actually wanted. This was because of long delivery times. Once we released investments, that was towards the beginning of the second quarter, once we noted a significant order intake. Coming to the balance sheet on the next slide, a few comments on the KPIs which you see here. Firstly, on working capital in absolute terms, it increased, yes, with the recovery of the business. If you look at working capital as a percentage of sales, it improved.
There's a reduction of 1%, and this again is thanks to our global program to improve working capital, in particular receivables. With regards to inventory, we took a prudent approach. We did not engage too much in optimization here because we were more focused on securing our supply, so that the improvement mostly comes from better collection of receivables. ROCE increased to over 25% in line with our ambition. This came from strong EBIT performance, lower investments, and also a bit from the improvement in working capital. Equity was a bit lower than last year, but still very healthy with 37%, and the reduction relates to the dividend payout. We not only distributed net income but added a special dividend payment totaling then to a total payout of EUR 31 million.
For 2022, as already shared in our ad hoc release, we propose a dividend of EUR 2.90 per share, including again a special dividend of EUR 0.80 per share. This means that we propose to continue with our generous dividend policy. Coming to the guidance, the last slide. With regards to revenue, we expect to deliver between EUR 450 million and EUR 470 million. Our EBIT expectation is at EUR 45 million-EUR 58 million. Cash flow will be impacted by higher investments. We invested quite moderately last year and the year before, so we have to make up for relatively low investment, and cash flow is expected to be between EUR 28 million and EUR 32 million. In line with our ambition, we expect to continue continually to deliver a ROCE of over 25%.
All these numbers, of course, reflect no further significant repercussions from the war in the Ukraine. As a summary, we look back at a very successful year, where we were able to deliver throughout the entire year despite all the risk disruptions and generated good business results. Thank you very much for listening. With that, I would like to hand over back to the operator to start the Q&A session.
Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial 0 and 1 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial 0 and 2 to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Alexander Mees from Berenberg. Your line is now open. Please go ahead.
Yes, good afternoon. Thank you for taking the question. First one I'd like to ask on higher input prices and how does it tie into your full year guidance. In 2021, you had a negative effect from higher input costs, mostly in the second half. Would you be able to broadly quantify it? Is around EUR 4 million sounds reasonable?
I can take the question. Thank you for the question. For 2022, we expect that around 5% increase will be hit or we will be hit by a 5% increase in material price with regards to material prices. I expect that somebody else would like to know how much is then the increase in our sales price, and here we expect around 2%.
Basically you're expecting to have, matter of fact, post price increases of half what you've been hit with from higher.
No.
Input costs.
No, we expect to offset the material price increases by higher pricing. One relates to cost of sales, the other number, the 2% to revenue. But that was before the war in Ukraine, so, but we, as I said, are working on further actions so that we can offset with our own higher pricing, cost increases, but with the backlog.
Yeah. I'm just trying to understand how prudent or conservative the guidance is if the original expectation was that the cost increases prior to the war in Ukraine could have been possibly fully offset by higher prices that you have already introduced. Now you're obviously faced with another headwind. I guess what I'm trying to understand is to what extent have you reflected this additional headwind in your guidance.
Because if one looks at the sort of implied incremental margins for 2022, those seem very low at around 12%, which kind of would suggest that the additional headwind is. I mean, depends how one calculates it, but it could be up to EUR 8 million from higher costs simply post your kind of measures to overcompensate that. Would you say that it's a reasonable assessment that one could see a headwind annualizing over 2022 over EUR 8 million, roughly? If you could follow me on that.
Yeah, I can follow on that. That's not too far away from our own assessment. As I said, we expect to be able to offset this by our own higher pricing. However, there is a time lag between those. We will have an impact, in particular in the upcoming quarter.
Yeah. Okay. In relation to that, maybe you can talk a little bit about the ability for you to really increase prices further. I mean, you've already mentioned you made one price hike in May 2021, January 2022 was the next one. How much room do you have in the? Yeah, kind of if you can just talk about your ability to increase prices further.
Jeff?
I mean, we have increased the prices three times within the last eight months. One in April last year, one in September, it was effective September last year, and then again in January this year. Overall, by more than 8% is actually when you added up your interest, like interest on interest. I mean, in total, it totals up to 8% price increase that are in effect now. In other words, we try to always, you know, go with the signals that we have. Like Kerstin said, some of the orders that we saw in Q4 were already written in Q1, you know, before we even had the first price increase, you know, or in Q2. That is the time lag that we see.
Okay, makes sense. I would like to switch to R&D expenses. You clearly had in 2020, 2021, in line with your strategy to digitalize and build those digital competencies, you had a higher sort of above average R&D cost. As of today, how do you expect this to continue? Do you expect to come back to a more normalized level, or do you see still necessity to spend more in this area?
Currently, the plan is to stay flat to these figures that we have. I think this justifies to keep pushing the growth we wanna go for. Yeah.
Okay. Thank you. A couple of questions on different regions. Maybe to start with, China. You mentioned that you see there's strong trend towards the key account business, especially in the mid and high-end range. Apparently you found also a way to do business without tying in capital in there. Could you maybe spend a little time discussing what does it mean for you? Is it really major growth opportunity opening up? Yeah, how do you see that?
Yeah. That's surely it is a growth opportunity opening up due to the nature that the larger players in the market have a certain model which is more related to pay per wash agreements, which we wouldn't entertain on, let's say, by ourselves. In the meantime, we have been able to find partners to do this in our behalf, and this gives us, of course, access to, let's say, these larger orders, you know? In that sense, yes, it is an opportunity. At the moment, however, one has to say at this current point of view, I don't know how current you are here. I mean, at the moment in China, we have other problems because it's again lockdown in China in certain cities. But overall, it's a good outlook for us in China with this new setup in place. Yes.
Okay. Understood. Maybe changing to the North American market. You mentioned that the SmartCare is tested with initial pilot customers. When do you expect these machines to play a bigger role in the sales mix? That would be the question.
Yeah. It will be introduced now on the next upcoming ICA show in May. We expect an impact, I mean, depending on the supply chain situation, now where we have constraints, as you can imagine, between Q3, Q4 next year we would expect the first impact. Currently, I have to say, as I also highlighted in the sense that I mentioned during the call, we have a very good order intake in tunnel business, which you might remember we introduced in 2018, and we have excellent growth there. That helped a lot last year and will help also this year largely to come to an aggressive growth in the U.S.
Mm-hmm. Okay. Could you also spend some time talking about, you mentioned that the North American EBIT margin has fallen short of expectations, because you have longer term contracts in an inflationary environment. Could you discuss how long is this situation going to bother you there?
Well, this will definitely most probably bother us until about Q1, early Q2, then we should be done with it. In the meantime also have made necessary price adaptations. As you might be aware, the impact of material price increases has been even more significant in the U.S. than it has been in Europe due to steel issues. Stainless steel prices have rocketed in the U.S. and have an impact. In the meantime, we have had even more aggressive price increases in the U.S. than we had in Europe.
Okay. Thank you. I think I have just the last one on chemicals. You mentioned that you have introduced this green range of chemicals, and that you also entered new markets in Europe. What are your expectations with regards to sort of the longer term growth profile of chemicals business? Also I'm wondering whether this has to be kind of in correlation with your equipment business, or can you actually also do chemical business without really so winning new customers in chemical business without having to really install your machines or your equipment?
I mean, the majority of the chemicals that we sell go usually into wash equipment, I would say, but it's not an exclusive case. I mean, we have also quite a number of other customers that are using our chemicals because of the sheer performance of these chemicals. Nonetheless, we have to say that the green chemicals will have to, I mean, the whole thing is we have been the first one to introduce it to the market and are providing already good traction, I have to say. We have also been able to to win two larger accounts just recently with the argument of green chemicals.
In the long term, I mean, I would say we are aiming for high single-digit growth, so in the area of 7%-9%, depending how the market is. I mean, for example, in chemicals, we also, as you might know from the past, since you are experienced in this business, we also weather-related and what Ralf showed, for example, if you had more Saharas, and I can tell you this, business will grow in the two digits, that's for sure, because we have never seen sales numbers like we're having them now. It has to do with larger revenues that we have since we grow chemical business every year, but also with the fact that the last three to four weeks, it's just crazy how people wash cars, you know?
You know, we are always sometimes also dependent on weather impact, despite all the organic growth that we are producing.
This Sahara impact would then surface in Q1 2022 in your chemicals business? Or does it have a-
It would-
Delay then?
Yeah. Towards the end of Q1, early Q2, that's how it is now. I mean. Yeah, but revenue-wise, you will see a massive increase in the last three, four months, four weeks in all over Europe, I would say. We have record numbers. So, yeah. Surely at the end of Q1, we will see this. The most-
Okay. Last follow-up is, when we talk about chemicals, so is it broadly, you have the same position in Europe or in the US, or do you mostly focus on Europe?
No. We have not at all the same position. In Europe, we have our own chemicals, so it's our intellectual property, the recipes and whatever we are, I think, so-so mastering the discipline. In the U.S., we have white label chemicals.
Okay.
In other words, branded, but white label and from a third party.
Okay. Thank you very much. The next question is from Egbert Kulesza Yes, hello. Thanks for taking my questions. First one is related to a potential natural gas embargo. Just recently, Russia said that they want to be paid in ruble. To what degree this could endanger your guidance? I think directly, it's not that important as we do more or less only assembly in Augsburg. I can imagine that some of your suppliers could be hit harder. Maybe you can share some thoughts on that with us. Thanks.Mr. Kulesza
As I said, if these things come, the bigger impact comes out of the supply chain, not out of our core processes. That's for the time being.
Yeah.
The issue we're currently looking into. Yeah.
Yeah. Understandable. Very difficult to judge. Regarding your price increases, I understood, in addition to the three price increases you have already done, you plan another one. Is that mid of this year, or when will that take place?
Please understand that we don't give this information beforehand. What I can tell you, and Stephan Weber was mentioning this, but this might not have been as clear. For example, the rising energy prices for gasoline and so on, of course, we can directly inject in higher service
Charges.
-charges, you know. When we talk about price increases, we talk about material price increases. The energy price increase we can very transparent give to the customer. We already-
It's already done.
It's already done. Yeah.
Okay, good. Your sales outlook, my first thought this morning was surprisingly positive, given the current environment. That implies to me that your order intake must be very good up to now. Regarding your price increases, I wonder whether you expect higher prices could dampen demand in the future. What do you think about that?
Let me take the first thing and then hand over to Stephan Weber . First of all, the high oil price, of course, is in favor of our customers, the big oil companies and key accounts. Definitely, when they look at, you know, what the investments to do to come up with the mobility concepts and so on, they kind of take profit of this higher oil price situation.
Mm-hmm.
I hand over to Stephan Weber to give you a more precise answer.
Yeah. I mean, so far so good, we have to say. I mean, it is. I mean, everybody is aware of the higher prices and the car wash business case, as you might know, is a pretty stable business case. We are not the only one increasing prices, but what you're asking is eventually these higher prices will lead to a, you know, a stalling effect on the overall inquiries. We cannot see this as of now. We have and we are working closely with our inquiry system, and we have all the opportunities in the system in our CRM tool. We cannot see an impact as of now that there is anybody, you know, refusing to order just because there's a, let's say, an overall price increase.
Whether this will stay like this, you know, this is very difficult to predict. I mean, for the time being, first quarter will be very good. Like I said, we have an excellent order backlog carried forward, but which is even bigger now. So in that sense, as of now, that's the only thing that I can answer, and I cannot tell you what it will be in three months.
Okay. Yeah, that's true what you said, with regard to the oil companies. We can expect that the share of key account business has risen further.
Absolutely. I mean, you know, in the year 2020, it was mainly the key accounts, if not only the key accounts, that didn't order anymore. Likewise, they are all coming back and are full-blown back now. In that sense, we have in the meantime increased further sales efficiency in direct sales. Plus we have now key accounts back to a, let's say, a healthy level. And this both in both cases together, it leads of course to the situation that we try to describe. Yeah.
Okay, good. My last question, you said that you expect CapEx to significantly go up this year. Can you provide us with a figure?
EUR 10 million-EUR 15 million.
EUR 10 million-EUR 15 million. Okay. This is a level we can also expect for the years thereafter?
2023, we haven't done the planning yet, but we'll also see higher CapEx.
I mean.
I expect
You know, you maybe should explain the CapEx in 2021 was around.
Okay.
See the-
Yeah.
We have some orders of renewals of machines that were not delivered. Basically, we have an effect, which we also see at the suppliers of our machining equipment. They have high delivery times, up to almost 12 months, and that's why there is a shift in the CapEx. We had a prudent approach starting 2021, and we were not able to execute the CapEx in 2021 in the second half year, as due to this reason which I just told you.
Just to clarify, you spoke about, again, higher CapEx in 2023. Is that compared to 2022 or compared to 2021? Same level in 2023 as in 2022?
Yes.
Okay. Thanks. Thank you very much. That's from my side. See you next week in Augsburg. Thank you.
Thank you.
Yes.
The next question is from Richard Schramm, HSBC. Your line is now open. Please go ahead. Yes. Good afternoon, everybody. Two quick clarifications from my side. One, concerning the delivery times. Can you give us a number of how long your delivery times are at the moment for equipment and how this compares to normal delivery times two, three years back?
Eight weeks, and they are standard. We have currently standard delivery times. Not all the, let's say, order intakes are scheduled for delivery right away, but we are still able to keep standard delivery times, yeah.
The kind of business you sometimes have orders, they are due for the supply a year later, you know. One, civil engineering, has been affected, but we are currently still working with standard delivery times.
Mm-hmm. That's amazing because all the industry is complaining about heavily rising delivery time. You can obviously completely avoid this problem. Is that correct then?
As of now, yes. We never know how it is going to be in four or six weeks, you know. This is the answer all the while, has been all the while. As of now, we can-
Yeah.
We can supply. That we are sitting on such a high order backlog has simply also to do with that we receive many orders from larger customers or in project business, where it's from the very beginning clear they don't want it in the next six months, you know, but they place the orders. In other words, you know, so that's the order backlog that we have. The order backlog is not so high because we are unable to deliver.
Yeah.
Mr. Schramm, I was telling this, I think this also a few calls before. It comes at a cost. We have heavily task forced work, and we have things that come in on Monday, and they are solved on Thursday. I'm very proud of the team, and it's not by chance that we have this.
It's a huge effort.
It's a huge effort. It's not by chance that we have this result. Just to remember that. It's preparation from starting from 2020, including electronics and all things. Yes, maybe there's some luck but it's only 1%. 99% is hard work.
If your delivery time is only around about two months, then this should also be a positive for your price increases because the gap between your price increases and realizing these in the top line would be also roughly two months at best, right? That's pure math.
No.
Normal math.
No.
No?
No. The perception is exactly wrong because it's not in for out. Not every order that we get now we have to deliver in six weeks. We have orders still in the books that were placed in June last year, but they were never meant to be delivered in four or six weeks. They wanted them to be placed, and they're placed, and they are delivered maybe in June this year. In large business, in parallels or with key accounts. Key accounts might order for 50 sites, 50 machines. Not all 50 sites will get all 50 machines at the same time. Neither them can handle it, nor we can handle it. So in other words, we are sitting on a number of orders into the Q1 that are really dating back from 2021. This is why the backlog is so high at this point in time.
I see. We have to separate between the let's say frame contract business with key accounts and the let's say normal machine business when a customer comes and says, "I would like to buy a machine," with delivery in yeah three to three months or so.
It's also that we have a delivery that's reliable to the date requested by the customer.
Exactly.
That's actually the main driver of our ambition. Yeah. It's not only just that we can deliver a certain volume. In the management of the supply chain, the date of the customer for requested delivery. That is the control point at which we look when we organize our supply chain. Here, if a customer comes and wants to have, let's say, a classical rollover, eight weeks would be possible. Yeah.
Exactly. The constraint, Mr. Schramm, is at the end of the day, also the ability to install. I mean, we wouldn't have the ability to install at the same time all the machines from one key account. They plan their installations, you know, when they have, let's say, replacement machines, and we have to plan them, and then we go. That's why they place these orders sometimes early enough that they can, depending on the season. Most of them don't want to change the machines in peak season, because in the peak season, they don't want to have any disruption in business. They always in the off-season or in the lesser season, they want them to be installed. However, it always has to be in line also with the available installation capacity.
You know, it's always a week's work to replace a machine out there in a wash bay with two guys, you know. There's also limits in what we can do. That's why it's always by mutual agreement, we have to agree which machine is to be changed when. In order to enable this planning process, they order bigger batches of machines and tell us already these machines go with the locations. This is how it works.
Yeah. All right, thanks. Understood. Coming just back, if I took this correctly in your outlook statement, you said you are calculating this on average 5% higher material cost for the current year. Was that correct? That's the average over all your material suppliers, right?
Yeah, that's correct.
Which, to me, sounds a relatively low number, to be quite open. If I look at the dramatic rise we see in steel price and related components. Not sure how can you escape this and come out with a relatively moderate increase? What's your secret here?
We can't escape it. I also said that there are no further repercussions included or reflected from the crisis from the war in the Ukraine. What happens at the moment with steel, you're right. For example, the steel that can have further implications. That is not included in the guidance that is currently happening or in future.
Mm-hmm. Are you lucky and you have still some longer-term contracts in place, or do you also rely, as a lot of other companies, on short-term procurement and you have to pay spot prices more or less?
No, we have both. We also have a lot of long-term contracts. With regards to steel, we rely at the moment on the long-term contracts. As I said, at the moment, the situation sometimes is deteriorating every day, so it's difficult to say. Our guidance is based on the status before any further heavy significant deterioration from the war in Ukraine.
Mr. Schramm, your question would be, you know, what are the expected price increases by steel products? This question is in the days being quite difficult to explain. You were mentioning about contracts and spot markets. What we do is, if we have chances on the spot market, we take in stuff, but not because we need, but we want to plan ahead. Very proactively, we see what the spot market has to offer. Now we are talking about really steel on the meter or whatever that we need for our products. Even we have fixed contracts, we look at the spot market, but to, let's say, extend our range.
The questions you are asking is basically what is the expected price increase? When you ask currently on the steel market, you know this probably, then you don't even get a price quote, you know. That's the current stuff. We know we have checked with our suppliers whether they take stuff out of Russia or Ukraine. But even if they take something out, let's say all the material out of China, then of course you have, because everybody switches to that supply chains, higher increases there. Therefore this question is a valid question, but it's at the moment difficult to answer and we work hard on this thing. Yeah.
That was a misunderstanding. I'm not asking about what you expect in future prices. I think it's just the status quo. I mean, on average, at present the steel prices, at the current time are 20-30% ahead of the average from last year. The same applies for electronics, the same applies for plastics and et cetera, et cetera. So far, I'm a bit surprised that you come up with plus 5% on average.
That, that was the-
As the prices are not as expected. I mean, the expected effect is not even included, but would come on top, of course, yeah.
That's, that's-
That was my surprise.
That's because.
I have one of the surprises relates to the following. My number is for 2022, so you have to include another increase in 2021. We already incurred a significant price increase of 3%, so that together makes an 8%.
Mm-hmm.
Is it now a little bit clearer?
Yeah.
8% on steel price. Yeah.
Thanks.
8%-9% and together with the increases we already incurred in 2021.
Yeah.
I was only referring to additional cost increases in 2022.
Mm-hmm. Yeah. Thanks a lot then.
We haven't received any further questions at this point. I hand back to the speakers for closing remarks.
Ladies and gentlemen, thank you for attending the talk. Those of you who are attending our Investors Day, we would like to welcome you then. For the rest, hope to see and hear you for the presentation of the Q1 figure. Until then, stay well. Goodbye from Augsburg.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.