Thank you. Ladies and gentlemen, on behalf of the WashTec board, together with my colleague, CFO, Andreas Pabst, I would like to welcome you to the half year and second quarter call. Same procedure as last time, we have the presentation. Afterwards, we switch to an interactive Q&A session. Detailed instruction will be given by the operator at the end of this presentation. It is my pleasure to provide you with some updates on WashTec, Andreas will present the financial figures after my presentation. Let me start with a slide that you are partially familiar with.
Our mission is sustainable car wash. Attendees of our calls know that with this slide, I usually repeat our business model. A deeper look reveals that the wash process by a smart machine can be tailored and minimizes freshwater consumption in combination with a water treatment system.
Cars are washed in the first phases by process water, and in the final phases by fresh water. Of course, you might already know that such operations make use of 30 to 40 liters of water. As a comparison, the newest technology of laundry machines uses 40 to 50 liters, according to my machine device app on my phone. With our smart dosing system, we have exact data on how much chemicals of type and volume, in unit milliliters, are applied while washing a particular car.
By using our Green Car Care products, assuring the most sustainable use of car chemicals, we know the chemical load that is brought into the water treatment system at a certain time. All this data can be processed by our myWashTec Cloud platform to ensure the most sustainable operation of a car wash.
We call it WirkSystem, which means in English, that actions performed by our car wash system and effects on the water treatment systems are known and can be controlled by data. Customer satisfaction is our goal number one. We can generate additional high customer value by offering product bundles that improves that WirkSystem, and take advantage of WashTec's largest installed base in the market. This brings us to the next slide, the goals of our strategy and the further specification of achieving our Vision 2030.
Last year, we presented our growth plan to achieve EUR 800 million, our Vision 2030. In our strategy process, we refined this plan. In the subsequent months to come, we will communicate further details along our implementation of the strategy.
In a nutshell, the goals are we will maintain global car wash market leadership and take responsibility in our market by driving sustainable car wash leadership. We are generating high levels of customer benefits through consistent digital orientation and smart integration of products and digital services. We realize significant market share in the tunnel business, especially in the North American market.
We will offer highest customer value based on the combination of machine and service, and chemistry and digitalization, thereby achieving higher share of recurring revenues in the aftermarket business, which is today approximately 35% and will increase to 45% to 50% in 2030. We want to achieve a double-digit EBIT margin. We at WashTec are committed to integrate sustainability in the business model of our customers by providing sustainable car wash solutions. We have published our Sustainability Report 2022.
The report showcases WashTec's ongoing sustainability initiatives, documenting progress towards targets, and highlighting future development potential of our sustainability program, which is innovation and leadership in sustainable car wash, dedicated to eco-efficiency and care for people and culture.
Furthermore, we have adopted two policies, manifesting resource conserving and socially responsible corporate management. This is the WashTec Group environmental policy and a sustainability policy, which can also be found in the report. We have reworked our corporate philosophy as planned in the first quarter of this year and decided to already present it in the report 2022. This sustainable report, like the last one, presents essential non-financial figures that are material for our business. We achieved a CO2 emissions reduction by 187 tons, or 26% year-over-year.
The two emission reduction per EUR 1 million revenue on year was 13.1%. Due to the energy crisis caused by the war in the Ukraine, we have accelerated energy saving measures that have already resulted in a notable 18.3% permanent reduction at European plants in 2020. We see this as a tremendous achievement that has also had positive impact on our employee motivation. In the report, we also discuss the economics of water treatment and provide examples for country-specific regulatory agreements.
I invite you to download and read the report, including facts and figures about WashTec and our business. We are looking forward for your response. As already stated, we want to take responsibility in our market by driving sustainable car wash leadership. One example is our new sustainable car wash site certification program.
Customers are calling for sustainable solutions in all areas, link consumption and sustainability. Brand loyalty is related to the visible commitment of companies to have a positive impact on the environment. There's a need for action. Mobility transformation is causing demand for fossil fuels to fall. For vehicle washing to become the mainstay of securing sales, it must meet consumer sustainability standards, especially in the use of water. Therefore, car wash operators need to provide credible, verifiable, sustainable car wash offers.
WashTec's car wash site certification program is the industry's first solution for petrol stations and car wash operators. The WashTec Certified Sustainability Partner program uses a seal to promote sustainable car wash sites. If customers have an active WashTec machine, including a water reclaim system, in combination with our Green Car Care chemicals, they receive a seal for customer communication of their sustainable offering.
WashTec is represented along with the Green Car Care logo on the seal as the sender and certifying company. The seal is free of charge and checked for renewal each year. We have already certified, in a short time, more than 100 sites. We presented a variety of new products at the car wash show in US, in May, and in Mittelstand, in Essen, in June. In the US, we have launched Aquapur Modular, our water treatment system for the US market. We've already talked about this in previous presentations. The product is already operating at customer sites.
In Essen, we launched the next step, the Aquapur Modular Connected. We have equipped our water treatment system with sensors. The sustainable operation of the water treatment system can be monitored on our cloud platform, myWashTec. The second big product launch is our new JetWash Modular.
We have completely redesigned our JetWash system and optimized it for superior functionality. The car wash customer is assisted by a digital car wash assistant that leads through every process step in a transparent way. With this new product lineup, we are able to drive the consolidation of our value streams and implement the next step, production optimization. The new JetWash Modular system will be assembled on our new flexible production line for MVT products in our plant in Nýřany, in Czech Republic. MVT stands for Modular Supply Technology.
This is the equipment which is hidden in the technical room, in a cabinet or a container. The products, JetWash installation towers, and water treatment systems, will undergo final assembly on one production line. The last generation JetWash system is assembled in plant Augsburg and will be shut down in steps.
In a similar way, we perform the final assembly of all our rollover systems on one flexible, high, efficient production line in Augsburg. We aim at the modularization of our automatic car wash equipment based on modular cross construction kits, which we call MQB. Before handing over to Andreas, I want to summarize. We have a clear vision for our company from which strategic goals are derived. We will grow, strengthening our global market wash market leadership. We will we will grow, strengthening our global car wash market leadership and drive sustainability in the car wash market.
We are also working on the continuous optimization of the company. A good example is the consolidation of our production value streams, which we presented. Order intake has been slowing down, but we will still have a very strong order backlog. We have reacted to the situation by adapting our costs. Andreas will give you some more details in his presentation. Andreas, please.
Thank you, Ralf. Hello, everybody. Good to speak to you today. Please move now to page number eight. Let me follow up on the last statement from Ralf. Also, WashTec's order intake for the first six months were down by a double-digit % year-over-year, due to the significant drop in demand in the market as a whole. Our order backlog as of 30 June 2023, is still at an over average high level. We took care on this development and adjusted and strengthened our processes. We reduced our employees from 1,824 as of 31 December 2022 to 1,776, end of June.
We set up an efficiency program in the US, and we are now working on our production value system to optimize the work in Czech and in Augsburg, as Ralf already gave you an idea about this.... You see, we are doing our homework, and therefore, we are happy to present you good results for the first six months, 2023, as you can see on the main KPIs presented on this slide.
The WashTec Group generated revenue of EUR 236 million in the first half year, an increase of EUR 16 million or 7.4% compared to prior year, a new record for the first six months. At constant exchange rates, the revenue growth was no less than +8.8%.
This increase was based on price rises, but also on strong growth in the key account business and the contribution of our chemical business. With higher revenues, the gross profit for the first six months increased to EUR 36 million. Prior year, it was only EUR 5.59 million.
The gross profit margin decreased slightly from 27.0% to 26.7% over the same period. With that gross profit and our ongoing proactive cost management, EBIT climbed by 19.4% to EUR 15.4 million in the first six months. The EBIT margin is now at 6.5%, whereas prior year number was 5.9%. Not only in terms of earnings, we improved. We also developed of our free cash flow. This development is impressive.
After negative EUR 2.5 million last year, we achieved a positive free cash flow of EUR 6.5 million in the first six months, 2023. Our CapEx spend was EUR 10 million higher than last year. You probably remember that this higher spend is mainly caused by the acquisition of the US production facility, which we did in January this year. Let's have an eye on the second quarter KPIs.
The revenue grew in the second quarter by 6.8%, and this was mainly due to the positive development of the chemicals business in Europe and an increase in the key account business in North America. In the second quarter, both gross profit and gross profit margin increased compared to the prior year quarter.
At 27.8%, the gross profit margin in the second quarter was higher than the same period last year by 0.7%, mainly due to the larger share in the chemical business. In the second quarter, the EBIT of EUR 9.9 million and the EBIT margin of 7.8% were significant higher than the prior year, with an EBIT of EUR 8.3 million and an EBIT margin of 7.0%. Of course, our EBIT margin was higher than in our already successful first quarter '23, where we had 5.0%.
On this slide, you find the information about our revenues by products. As you see, equipment and service revenue increased significantly compared to the first half-year of prior year, mainly due to price increases. Impressive is our growth in chemicals.
Turnover increased by 16% over the first six months and 26% in the second quarter. Despite a weather-related fall in car wash volumes, significant revenue growth was achieved, thanks to some newly acquired customers in Europe. One of the biggest new customers here is, as announced in our press release in July, the customer IMO, a car wash operator who runs more than 700 sites in 13 countries in Europe and Australia.
We are able to partner with IMO due to our leading position in sustainability, international service competitiveness, and our long-term experience in chemistry. Now, let's move on to group revenue by region. In the European region, revenue rose in the first six months by 5.5% to EUR 184 million.
Revenue grew across all customer and product groups, with the chemical business developing especially positively, with a double-digit growth compared to prior year. I already explained why. Revenue in North America was significantly higher in the first half year than in prior year, with an increase of round about EUR 5 to 48.5 million.
The key account business was the main contributor to revenue growth in both the first six months and the second quarter. With a growth rate of 10.7% in the first six months, the revenue share of North America increased now from 90.9% to 20.5%. This is totally in line with our strategy. America is becoming more and more important for the WashTec Group.
In Asia Pacific region, revenue rose by 14.1% in the first half year to close to EUR 9 million. Next page, please. Earnings in Europe region over the first half year remained at the level of the prior year, while the second quarter earnings fell by EUR 1.6 million. Overall, majority of EBIT is still created in Europe, with an EBIT margin of 7.8% in the first half year and 8.5% in the second quarter. In North America region, we recorded an EBIT of EUR 1.3 million in the first six months, whereas in prior year, we had a loss of EUR 1.3 million.
This positive development was mainly a result of effects of the efficiency programs launched in the first quarter, on which we are working hard on a day-by-day basis. Following a loss in the first quarter, the Asia Pacific region reached breakeven in the second quarter. The market in China remains challenging, and the company is reviewing its market approach here. The next slide, our EBIT bridge, shows some more details to explain the EBIT development compared to the prior year. As already explained in our last calls, we are facing significant material cost increases throughout the whole year, 2022.
We conquered by own price increases and efficiency improvements. Despite good progress, we are, in terms of gross profit margin, with 26.7%, still slightly below comparable figure of H1 2022, which was 27.0%. Nevertheless, our higher revenue helped us, that gross profit in absolute terms increased by EUR 3.8 million.
Mainly higher outbound rates led to higher selling costs, whereas our strict cost management led to stable R&D expenses and especially lower administrative costs. We managed to decrease the administrative cost as a ratio of revenues from 4.4% in H1 2022 to 3.8% in H1 2023.
All this contributed to an increase of our EBIT by 19.4% to an overall amount of EUR 15.4 million, with a respectable EBIT margin of 6.5% for the first half year. Next page, please. Now, let's spend a little bit on time on some non-P&L figures. First, net operating working capital. This figure decreased relatively to year-end 2022, falling by EUR 7 to 98.2 million.
Relatively to 30 June 2022, the figure increased by EUR 2.2 million or a small 2.3%, mainly due to lower trade payables. The decrease compared to year-end is mainly attributable to the lower level of trade receivables, following the record revenue in fourth quarter 2022. Currently, we are focusing on inventories reduction, and we are sure to present here some progress soon. Second, free cash flow. I already spoke about this one at the beginning. No need to repeat that. We are happy with the development here.
Third, net financial debt. This figure increased mainly to the financing of the acquisition of the US facilities, around about EUR 10 million, I already mentioned. Fourth, the equity ratio. The ratio declined by 1 percentage point to 23.7%, which is, to our perspective, still a reasonable number. Coming to our guidance.
As you all know, we are facing time of great global economic uncertainty. The International Monetary Fund updated July 2023 economic outlook forecast, no significant change in the development of the global economy, the German economy is expected to enter in a recession, with a gross domestic product contracting to -0.3%. Ongoing high inflation rates continue to characterize global development. This results in higher interest rates, which has a negative impact on demand, especially for capital goods.
The situation is not expected to be changed on short term. These effects of the macroeconomic environment are also having impact on WashTec Group's business development, currently reflected above in a year-on-year decline in incoming orders.
Nevertheless, the order backlog in the machinery and plant engineering sector remain at a solidly high level at the end of the first six months of 2023. The after-sales business developed very positively, especially in the chemicals business. This is why WashTec Group confirms this guidance for the fiscal year 2023. For revenue performance, the company expects revenue in the range of ±3% of the prior year, and a significant increase of the EBIT, which means an increase of up to or more to 10%. We also state that this guidance is fundamentally subject to uncertainties.
This may result, for example, from possible escalation of the Ukraine war, a significant deterioration of economic conditions in key sales markets, or additional burdens from structural adjustments. As a last point on my part of this discussion, let's have a glimpse on our financial and event calendar.
Next slide, please. You see our next event is third quarter statement, 2 November 2023, followed by the Equity Forum in Frankfurt at the end of November. We, Ralf and I, hope to see you there. This was it from the finance side. We are happy to answer your questions you may have. Therefore, I hand back to the operator.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. Please press nine and star to register for a question. First up is Tore Fangmann from Berenberg. Over to you.
Good afternoon and thank you for taking my question. Maybe looking at the EBIT guidance for 2023, could you maybe tell us a little bit more about how you see the impact of the ongoing restructuring initiatives in China, and also about the wage inflation, which should hit the P&L now in H2? Thank you.
I think the question... [crosstalk]
Yeah.
Maybe first answering the wage inflation. In our budget planning, we have a 5% increase of the wages included, and that is what we currently see. Therefore, this is included in our forecasting numbers. In terms of, you called it restructuring China, at the current stage, yeah, we are really looking at how to approach the Chinese market and how is the best way to serve this market. There are a lot of ideas which we are discussing internally, which are but not finalized currently, yeah, but we are, we have really, we are looking deeply to the market currently.
Thank you.
You're welcome.
At the moment, there seem to be no further questions. If you have any additional questions, please press nine and star now. The next question comes from Sudhanshu Maru from Redes. Over to you.
Hi, Andreas, and hi, Ralf. My question is on the North American market. You know, the growth potential there, which is mostly in the tunnel express car wash segment, it doesn't reflect in your growth, especially in the first half. The revenues are up, up only single digits. When we talk to market participants there, they think Mark VII is not really tapping into the express tunnel car wash market. I just wanted to get your thoughts on the opportunity and how are you attacking it?
Thank you for the question. When you look at the market, the US market and the competition there, I've been at Las Vegas, at the fair, where you basically see all the things that are offered. For sure, Mark VII is known for superior rollover systems, serving big key account customers. Second, we have a tunnel equipment that is also superior to the American equipment, and it's not the European equipment which we export to the US. We have, in the US, our own more simpler version of that, as you said, express tunnel equipment.
The point is that we grow step by step, and we have to basically put exactly what you said, Mark VII, into the scope of the customers, which are big private equity-driven chains, or at least multi-sites operators. We do that with a certain strategy, but also offering tunnel segments or tunnel partial tunnel equipment that is not available at the competition. By that, we will start step by step and grow on the tunnel business. We have seen growth in the tunnel business, and we will continue that growth. We expect, let's say, a tunnel share of 200 tunnels a year by 2030.
Of course, that's a projection on 2030, but we have very concrete measures to also talk to existing customers that have not the Mark VII equipment but get upgrade a certain part of their equipment by Mark VII, and therefore, gain reputation for, let's say, our good equipment. Did this answer your question, or if furthermore?
Yeah. No, this is, this is helpful. If I can ask, another question, you know, on the order intake, and you mentioned it is across the board, the order intake is down for second quarter and also down for first half. Just, just wanted to hear from you, what is it? Are the customers, as in your customers, are they delaying their plans? Are they worried about the macroeconomic situation? Just, just, just if you could provide some color on what are the discussions like with your customers.
The direct business customers are for sure worrying in a sense, yeah, because as you look at the press and also there's a miraculous thing like the bad wash weather, that causes to less revenue in their business, kind of, is not accelerating the wish to get the next equipment now, yeah. We can put by new things which we put on the market, by bundle offers and so on, impulses into that market. The key account market is currently, how would I say?
There are some big projects that we have actually won in, in a tender, are not yet executed due certain reasons at the key accounts that are not that we cannot influence. These are, let's say, contractual reasons between the big key accounts and their partners, running the sites.
We expect some upside on that, and we will see how this is going on. There's really not, let's say, one big thing, so it's really different from the group. Key account are willing. We have the tenders, but they're not yet executed. We're waiting for that. It's not, not that pessimistic on the key account side. That's it.
Thank you very much. If, if... Sorry, if I can ask a last question.
Sure.
You, you spoke about the chemicals business growing pretty decently. Just wanted to understand, are these customers with equipment supplied by you, or these include customers who have, you know, equipment from other companies?
We both supply chemical equipment to our own customers and also to customers that have not our equipment. Yeah. If, if you have more insight, you know, a little bit more about IMO, they built their own tunnel system, so they basically take now our chemicals, because Green Car Care chemicals is important for them to push their sustainability brand. You know, might be further options for business in the future. In general, we do both.
Thanks a lot. Thank you very much.
Thank you.
A follow-up question comes from Tore Fangmann from Berenberg. The floor is open again.
Thank you. Thank you so much for taking my, my second question. The call just broke up for me, so I hope I'm, I'm not repeating myself. Please forgive me. Maybe looking a bit further into 2024, are there any further price increases that you still plan on doing, or do you, do you envisage, like, pushback from your customers currently, that they say, like, they see that your input costs are lowering down, so they want to basically renegotiate the price increases that we had now over the last one and a half years?
First, to my knowledge, and to all the speaks with our, with our salespeople, there is no renegotiation about already existing orders in terms of price. For sure, there's also the competitors have increased the price. We need to be sensitive to understand where the best price level for WashTec is.
We are looking at the market on a day-by-day basis. With the current prices, and coming in all the new orders, we feel good that the price increases we get from the material and from salary wage increase, that they are covered, but with the new orders. Therefore, currently, we do not see that we need to increase prices any further. This is a statement given as of today, and it's important to understand that we are looking at the market on a very regular basis to see what the, the best price is for us.
Thank you.
Nothing to add. Yeah. Nothing to add? Nothing to add.
Thank you. Yes, thank you. At the moment, there are no further questions. Any additional questions, please press nine and star now. We do not have any further questions. With this, I hand the floor back to Ralf Köppe. Oh, I'm sorry.
Please.
All right, just go.
Another question was just raising up, and it comes from Alexander Galitsa. Over to you.
Yes, thank you for taking the question. I apologize that I only joined later, so I am apologizing ahead of time if that has been discussed already. I was looking into the order intake that you reported, and also comments around order backlog. Could you maybe provide any more color with regards to what exactly does high level overall for order backlog mean in, in terms of what's the reach of the backlog?
How much more of order intake, and how soon do you need to generate to get to your full year guidance? I guess what I am really asking is, if you continue to see double-digit declines in order intake, how confident are you to still be able to meet your full year guidance?
What we can say about the order backlog is that it's not on the record level. If we take it and compare it to the last year, we are on the second place of record level. Yeah. We're still on a very high order backlog. Of course, the question is how these tenders are executed, which is certain things we are close to the key account customers, in close contact and discussing to them.
Also in the tunnel business, we have to see what the current situation is. There's, of course, high interest rates, but there's also the availability of construction material and lower prices in constructions that could trigger the orders that we have registered.
That are maybe not yet, or that are for sure, not yet, in our order intake, but are in our, our order booklet and triggered by, let's say, starting of the building and so on and so on. That you have the possibility to, to, yeah, to look for a certain for certain day when this tunnel will be released and can be returned, can be turned into revenue. Yeah.
Yes, Alexander, in other words, if, if I look at the order backlog, I think it's, it is really on a very good and high level. It gives us confidence for, for more than, than one quarter that we can achieve our, our planned revenues. I think that is a, that is a good sign, yeah.
If you, I know that you know the churn rate of our order revenue, I think it's, it's, it's, it's a good situation where we are in, yeah, it is important that we also always have an eye on the order intake, and therefore, as I already explained, we took some, some first measures, yeah. Overall, I think that was the question for the, for the guidance for the year 2023. Standing here, we both really believe that we can manage it.
Understood. Then another question on the US market or US region profitability. I think second quarter margin was on a very good level. Do you expect this to carry over into the second half of the year, provided that the revenue is coming as planned?
Yeah. What, what, what we really did in, in, in the US, and we also spoke about it, I guess, in the first quarter call. We set up there a very tight efficiency program, which we are monitoring on a, at least on a monthly basis, very, very closely. There's a lot of exchange now between North America and Europe, how to do the process in a good and in a best way. I think we are on a good path in North America, yeah. It looks good. Development is, is... It goes in the right direction, yeah.
Mm-hmm. Current forecast would tell us, yes.
Yeah.
It will carry over. Yeah.
Yeah. Understood. Maybe if we stay in the North American region, I think you had a reasonably optimistic forecast in terms of tunnel business for this year. Do you see that trending positively, or the recent order intake dynamics would suggest that you might be falling short of the initial targets?
In terms of revenue in tunnel business in the US, the topic is that we need to bring them on the road, yeah, to finalize them, yeah. There are orders for tunnels, I would say significant more orders than last year for the tunnel business in the US. We are working on the civil works and all that stuff, yeah, so that we can, at the end of the day, also recognize the revenue.
That is, that's improving, and also Ralf mentioned that on the long end, yeah, 2030, we want to have 200 tunnels a year in the market. It's a curve, yeah. Last year, it was lower. This year, it's already higher, and it will climb and accelerate. I think we are, we are on the right track here. Yes.
Understood. Maybe on the European profitability, I think second quarter margin was down 2 percentage points to a relatively modest level for this region of 8.5%. Apologize if you already mentioned that, what caused that, and do you expect margin in the European region for the full year to improve year-on-year? That's the question.
What's part of the presentation? Let's go.
Me?
Yeah.
If you look at the second quarter compared to second quarter last year, there are some, I would say, price increases are not included in the last three, for example, wages. We have higher wages this year. There was an ongoing price increase for material costs last year. This is also fully reflected now in this year's figures. On the other side, we did our own price increases. You know, the churn rate of our order backlog is four to six months.
That means not all revenues we created in the second quarter are already the orders with the higher prices. That is one topic. The other topic is what Ralf already mentioned that we are working on the efficiencies. Yeah, we are setting up the plant here in Augsburg and combine it with the plant in the Czech Republic, to have the MQB and the MVT to optimize here our production. I think there is already some progress.
Actually, several measures that we have taken that work on the cross-margin, in particular.
Yeah.
Which is installation, it's rate, it's the footprint of the, of the production. We, we, we have to, we want to improve that. Also, since markets become more volatile and unsecure, we hope, let's say, for the best, and of course, but we, we act. As I said, we already acted on, on the operational cost, are really ramping down the cost and doing the best efficient mode on the company, executing the company work here. You see the results of this, yeah.
Mm-hmm. Understood. Just last for me, in terms of gross profit margin for the group, you would think that it should improve sequentially in the coming quarters, provided better cost position, probably, pricing fitting through the backlog? Is that...
That's our own forecast, yeah. Right. It's a fair assumption of what we see.
Thank you.
The next question comes from Stefan Augustin from Warburg Research. Over to you.
Yes, thank you. Also, sorry for my side, I'm a little bit late to the party, so if I ask a question that has been asked before, please simply skip it, and we will do that off the call then. I have one on the chemicals business, which I see quite nicely up in the second quarter. Is this, let's say, more to weather, or are there structural elements behind that? Is that sustainable movement, and can I forecast, let's say, a better so-called product mix for the total European business into that development?
I already explained it a little bit in, in the presentation. The topic is that we have won this IMO contract, which really helps us a lot. Yeah, it's, it's a huge chemical customer. On the other side, there were some, some months in, in this year, where the wash counts really went down. There are two different, different movements in the chemical business, yeah. Up by this new customer, and a little bit down by the overall wash counts, due to the weather.
Same in North America, by the way.
California, especially.
When you think about what happened in the first quarter, the weather conditions on the, the West Coast and so on, we saw really bad wash count, wash counts, in Europe as well as in North America. However, things come back, good weather kicks in, later than maybe last year, and the new contracts and also the price increases, of course, bring us in, in this, condition. We have record production rates in our Klenau plant, so we really have to produce a certain amount each day to fulfill the demands. That is a very nice thing, and we have started that right away, in January, and have been keeping up this, since today.
We also will see a record production in terms of ton, tons by the end of the year.
Yeah.
Okay. Just maybe as a clarification so that I don't get overly excited, probably. If I would assume the wash count's down in the second quarter, and we would be up around EUR 3 million quarter-over-quarter in the chemicals business, so I would conclude that I have more than a EUR 12 million contribution from the IMO contract. Is that not a little bit too high?
That, that's too high.
That's too high for the IMO contract, yes.
That's too high, way too high. The, the, the IMO contract has not been, actually, a, a part of our budget. We have taken it in as a chance, it basically adapted the situation for, for the bad weather. The bad weather did not occur in the plant in Klenau .
Mm-hmm.
When we talk about 700 locations, those locations are onboarded step by step.
Mm-hmm.
So, you have a ramp-up phase, yeah? The ramp-up phase has been very, very steep, because the customer required to move in earlier as we planned before, but we were successful at doing that. That made us and the customer happy. The contributions, we should move over here. That's, we therefore see a good contribution on that and probably have higher growth as in the budget. As I said, putting it in the quarter and assigning it and modeling it is difficult, because I think the bad weather was until May, and the record revenues... [crosstalk]
Kicked in end of second quarter. Yeah.
End of second quarter, yeah. Also now in third quarter, but during vacation, things will go down a little bit and come back in September. The modeling this is a little bit difficult, yeah, on the side, just by the weather. The IMO contract, somehow putting it into the model and comparing that effect to the weather is rather a difficult prediction. Yeah.
Yeah. As obviously, there are more or less, there are three different explanations there. One is our own price increases we did in, in chemistry business overall. The other one is the overall number of wash counts, which was a little bit down. The 3rd one is this really a successful cooperation with, with new customer, for example. Those three together lead to the result that we overall had a very good chemistry business in the second quarter.
Okay, thank you. Then maybe on the European margin development. Is this a transitory one? When would you think that you will be back into the sound double digits, which is, let's say, usual margin expectation for the later part of a year?
Okay, I take the question. Yeah. You asked, is it a trend that the gross profit margin in Europe, in the machine and service business is going down? The answer is no, it's not a trend. Yeah. What we are currently seeing is that we go down a little bit due to some, let's say, volume topics, yeah, but we are counteracting on that one. We do our homework in the purchasing, we do our homework in efficiency topics in the production.
If I look at the number on a month-by-month basis, I see that it is going in the right direction month by month. In other words, yeah, we took out some temporary workers to have our production efficiency at a very high level. Once again, the, the answer to your question, is it a trend? The answer is no.
Okay, thank you. The last one is maybe when we look at the US improvement, which of the measures that you have taken in the efficiency program is the one that, let's say, worked best for the second quarter?
So...
Installation, yeah. I would say two, yeah. I would say, which one worked really well was that we have now our own installation teams in the US market. That means we are not depending so much on subcontractors like we did in 2022. This is a huge improvement. Another, from my perspective, really good improvement was challenging all our suppliers, that also contributed to lower US production costs.
Okay. Thank you very much. That were my questions.
Welcome.
There are no further questions. With this, I hand back again to Ralf Koeppe.
Ladies and gentlemen, thank you for attending our half-year call. Here in Augsburg, vacation started. I'm not sure if you're up to certain days for holidays. We will close down two weeks, the production, as planned, as usually, and then ramp up to make the second half-year a success. Thank you for attending. We're looking forward to see you at the third quarter call or maybe on a bilateral talks or on the Eigenkapital Forum in Frankfurt. Thank you.
Thank you. Bye-bye.