Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the ElringKlinger Group Q2 2022 earnings call. At our customer's request, this conference will be recorded, and all participants will be in the listen-only mode. After a short presentation by Dr. Stefan Wolf, CEO, and Thomas Jessulat, CFO, there will be a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Dr. Stefan Wolf, CEO. Please go ahead, sir.
Yeah, thank you very much. Ladies and gentlemen, I warmly welcome you to our conference call on the results of the second quarter of 2022. We have already published preliminary figures on the 8th of July. With today's publication of the full figures, we confirm them. As always, I will start with some headlines on the second quarter. After that, my colleague, Thomas Jessulat, the group's CFO, will discuss financial figures on the second quarter of 2022. I will then close with a few remarks on the current year. As usual, you will have the opportunity to ask questions at the end, and we are pleased to answer. Let me start with the current market environment, which is affected by a number of factors. First of all, supply chain bottlenecks remains to influence the market.
In the second quarter, there were regional lockdowns as part of zero-COVID policies in China, especially in the month of April. This also had a hampering effect on the automotive production in the region. According to IHS data, the light vehicle production in China was down by 5.9% in Q2 2022, compared to last year's second quarter in 2021. In April 2022, production even plunged by 42% compared to April last year, or 45% compared to March 2022. At the same time, the war in Ukraine went on with an uncertain outcome. Western countries have imposed sanctions on Russia. As a consequence, distortions on world markets have intensified. Continuing from the first quarter, the war has contributed to supply chain disruptions. Take the cable harnesses coming from Ukraine, for example.
On the horizon, the next crisis in Europe is looming with gas shortages. Generally, the global economic conditions in the second quarter were subject to slower growth. Across major economies like the U.S. or the Eurozone, GDP growth slowed down in Q2. Macroeconomic development always affects the automotive sector as well. Prices for raw materials, energy as well, and transportation have increased. On the other hand, the semiconductor shortage has slowed down but still exists. The second quarter had to deal with this environment of many critical factors. Despite the fact that the global light vehicle production showed no growth in Q2, ElringKlinger could increase sales by 9.4% to over EUR 430 million. Organically, the group revenue grew by 5.6%. This means we have outperformed the market once again.
Earnings are influenced by impairments totaling EUR 95.4 million, which were mainly due to rising interest levels. Mr. Jessulat is explaining that later. Our operating EBIT, which excludes these exceptional items, stood at -EUR 1.6 million, stated EBIT at - EUR 97.1 million. We continued to manage working capital efficiency in the last quarter to counteract supply chain shortages. As a result, net working capital came in slightly higher at around 28% of sales. The group generated a positive operating free cash flow of EUR 3.9 million. Net financial debt stood at a low level of EUR 390 million, after EUR 387 million at the end of Q1, resulting in a net debt to EBITDA ratio increase of 2.5x.
Finally, the outlook for fiscal year 2022 remains subject to a persistently high degree of uncertainty. Well, having now provided some of the headlines of ElringKlinger's second quarter 2022, I will now hand over to our CFO, Mr. Thomas Jessulat. He will present the financials of the period under review.
Dr. Wolf, thank you. Ladies and gentlemen, also warm welcome from my side. Over the next couple of minutes, I would like to comment on the financial result of Q2, starting with the order situation on slide number four. In the second quarter of 2022, ElringKlinger's order situation was very good, very pleasing. Order intake recorded in Q2 was at EUR 453 million, up by 5.5% compared to the second quarter of last year. Secondly, and as a result, the group's order backlog was at a record level once again. Order backlog rose to EUR 1.55 billion as of June 30, 2022, corresponding to a further increase of 27.1% or EUR 331 million compared to the end of the second quarter of 2021.
Despite the current environment as outlined by Dr. Wolf, ElringKlinger's revenues expanded by EUR 37 million or 9.4% to EUR 430.6 million. Without exchange rate effects, revenue increased organically by EUR 21.9 million. Considering this organic growth of 5.6%, the group outperformed the global automotive production, which showed no growth in Q2 of 2022 according to latest IHS data. On slide number five, we see the revenue development of our different segments and business units. In the second quarter, the Original Equipment segment continued a strong performance seen in the first quarter of the previous year, with EUR 338 million of the OE segment increased by 9.9% compared to the second quarter of 2021.
Revenue was also slightly up on the figure posted in the previous quarter, the first quarter of 2022. In navy blue on the chart, you see the business units within the OE segment. Revenue of the Lightweighting/Elastomer Technology business unit are up by EUR 15.8 million or 13%. With EUR 133.4 million or 31%, Lightweighting/Elastomer Technology accounts for the largest share of group revenue. The Metal Sealing Systems & Drivetrain Components as well as the Shielding Technology business units grew by EUR 5.3 million and EUR 11.9 million respectively.
The E -Mobility business unit increased its revenues to EUR 14.1 million compared to the first three months of this year, which was at EUR 5.3 million, but recorded a slight decline in revenue compared to the second quarter of 2021 with EUR 16.5 million. When looking at the sales split by region, sales revenue increased in all regions in the second quarter. The rest of Europe, which is the region generating the highest revenue within the group, showed growth of 4.2%. Revenues in this region increased by EUR 5.2 million to EUR 129 million. The revenue in Germany was stable at EUR 88.4 million, up by 1% compared to the same quarter of last year.
North America accounted for about a quarter of group revenue in Q2, with revenue of about EUR 110.7 million, making it the group's second largest region. Revenue in this region was up by EUR 21.7 million or 24.4%, which is well above the group's considerable growth rate of 9.4%. The exchange rates development also contributed to this performance, of course. In the Asia Pacific region, revenue expanded by 5.3% compared to the prior year figure, totaling EUR 79.4 million in the second quarter, despite the recent resurgence of the coronavirus pandemic and respective lockdowns in several Chinese regions. Also, in this region, revenue had some tailwind by exchange rates. Assuming constant exchange rates, the region came close to matching the level recorded in the previous year.
Let us now have a look at the earnings on slide number seven. The price development of commodities exerted pressure on earnings. Due to the war in Ukraine, raw material, transportation, and energy prices rose, and supply chain bottlenecks continued and intensified over the first half of this year. In particular, the group was faced with continuously high costs for aluminum, steel, and plastic granules. It has to be considered that the raw material impact shown here is a net position and also includes, for instance, compensation payments by customers. HR-related costs also increased, partly due to additional obligations in the context of planned discontinuation of production activities at one of the German facilities, as well as due to adjustments to senior retirement. The group's operating EBIT, which means excluding the impairments, came out at EUR 1.6 million.
Even against the backdrop of consistent cost discipline, the increase in revenue compared to Q2 2021 did not yet offset the increase in raw material costs. Taking the impairments of goodwill and fixed assets into account, stated EBIT in the second quarter was at -EUR 97 million, after EUR 23 million in the same quarter of the previous year. Fixed assets included various assembly and handling machines. On slide number eight, I'll provide an overview on the impairment of goodwill. Triggered by the significant rise in interest rates in Q2, the group conducted an impairment test, and this led to an impairment loss relating to goodwill totaling EUR 86.1 million in the OE segment, recognized in other operating expenses.
The intangible assets went down by EUR 75.9 million to EUR 139.7 million compared with year-end 2021, which is mainly due to the adjustment of goodwill. The effect of the remeasurement of pension liabilities changes the carrying amount on the balance sheet, while it does not touch the P&L. A large portion of the reduction amount of the pension liabilities is recognized directly in equity. The exceptional items influenced earnings before tax, net income, and earnings per share as well. The net finance results in the quarter under review was EUR 6.3 million, up by EUR 10.9 million compared to -EUR 4.6 million in the second quarter of 2021.
Higher unrealized foreign exchange losses and significantly higher unrealized foreign exchange gains translated into a net foreign exchange gain. In addition, net interest result was -EUR 3.2 million compared to -EUR 2 million in the second quarter of 2021, despite the significant rise in interest rates. That illustrates the group's solid financial position. Taking net finance costs into account, earnings before taxes for the second quarter of 2022 amounted to -EUR 90.7 million. After deducting tax expenses, which fell by EUR 8.6 million to EUR 3.3 million, and taking also into account non-controlling interest, the share of net income attributable to our shareholders added up to -EUR 94.1 million. Therefore, earnings per share amounted to EUR -1.49.
On slide 10, we take a look at CapEx, net working capital, and operating free cash flow. At EUR 13.8 million, CapEx, so capital expenditure in property, plant, and equipment, was at a higher level than in the same quarter of the previous year. The investment ratio stood at 3.2% in the second quarter of 2022, up from 2.8% in the first quarter of the previous year. Regarding net working capital, higher inventory amounts reflect the difficult situation within the procurement markets, and this approach was continued in the second quarter of 2022 and resulted in higher inventory on our balance sheet. Net working capital to sales increased slightly to 27.9% in relation to group sales after 27.5% in the first quarter of 2022.
Totaling EUR 413.3 million at the 30th of June 2022, inventory was up by EUR 24.5 million compared to 31st of March 2022. Irrespective of this, inventory levels also expanded in view of the group's solid order books, of course. Against the backdrop of one of the factors outlined before, ElringKlinger Group recorded operating free cash flow of EUR 3.9 million in the second quarter of 2022. Now, coming to slide number 11. Net financial debt increased slightly by EUR 27 million year-on-year to EUR 390 million. It slightly increased over the reporting period as a result of the higher funding requirements for the group's operating business.
The net debt to EBITDA ratio was at 2.5x as of 30th of June 2022, up from 1.4x a year earlier. As a reminder, to the previous year's figure, the ratio as of the second quarter of 2021 included, of course, the transactions in the Fuel Cell business. Let me now turn to slide number 12, showing the performance of our segments. As mentioned above, the Original Equipment segment was able to expand its revenue by 9.9% compared to the second quarter of 2021. In terms of earnings, the segment was affected by two main factors. First, more substantial material related costs, and second, the impairments described before. Therefore, the EBIT was down on the prior year.
The aftermarket segment generated sales between April and June 2022 amounting to EUR 59.7 million, which is an increase of 12% compared to previous year's quarter. Regarding earnings, this segment benefited from a consistent approach to cost efficiency. EBIT increased by 14.5% to EUR 11.4 million. Overall, the EBIT margin was 19.2% compared to 18.8% in the same quarter last year. The engineered plastic segment slightly increased its revenue year-on-year by 0.3% to EUR 31.9 million.
Concerning earnings, higher costs for raw materials are reflected in the figures for the second quarter. EBIT was down slightly from EUR 6 million in the second quarter of 2021, to EUR 4.7 million from April to June in the year 2022. Having said this, I now turn back to Dr. Wolf.
Yeah. Thank you very much, Mr. Jessulat. Ladies and gentlemen, the current environment is difficult, complex, and uncertain. First of all, the ongoing war between Russia and Ukraine has no real foreseeable outcome. The economic consequences heavily strain supply chains. The tense situation on procurement markets exerts pressure on the commodity markets and might reinforce the volatility. In addition, and depending on the further course of the conflict, the uncertainty regarding energy supply in several advanced economies may rise further. From the news this week, we have learned that tensions are also increasing in other regions of the world. Further, the price increase across most goods and services have brought several central banks to the arena. The Fed, Bank of England, and ECB has already increased base rates or announced to further raises the rates in order to bring down inflation.
In this vein, global economic growth may slow down. The International Monetary Fund global economy forecast now expects growth of 3.2% for 2022, for example, 0.4 percentage points less than the April projection. In addition, the regional coronavirus lockdowns in China, as well as the potential emergence of new variants, have shown that the coronavirus pandemic is imponderable. The possible repercussion of the pandemic may have an impact on revenues and earnings. I have already outlined the current market environment in my introductory remarks. Given these challenging underlying conditions, markets continue to be exposed to high level of uncertainty. Key factors such as bottlenecks within the semiconductor industry, issues surrounding supply chains, and ongoing distortions on raw material markets are placing considerable constraints on the recovery anticipated.
On the other hand, according to IHS data, despite price dynamics and general uncertainty among consumers, demand of new vehicles is strong in many regions. Especially concerning the second half of 2022, global automobile production is expected to increase by 11.5% compared to the same period of the previous year, or 4.7% on a year-on-year basis. Looking at the forecast for different regions, the recovery in North America and in Europe is expected to grow more than 20% in the second half of 2022 compared to the last six months of 2021. Coming to slide number 16, illustrating the new revenue and EBIT outlook. Given our favorable order situation as well as the forecast regarding global demand for light vehicles, we expect sales to grow in fiscal year 2022.
As just shown on the previous slide, IHS expects global production market to grow by 4.7%. Against this background, the group expects to exceed this level of expansion with organic sales growth slightly above market level. Earnings continue to be influenced by a wide range of factors. The associated risks remain significant, and the degree of uncertainty is still considerable. Based on these conditions, the group anticipates an operating EBIT margin of around 2%-3% in relation to sales for 2022, excluding the exceptional effects of impairments. This corresponds to an EBIT margin for the group of around -2% to -3%.
The new outlook is, of course, based on the assumption that there will be no disruptive impact on markets or macroeconomic environments, like for instance, a further impact on the Russian-Ukraine conflict or the increasing tensions in the Far East. This last slide now summarizes the outlook of the key indicators for both the fiscal year 2022 and the midterm perspectives. Regarding the cash flow, the group expects to generate a slightly positive operating free cash flow in 2022. As a result of the earnings situation, we expect ROCE to be significantly below the prior year's level. The ratio of net debt to EBITDA is anticipated to be between 2.0x and 3.0x by the end of fiscal year 2022.
We expect net working capital in relation to group sales to be slightly above the prior year's level as a result of prudent inventory management. With regard to CapEx, the group will continue to focus on strategic future areas and maintain its disciplined approach.
CapEx is expected to be approximately at the previous year's level of 4.3% in relation to group sales. For fiscal year 2022, the group expects that R&D costs, including capitalization, will account for around 5%-6% of sales. Finally, the group expects the equity ratio to remain within the long-term target range of 40%-50% of total capital. The group can also confirm its other medium-term targets. Well, ladies and gentlemen, thank you for your attention. Things are tough. The world is in disorder. On July 1st, I was 25 years with this company, been 16 years as the CEO, and I've never experienced in those 25 years time as we have them right now.
Really tough, but of course, we take those challenges, and we will bring this company group in a good future. Thank you for your attention. Mr. Jessulat and myself are, of course, now happy to take your questions as always.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift your handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Christoph Laskawi from Deutsche Bank. Please go ahead.
Good afternoon. Thank you for taking my questions. The first one will be on the guidance on raw materials. If we look at the net impact of raw materials and additional energy and logistic costs, it has been quite a negative in Q2. When we consider the margin bump in H2, which is factored in the guidance, is it fair to assume that these two buckets need to become neutral to positive, at least in H2? And is this already covered with customer negotiations? Then a bit of a follow-up to the guidance, but also a question with regards to the gas shortage or to the potential gas rationing later in the year. Elaborate a bit on how you are currently looking at fallback plans.
Could you source energy in alternative ways, and would there be extra cost associated to that? In case, yes, is that already covered to some degree by the guidance? That will be the start. I'll have a follow-up question for you. Thank you.
Yeah. Christoph Laskawi, thank you for your question. You know, to your first question, when we look at the situation we have seen now, for almost a year, really an upswing in raw material costs, which we have shown is the net amount. Yeah. This net amount has been really significant on the negative side. We have in fact parts of the portfolio with prices that are indexed to some raw material indices. What we have seen and of course, this is sort of trailing because the update, you know, is happening in a period three to six months after in fact, you know, those indices have changed.
We have here, of course, this delay that we have to factor in if we look forward because, you know, the highest amounts that we have seen here in raw material increases happened in fact now in Q2. The effects on the other side, on the sales prices we have not seen as of yet, but we will see with a little bit of delay. Yeah. When I look at the guidance, you know, outside, you know, the sort of operating EBIT, and here we say it's 2%-3%, you know, the 2%-3% is including additional amounts that need to be covered by customers that are not part of the automated price adjustments.
When I look at that and I look at the current information that I have, then the 2%-3% that I have in there, despite the fact that we have to include additional payments here, I feel pretty confident. Yeah. This is what I can say at this point in time. Of course, we need to update you as long as more information becomes available. Yeah. On the second item, there is the short term and the long term because we have energy, you know, electricity and heat and cooling, in the plants, which is not necessarily part of the processes.
On the other side, of course, we have ovens to a large extent that are gas-driven in operations. The first one is a short-term measure where we see opportunity to save gas consumption in the area of electricity as well as heating and cooling. We see, you know, in process, so to say, in regard to ovens that we operate here as part of our production operations only a longer term opportunity here to substitute with equipment that is driven not by gas, but by electricity. Yeah. This is the status here.
Thank you. A follow-up to the raw materials answer. Do you already have the agreements with the OEMs to cover that, or is it still in negotiation currently?
No, in ask
And another—
Yeah, sorry.
—no. A second question would be just on employee costs into 2023. I think the negotiations with the unions have kicked off. Are you confident that you can move down from the 8% ask that unions have overall, or very tough stance currently in negotiations from the unions? That will be another question.
Well, let me answer that because I'm pretty close involved in those negotiations. I think the whole thing depends on the situation that we are going to have in the second half year. I think the 8% is just out of the way. We have to make the union pretty clear that those, you know, burdens by additional personal costs is just a big problem for a lot of companies. With regard to raw material, some of the contracts are finalized and some are still under negotiation.
Understood. Thank you.
The next question comes from the line of Akshat from JPMorgan. Please go ahead.
Thank you. Good afternoon, Akshat from JP Morgan. Three from my side as well, please. The first one on the quarterly bridge, you show a net raw material impact of EUR 19 million in the quarter. Can you share with us what was the gross headwind please in the quarter? That's the first question. The second question is on the full year margin. You're talking about an adjusted EBIT margin of 2%-3% for the full year. It probably implicitly assumed a 0%-1% for the Auto OE business in the second half of the year. Do you think this is a new normal, in terms of margin for this business division in this new inflationary environment as we look into 2023?
Do you think it can be realistic for you to target again levels closer to that 3% that you achieved in 2021? The final question is on free cash flow. You're guiding for a slightly positive free cash flow for the full year. Can you just talk about the risks to that guidance? Given the production uncertainty, you talked about the gas shortage and the energy risks, going into the second half. A lot of suppliers are talking about safety stock on the balance sheet and also rising working capital levels. Does the guidance include any financing of working capital or any buildup of safety stock? Thank you.
Yeah. To your first question, you know, the share of price impact, you know, across, you know, the impact here, is, you know, somewhere around 30%. Yeah. The difference between gross and net would be a roughly 30% increase in terms of what the gross impact would be, also relative to, you know, what the price adjustments would be to come up with a net effect. Yeah. As a rough order, I would want to give you. What you say with the 2%-3% guidance and the conclusion in regards to the OE segment, yeah, number one, it needs to improve in the second half of the year, of course, you know. That's very clear.
That includes more compensation here for the impact that we have seen here in the past quarters. That is very clear. As the new normal, I don't see it like that because you know the longer term needs to be significantly different relative to what we see right now. When we talk about target setting here and talk about negotiations, clearly the reference as a new starting point is where we stood at you know from an operations perspective at the end of 2021, at the end of our efficiency program. No? This is really you know the new starting point where we have to work our way up to start again at that point.
No, it's not what we have as a target here to stay on that level, what we see in 2022. On the free cash flow, I do not really see so much more risk from the inventory side. Inventories have been affected, of course, by higher quantities based on inefficiencies here in the supply chain process, but also foreign exchange and, of course, prices for raw materials. You know, those three factors all go into inventory. But I see this as more like an opportunity and not a threat. Out of working capital, I don't see much more threat the way we operate it. What is, of course, having a high uncertainty is the assumption that we have now in regard to the compensation side from customers. This is uncertainty number one, and the other one is CapEx.
We have quite a number of new projects coming online here. In particular, of course, E-Mobility, but also Lightweight. Here there is a lot of activity, so that means that CapEx, I would expect that it's gonna be picking up in the second half, relative to what we have seen in the first half. I factor those in regard to, number one, having, you know, a positive free cash flow in the second half. For me right now, it's a little bit early to say it's more than that. I'm pretty sure we get it done, that it's gonna be a positive free cash flow, the way we run it and the way we see things right now. To promise more at that end is too early for me. Yeah.
Thank you so much. Just one follow-up on the flow-through OE margin. I understand it's a more medium-term comment, but as you talk about building your way up from the 0%-1% margin level to the 3%, what are the main drivers in your view? Is it still volume recovery? Is it product mix with all the lightweighting, battery orders that you have in your pipeline with all of those ramping up, is it a product mix point? Is it more cost efficiencies? How should we think about the incremental operating leverage, please? Thank you.
You know, there is from short term going more to midterm the following items in my opinion. The one is short term, clearly, the compensation from the customer side relative of course to the market development, raw material markets. That's clear. You know, also other inflationary developments regarding logistics, energy costs and also labor inflation, of course, that factors into that. On the other side, what we have to remember, we have new business units in the group that are in the development cycle. They are in the start of loss-making situation right now, and that is a pretty solid double-digit figure. Step by step, you know, for example, along with the Drivetrain business unit here in E-Mobility, we have a factory in the U.K. that now goes or is in the revenue cycle.
We see the same in battery, and we will see also the same in fuel cell. No? The second factor here in OE is that we move structurally from a start-up situation to the revenue cycle, and that will give us also significant contribution and will help to bring this segment, which is of course, you know, having the classic products but also the new products in this segment. That will help this segment structurally, really to improve and to get stronger.
That's very helpful. Thank you so much.
The next question comes from the line of Marc-René Tonn from Warburg Research. Please go ahead.
Yes, good afternoon. Thank you for taking my question. First one, coming back to cost inflation and you mentioned the energy cost and logistics with the EUR 7 million increment and -EUR 4 million for Q2. I would like to ask whether there's been any kind of hedging still in place, whether you still secured rather, let's say, favorable energy costs for this year and whether we should expect another big chunk negative from that side in the future, be it in the second half of this year or in 2023, from, let's say, any kind of hedging which might have been still in place in the current year. Second question would be on the E-Mobility. I think we've seen that the revenue is improving substantially already in the second quarter.
Whether you could give us some indication that you would like to be at, let's say, in terms of E-Mobility revenues, in terms of a run rate, perhaps towards the end of the year, be it per quarter or let's say some kind of indication that this may go next year. As I understood that there's a lot of, let's say, interesting contracts in the ramp-up phase. The third question would be more a bit like a kind of housekeeping or technical question. When we talk about underlying or operating EBIT margin, you're just basically adjusting for these impairments which we have seen in the second quarter. I think the HR-related cost from Q3 amount is EUR 5 million.
It could be some kind of considered as a one-off as well or is there anything we should expect from that side in Q4 as well? I think also the first quarter had some negative one-off effects in the amount of EUR 9 million. These will not be adjusted, so it's just simply the impairments which we taken out when we're looking at the adjusted margin for the full year. Thank you.
On the cost inflation, we have had, have, and will have, you know, hedging on different levels. We have of course the contracts with our suppliers which, you know, could stretch out over several years. On the one side and, you know, this also of course may be the case in regard to electricity, not so much in the logistics area. On the second side, of course, we hedge in the market for raw materials. No? What we have done in the past on the major materials is aluminum and nickel as part of the alloy materials that we use for gaskets.
Right now, we have seen that the LME has come down also based on, I think, some worries in regard to the, you know, general development of the economies. Of course we do that. We have done it, and also we have benefited from it also this year in particular in the time where we had, you know, the significant increases here around the beginning of Q2. You know? The target that we have here is to make us, you know, less dependent on price swings, yeah, to the extent possible. There is always, you know, a short term what the situation looks like and the assessment if it's, you know, a good level or not. It's part of our active risk management in the group.
Of course, we do this, you know, as it helps us to secure the margin that we have set. Yeah? On the other side, E-Mobility, there is, you know, currently in the foreseeable future a little bit upswing, I think, in the single digit amount here. But there is more next year coming from start of production here from a project that we have also published in the battery area. Also expectation is, you know, from the sales, you know, success in the Fuel Cell business that here step by step we grow sales. You know?
I cannot and don't wanna be more specific now because with those new projects, sometimes there's delays and as we come close, I can get a little bit more detail in regard to that. Right now, it's a little bit far away when we talk about the startup next year. On the third point, you asked, you know, the impairment, what we have seen, if there is more to be seen towards Q4, right? Was that your question?
No, it was more that you're tackling a question about adjustments overall. I think you maybe will only adjust the impairment, right? Which you now had in the second quarter. I think you have other one-offs, or I don't know whether we should, if I think about these HR-related costs, which are in 2023, whether this is more one-off or if they're an ongoing issue. I think you will not adjust for that one, just for the impairment.
Yeah. What we have reported here from an operating EBIT is the adjustment for the impairment.
Yeah.
Topics. No, we don't have a more complex structure underneath that. Yes, that's right.
Perfect. Yeah. Because underlying, if I see it correctly, I mean, the Q2 results and these HR-related costs, this is kind of one-off, isn't it? Or is there something we should also expect for Q3 and Q4?
Yeah. You know, there is what you mentioned, no? There is one-offs in there, yeah, what we have as an operating EBIT. Going forward, we probably will be more specific on what's a one-off and what not. No? Right now, in our current reporting, we have only taken out the impairment.
It's the impairment. Only the impairment.
Okay. Perfect. Thank you very much.
As a reminder, if you would like to ask a question, please press star followed by one. The next question comes from the line of Michael Punzet from DZ BANK. Please go ahead.
Yes. Michael Punzet. Good afternoon. I have two questions left. First one is once again on your EBIT guidance. In a rough case, could that be the case that you came in below this -3%, taking into account also the one-offs you have booked in the first quarter? The second question is, taking into account your guidance, I think it's fair to assume that you will have a negative net result in 2022. What will be the base for your dividend proposal for the AGM? Will that be the reported figure or the adjusted figure? In other words, is there the possibility that you will pay a dividend despite a net loss in 2022?
Yeah. On your first question here, you know, like I said initially, no? There is a lot of discussion and negotiation going on right now in regard to compensation topics, which by the way, in my opinion, is gonna be continuing into 2023. Not on the past amounts, but in particular on the future amounts as well. What's the risk to arrive below that level? You know, I said, you know, in my first statement, I'm pretty comfortable. I see the risk here as fairly low to arrive at a lower level from what I know today. Yeah?
On the second question?
Yeah. To be honest, it would not be really a good thing to talk about a dividend on August 4th of the ongoing year. We always had the clear view on that. That once we have the full year result, we as a board make a proposal to the supervising board.
Okay. A follow-up question to my first question. I think it's not related to things could happen in the second half. I only relate to the already booked negative impact of EUR 8.7 million. Is that included in your guidance of -3% on the lower end, or is that only adjusted for the EUR 95 million from goodwill impairment?
No, it's essentially it's factored in. It's part of it. You know?
Okay.
When you run the numbers, you know, with a comma, then you see there is a little bit of course, you know, an offset here. But the, you know, those roughly is all factored in what we have communicated here. Yeah.
Okay. Thank you.
As there are no more questions at this time, I will hand back to Dr. Stefan Wolf for closing comments.
Yeah. Thank you very much. You have heard rough times, but of course we deal with that, and I'm pretty sure that we will go successfully through those rough times. We see also better times to come. Thank you for your attention and looking forward speaking to you in November. All the best. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.