Good morning, thank you very much for joining us for Manz AG's conference call regarding the publication of the financial figures for the first half year of 2023. First, our CEO, Martin Drasch, and CFO, Manfred Hochleitner, will give you an overview on the operational and financial developments in the first half year of 2023. Afterwards, you will have the opportunity to ask your questions. To ask a question, please use the Raise Hand features on Microsoft Teams. You can find the respective hand icon in the upper navigation bar. As standard settings, the opinion to turn on your camera and unmute your microphone has been disabled. We will call on people to ask their questions and unlock the camera and microphone options. Please make sure to afterwards unmute your microphone yourself as soon as the option has been unlocked.
In addition, you can also use the chat function to send us your questions. One last point before we start with the conference call. Please note that this conference call is being recorded. I would now like to hand over to Martin Drasch and Manfred Hochleitner.
Thank you very much, Axel. A warm welcome and good morning from my side. We are happy to have you here today to discuss and to give you a deep dive into our half-year figures, which we published as of today in the morning. As you will see, we had a very busy and also quite stressful second quarter, with good success at the end of the day. Due to several impacts and, let's say, developments, which we will go into deeper afterwards and give you some insights here, we had really some good outcome here. Let's start with our KPI numbers, which you know from the last time. We start with the order intake.
As you can see, we achieved roughly EUR 48 million of order intake in the first half-year compared to last year's half-year number. This is a reduction by -57%. This is due to the overall situation and also the very good order intake we had in the second half of 2022, also the reluctance of our customers due to the topics of the economic situation and the reluctance of investments of our customers and a lot of technical discussions we had with them. The decision-making process was, in several orders, delayed, we are actually in a hell of discussions with different customers in front of the summer shutdown to finalize this discussion and generate the necessary order intakes. We are looking here very optimistic into Q3 and Q4 to achieve them.
Very good order intake is the also then good situation, which we actually face now with a good order backlog, which helps us to overcome such influences and impacts out of the market. Second topic is the cash situation, as you can see, which is also in connection with our order intake, as we normally achieve a huge amount of our cash with down payments from our order intake customers. Also, this is in combination with the missing order intake we see actually. Manfred will also give you here some further details in the next slides. On the revenue side, we had really good development, as you can see, compared to last year's half numbers, around EUR 142 million of revenues, which we generated in the first half-year.
As I mentioned, it was very busy second quarter, and we had a really good outcome with several customers, where we had to support in the ramp-up of their lines and machines we delivered to them, as they are still not on the level that they are able to handle such lines alone. We invested here and now got the feedback from the customer with further order intakes and payments in such relation. This was a very busy but also very successful outcome in the first and second and first quarter. This is also then reflected in our EBIT numbers, as you can see. This negotiations and developments with higher revenues and closing of some of these orders really lead us then to the situation that we increased the EBIT.
Also, the final negotiation and finalization of our Britishvolt order, which we'll give you some further insights afterwards, had an effect on, on this topic. This is the overall KPI figures, which you can see and which you can see in the development, and I will now hand over to Manfred, which will give you some further insight into our financial figures.
Yeah. Thank you, Martin. Also from my side, a warm welcome to our today's conference call. After you have seen the KPIs, let's make a deep dive into our income statement first. We have achieved, as you have already seen, a significant and strong increase of revenues of 12% compared to the previous year, and this increase was driven by both divisions, where MBS showed a stronger growth than Industry Solutions. As already shown in the previous reports, the total operating performance reflects the progress of our IPCEI subsidy project in connection with developing new battery competence here in Europe. The main item under the operating income is the effect out of the share swap from Customcells, which happened already in the first quarter, this was a share swap from Customcells Tübingen into Customcells Holding.
Aside from this, we recognized roughly EUR 1.6 million of exchange rate gains under this position. Very good development on the side of material expenses, in the first six months of this year. We reduced the material cost ratio by 9 percentage points compared to the first six months of the previous year. Main reasons are contributions of improvement of costs in running projects and an optimization of external service providers in connection with our ongoing execution of our customer projects. Personnel expenses are higher due to the usual salary increases and higher headcounts in Germany and Italy in connection with the IPCEI project. Therefore, we have an increase in high-cost countries compared to certain stable results and stable headcounts in the low-cost or lower-cost countries.
The other operating expenses are in the level of the previous year, which shows clearly that we have a strong focus and keep our costs successfully under control. In total, our EBITDA came out at EUR 16 million, which is EUR 16 million higher than last year. Overall, an excellent development, even without the impact of the share swap. The same is true for the EBIT, of course, this EBIT growth too, also very strong by EUR 16 million. Finally, our net result ended also up with a strong plus of EUR 7.6 million. Let's now look at our divisions. As already mentioned, let's first start with the division MBS. As already mentioned, the revenues grew by roughly EUR 9 million or 18% compared to last year, mainly due to a good progress of our projects.
The EBIT grew also very positively, with more than EUR 14 million compared to last year, as we could close several major contracts with additional cost coverage incurred already earlier. In addition, we terminated now officially, Martin mentioned this already, one of the two orders from Britishvolt, and you can see this also in a decrease of our order backlog, in Mobility & Battery Solutions. We see now, that's very important to mention, that our cooperation of Dürr and Manz starts to come into real life, as we have processed now the first RFQs together. The European market now realizes more and more that there is indeed a European alternative and a European answer to the very aggressive competitors from China.
Regarding the market development in the past six months, we see that investments have been postponed due to many question marks now arising from the different subsidy projects in Europe and in the U.S.. As a consequence, the order intake is below our expectations. However, our sales funnel remains with a volume of more than EUR 500 million for battery applications, very strong, and so we are expecting a much stronger order intake in the coming months. Going forward now to the division Industry Solutions. This division shows, in total, a very good development with a further growth compared to last year. This growth is also reflected on the EBIT level, with an EBIT of EUR 4.7 million. This is EUR 1.5 million higher than last year.
The growth is mainly driven by the German business area, Industrial Automation, whereas we see a weaker market for display in Asia. Nevertheless, the growth perspective of our FOPLP business remains very stable and shows increasing order intake perspectives. Just to remember, for those who are new in this call, FOPLP or fan-out panel level packaging, in, in this application, the components are wired in thin-film technology on a wiring layer with embedded components. Passive components, such as resistors, capacitors, and inductors, are integrated. This thin-film technology allows the package thickness to be reduced significantly compared to other packaging technologies. Now, going forward to the balance sheet. The balance sheet total is now EUR 28 million lower than at the end of last year.
On the non-current assets side, we have a slight growth by EUR 7 million, mainly due to the impact of the share swap, which I already mentioned and which happened already in the first quarter. The current assets came down by almost EUR 36 million, mainly by a reduction of contract assets and lower cash and cash equivalents, due to these missing down payments from new orders, as I already mentioned, I and Martin before. On the liability side, the equity grew by EUR 6 million, based on the positive results of the first six months, this leads now to a very healthy equity ratio of 34.3%. The non-current liabilities remain on a stable level, the current liabilities are now EUR 33 million lower, based on lower trade payables and contract liabilities.
The delay order intake was compensated over a higher usage of our financing lines, which leads to an increase of our net debt position. Regarding the cash flow, as already described, the negative cash flow from operating activities results mainly from a decrease in contract liabilities due to delayed order intakes. The cash flow from investing activities shows the current status of the financing of our IPCEI projects. Also there, we have seen a delay in getting the payments from the governments. We received this only after the first six months, 2023, so this had also a negative impact on this cash flow from investing activities. Finally, this negative cash flow from operating activities and from financing activities was financed partially over a higher assumption of our credit lines.
In total, we ended up at a cash level of EUR 7.6 million at the end of June 2023. So far, the deep dive in our numbers. I hand back now to Martin for our strategy and outlook and more details for that. Thank you.
Thank you, Manfred. I will take you on the journey now further on our outlook, but first of all, short reminder on our strategy focus. As you can see, based on our two division model we have, we want to be the top 3 supplier for EU and U.S. as integrator of production equipment for the battery industry, and for our Industry Solutions department, we want to be the clear target provider, solution provider for our customers. In case they have special topics, we can solve them and grow with them, with their special demands. That's the second part of it, and as you can see, the principles of our focus strategy is clearly to invest in such markets where we see opportunities to bring on our technologies and see a further growth.
Also what we see, that we have then the potential in this early entrance in these markets, that we can realize then business potential in maturing markets or development of maturing markets. Clearly, also, as I mentioned, we want to pushing forward our innovative technologies and solutions in different businesses and want to become here with our customers, the first in the road to solve their, their issues. At the end of the day, this then reflects as well in a further expanding service business, which we already recognized the last two years as more and more machines of Manz are in the field and need for sure our assistance and service.
Having a look on the industry solutions potential, what we see actually is a really increasing demand from the automotive market, especially for components and solutions for the electronic in the powertrain area and, for example, for the cell contacting system, but as well for inverters and battery management systems. There is a huge demand coming up for scaled solutions, which we can answer with our LightAssembly platform, which we made now fit us as well for the automotive industry, which was the development target of the last years, to clean it up and really make it traceable and have also traceability in our lines in there, that we can supply here the necessary solutions for the automotive industry.
As you have seen, also, we won here the first order from a Tier 1 supplier, which was beneficial for the solution of Manz. We see here a huge potential, which I will show in the next slide, in some figures and data for the upcoming years. Also, what we see is that there is a strong demand also for the non-automotive market, because more and more tools and equipment is also supplied with power electronics. Also here, in a smaller scale, we see the huge demand for solutions from Manz that we can assemble on a high quality and also on a high scale with our solutions and our technologies, such products.
In the digital printing technology, we see a further demand after now our first projects are realized and, in the finalization of the projects, that there is huge interest from different industries, coming up with our solutions of, fast supplying of the products under the printing head. There's a high precision and the highest throughput, so that the cost of the printing head gets reduced, and that makes this technology interesting for, for other areas, especially also in the automotive sector, to get rid of the lamination technology in different applications. In our Asian market, we are actually developing here a solution for functional printing, which is of high interest of several customers, which are developing with us here a solution which can be scaled in the next quarters.
Also here, like Manfred mentioned, we see an excellent market position in the FOPLP technology and also in the IC substrates. We had here the last weeks, a roadshow in the U.S. with high interest of several big customers, which are interested in this solution with our customer, STMicro. Here we are seeing a huge demand coming up also out of the aerospace industry, which has a huge demand for such technologies and such potential solutions also then build up in the U.S. market. As announced, you can see now in this slide here, for example, for EV inverter assembly lines, our assumption, which we had in a basic scenario and in an extended scenario, with a CAGR of the roughly 11% for the next six years.
As you can see, there's a huge demand in, in this market coming up from roughly EUR 500 million in 2024 of the basic scenario and going up to nearly EUR 800 million or EUR 900 million. If we go to the extended scenario, even EUR 1,600 million of overall investment in this market is, is achievable. Coming back to what I mentioned before, there is really a need of highly automated solutions with a high precision traceability, as these inverters and as well, the necessary components need to be on a high accuracy to avoid failures in the systems and avoid burning of such components.
Therefore, we see here a huge potential for our solutions that we already have proven with our customers we have in place, that Manz is able to handle here also lines in a scale of more than 160 process modules in a highly connected way in the automotive industry sector. This gives us here the good outlook for this business and a further development in this area as a given fact. Coming to the growth potentials in the Mobility & Battery Solutions department, we still see a significant growth in the demand of lithium-ion batteries, but as well, other technologies coming up, if it's sodium-ion batteries, also lithium colored batteries, which are coming up.
This is really a huge demand and a necessity for different customers to be here in the market and thinking about to develop their, their own technologies. As you can see, we see that the forecast will reach roughly $9 billion by 2026, which is a CAGR of more than 20%. We are in this business since several years, so we are good prepared also with our IPCEI project and our anchor machines we have developed and we already sell.
For sure, as Manfred already mentioned, with our partnership with Dürr and GROB, we are also very interesting for our customers coming out of the OEM sector, which see us really here as a beneficial part for them to have other technologies, more reliable products, higher OpEx, and less scrap in the lines than they actually face with our Asian competitors. This gives us also here a good opportunity for the future to have higher growth. Also we see in the future, and also the next quarters, a very, very good situation, like Manfred mentioned, with more than EUR 500 million of projects we're actually processing in our sales department, which we are actually discussing and further develop with the customers.
We see now a strong revival or coming back of the North American market, even faster than we have expected. This is due to the Inflation Reduction Act, so there are more players now in the game, taking opportunity and advantage out of this program, which is, from our point of view, very interesting and very beneficial for such customers. They are now actually in discussion with us how one can support and when we are able, then we have the machines ready for their products. This is also something very interesting also for the big partners over there with Dürr and Hope. One solution is a very interesting field for them to have here a reliable partner with scalability and also very good footprint in the North American markets.
Therefore, we still have a strong focus on the development of technologies in this market. Our FPT department have developed already very good products, and I just would give you here a heads up. We will have our showroom showing on our site in Tübingen in October, where we will give you your insight, and we will present some of our new machines and technologies. It's our Tech Day, which we will closely have our customers with us and show them the advantages out of our developments. This is also clear focus for the future, that we develop the technologies on a level and also with the necessary developments in the software and digitalization area to reduce scrap. This is the biggest advantage the European suppliers can deliver.
We are famous that we have machines already delivered years before, which are reliable, which have, availability and capability to process on 99% of availability, and meantime, to repair more than five or less than five minutes. This is something which we are famous for, our task is now to show this as well in the battery production, which our competition is actually not able to show such numbers. This is our clear focus, where we need to step in and need to prove our capabilities in the near future. Therefore, also due to the fact that there is no standardization from a battery perspective, visible, actually, we developed further our motorized, anchor machine products.
Means that our machines are flexible and are fast adaptable to the needs and dimensions and decisions our customers, at the end, make for the dimensions of their cells. We are then capable with a lower and very fast mechanical engineering effort to adapt these machines. The processes are stable and known, and this gives then also us the opportunity to integrate and ramp machines earlier, and lines earlier than our competitions. With these topics, like mentioned also in our strategy, we see a huge chance to have here increasing part of series business in the future. Underlining that one with some facts and figures.
What, what we found out after several discussions also with, with some of our close partners and customers, like Daimler Truck, we see the future here is, is coming in waves. It's not coming straight up and reliable, but it's, it's different waves which we are actually seeing. The first wave of battery production equipment is actually ongoing, and as you can see, the main focus actually was here in the area of Asia. Europe and America were, let's say, on a, on a lower number, that's what we are focusing now, is wave number two. Already a little bit delayed due to the fact that some of the subsidy programs and uncertainties, energy costs, actually, were a huge point of discussion for investments of, of our end customers.
Nevertheless, with the infield and a deeper look inside with our customer, we see that these investments will now come, and you see now a different share in this wave for 2024-2026. where Asia is lower and Europe and America come into the focus. Then for the next scaling effect, we see then again, a clear focus for the Asian market, which we have then roughly a number of 60 or two-third of the installation. Also Europe, with a part of 24%, is still highly reflected. Overall, what you can see, it's the number of factories which we see.
In the second wave, is 85 factories worldwide, which we see roughly 60 of them interesting for Manz, is a huge number. We are able to focus and as well target them with our corporations we have in place, but also with our concept of anchor machines and solution provider technologies, where we can solve some of special topics of our end customers. Also here, the growth market of battery and cell production equipment is ongoing, and we see also here a huge, huge demand for technologies which are really outstanding and delivering the capability to lower the cost in the cell production.
Means that, that the cost of kilowatt hours per, per, or the cost per kilowatt hour will be reduced, and this is only possible if we can reduce scrap and have a higher capability and less energy consumption in the manufacturing of these cells. For the opportunities, for Manz, we have identified four clear opportunities. First, window of opportunity is for new cell producers, which have less capabilities and knowledge. They need to act reliable and as well, experienced partners and machine builders, which can support them and help them to train their people to not make the failures all the others do. This is our first window, which we see as, as target customers and opportunities, and they also see this in the capabilities of Manz.
That's also the second topic, that with this expertise, we are really a partner on eye level. We are already supporting our customers in the development phase of, of the cells, with the experience we have based on the lines and the products we deliver to our customers since more than 30 years. We also have here a clear line model, that means that there are more than 50 processes in such a battery production line, but each process can lead to a failure and to scrap off the entire cell. The interconnection and the digitalization of such a line is of a huge effect.
That, that means at the end of the day, we can detect in the pre-processes, the failures, can do a rework in the after-processing, or even take the cell out, that not even more waste is generated if the defect is too high. This leads to really lowering of cost because the material ratio of a battery cell is roughly 70%. If you produce a scrap, then these costs are on the table, you cannot use them. If you avoid scrap, then you have a huge effect on the overall cost structure of the output of your fab. The fourth window of the opportunities for Manz is that we are modular, so we have developed our processes.
Even three, actually, patents are ongoing for new processes that we are filing, and we will show on our Tech Day in October, which are outstanding and really will deliver a game-changing solution in different areas for our end customer. We are looking really forward here to integrate this in the first lines. First of this equipment already is sold to our partner, Daimler Truck, and will be used in their fab in Mannheim for a first test on real production. All of this leads now to the order intake and backlog situation. Mobility & Battery Solutions, you see, for the order intake, we have roughly EUR 42 million achieved, like we announced before, in Industry Solutions, EUR 42 million.
You can see here we have the biggest gap of the order intake compared to the 6 months figure of 2022, mainly due to a weak order intake in Asia. There, we already face huge topics in the investment behavior of our customers due to the difficulties over there in the industry of display. Different looking field is then the area of the FOPLP and IC substrates technology. Here, we see a huge investment demand, but still some reluctance, but the development is very promising in this area that we will see a change here, which leads then to an overall order intake of EUR 84 million, like shown before.
Backlog in Mobility & Battery Solutions still quite very good with the reduction of the Britishvolt order of now EUR 118.6 million. Order backlog in the Industry Solutions department, we have an order backlog of EUR 102 million, so still very healthy, EUR 221 million of order backlog, which we are actually reducing by very good development in the order processing, with very good development also on the material side. Clear target is for the next quarters to get the necessary order intake. Potentially, the market is there. We need to convince our customer to go with Manz. This is the strong task for the entire team of Manz in the next weeks and months.
Coming to the guidance, we see still that our guidance is very valid, so the increase of the revenues in the lower double-digit percentage range. The EBIT margin we see in the middle positive single-digit percentage range, and the EBIT margin will stay in the low positive single-digit percentage range. With the situation we see here, we keep our guidance in the way we have published this in the beginning of the year. Far from our side, thanks for having us here, and we are now looking forward to receive your questions.
Thank you. As already mentioned in the beginning, I want to remind you to use your Raise Hand feature of Microsoft Teams in order to ask your questions, and I will then give you the opportunity to talk. First question comes from Mr. Rutzgar. Mr. Rutzgar, you should now be able to unmute yourself and ask your question.
Yes, good morning, gentlemen, and thank you for taking my questions. The first one is on your earnings development, and here on the MBS segment. We see some fluctuations in the earnings development, and the Q2 EBIT looks quite high. What were the drivers here for the strong performance, and do you consider this as more than the usual cautiously calculated project costs?
There are different drivers. First one is the Britishvolt, the current stock of this project. Also clearly to mention here, it's not a decision against Manz, just the project on the new owner of the project is postponed. Therefore, we decided together with the customer to cancel this project, which has one effect. The other one is the topic that we were able to close really some important projects where we have invested for our customers with amendments and also support in the ramp-up of the lines, which we did without the necessary order intake.
The money was spent, and we received now, as a commitment from our customers, the payments, which it was then an increase in the EBIT area here and was highly appreciated by our customers. The other one was the effect of our anchor machines, like the BLS, which we sold with very, very low headaches and a very good margin. These projects or products are delivered in 3 to 4 months and are able then to get SAT, so final acceptance, on our customer side very fast and with a very low effort from our engineering side and low risk. These are the three effects which had this impact, besides the Q1 effect of the swap deal we had in Customcells.
These are the main drivers for this positive development in Q2. As an outlook, this is ongoing. We still see with the projects we actually develop with our customers, that there is strong need within months to support, and we see further development also here in the service department, which has a very good margin in this direction. On the other hand, we have a huge interest now coming also for welding technologies and anchor machines from our side of customers, which will support us in the direction of having here a good EBIT margin.
In a nutshell, it's now the developments and the investments we have taken the last two years in process developments and machines are now coming really back to us, that the risk is reduced, and we have the potential to increase our, our EBIT and margin in the projects. In a parallel effect, that we have now a different situation in the components area, so the market for components is coming down. There is no really need anymore to pay more to get components and parts earlier delivered from suppliers. This was a huge headache of the last 1.5-2 years. Also we see here some effects that the negotiation with suppliers is much better than we had this before.
Okay. Maybe can you provide us the impact of the Britishvolt order termination on the EBIT?
Overall, we, we recognized the first portion of the contracts in, in revenues, and EBIT is about EUR 10.7 million. It is very important to see that the costs in connection with the projects happened already last year. This is only, let's say, a delayed recognition now of revenues and EBIT in this context.
Okay, fine. Got it. Thanks. My second question is on your order situation, and I guess it is, the situation in the Industry Solutions segment is somewhat different than in the MBS business. There was a slight improvement in the order intake in Q2 versus the first quarter, but still on a low level. Where do you think is the industry in terms of the cycle, for the large orders, mainly in the, in the display area? What are the signs you get here from your customers for the second half of the year?
Well, for the display industry in Asia, mainly here in China, we see some revival of the industry. There was nearly 1 year, nearly no projects on the market, and the few projects or tools which were requested from customers was a highly competition with the players in the market. Now, 2 or 3 projects coming up in the display industry. Actually, one is in final negotiation in the next weeks with a long-time customer of Manz, where we see a huge chance to get the order intake here, but still very, very strong competition in this field, and very low projects on the market on the display industry. That's.
While we focus here on the FOPLP technologies in IC substrates, where it's really a different business, which releases us a little bit of this cycle market here in the display industry. I see here really some, after this roadshow in the U.S., some projects coming up also with fast decision-making process for the first lines. The first prototype lines are here in discussion, but even these lines are already of really reasonable value. Also in the Asian area, we see that the FOPLP technology is requested as well. Here in Europe, we see some projects.
Based on that, that this revival of the display market is coming back, the potential for electronics, with these two new technologies, and then additionally, the digital printing technology, gives us here really a good opportunity to have an improvement of all the intake in the next two quarters. Then let's see how this develops for 2023. I think with the new technologies also here, we have some good chances. Here in Europe, for the Industry Solutions and our department, we see also quite good chances for all the intakes. The decision-making process is ongoing.
A lot of these decisions is driven by uncertainties due to supports of the government and subsidy programs, and driven also by discussion about costs of energy, especially in the area of the inverter technology. For the battery production, as mentioned, it's really here in the final stage of the decision-making process. Also, now, these processes are so far delayed that they need now to decide. Doesn't matter where they build the fab than in Europe, outside Europe, in the U.S. or elsewhere, but the decision process is to be made, not to lose further time in this direction.
Okay, thank you. My last question is regarding your cooperation or the cooperation partner, Dürr, has acquired a few weeks ago, the automation specialist, BBS Automation. What does that mean for your cooperation and also for the potential co- contribution of BBS to the overall cooperation, and do you consider BBS as a competitor of yours?
No, there's no impact from, from this deal which Dürr made with BBS. We haven't seen BBS the last five years as a competitor, so they are in complete different fields acting. It's more or less more related to, to GROB, as they are also in the technology of manufacturing of, of hairpin technology or winding technologies in the area of e-motors. There, there is a potential, let's say, field where, where we have some, some friction, but as the e-motor is not part of the cooperation, this is beside, and BBS is not part and not visible in, in this area. We have a clear structure who is responsible for what. Manz is responsible for the entire cell assembly technology.
Means after the electrode manufacturing, Manz takes over the responsibility, does the assembly of the entire cells, and at the end of the line, then GROB takes over and is responsible for the module and pack assembly. Just to give you also here a little bit more insight, we finalized now our reference fab, we called it. It's a complete fab of 10 GWh with a complete footprint, with a really advanced layout and setup, which is, let's say, much better than what we know and see on the market. Means the footprint of the surface is lower, the logistic processes are lower. We have a digitalization concept in, which is fully driven by MES system, which is developed by Dürr.
They have a huge experience out of the industry of paint technology and also body and mind technology, where they have already achieved here with their setup of digitalization, availability, improvements of 6%-8% in existing lines, which we can make use out for our industry and the technology in the battery manufacturing. We will have now a roadshow in the next 2-3 Manz, and visit with our setup and with our capabilities, the main interested customers here in Europe, which have us really here in the focus.
All three C-level members, we will have here a roadshow with dedicated C-level meetings on our customer side to show them here the advantages of the collaboration and also the capabilities, and really the, the drivers, which gives them a possibility to reduce their cost per cell or cost per kilowatt-hour. I was, was really proud to, to see this two weeks ago when we had here a huge internal, internal meeting to show them the, the changes and the advantages out of, of this development. It's, it's really impressive what we have as an outcome here compared with the competition. For sure, still cost is a topic for the equipment.
We know we have higher costs, but, as I said before, if you have 70% of material cost in and you produce more than 20% or 30% scrap in a production line, if you can reduce this by 5%, even then, the higher CapEx investment for the machines, they expect.
in several weeks or Manz, whatever, at the end of the day, it's the size of the fab. I think this is our huge advantage, and we will explain this now to our customers and discuss with them the next projects out of the cooperation. First is already ongoing, the next ones are really in the pipeline.
Okay, perfect. Thank you. That's it from my side. Thank you very much.
You're welcome.
Thank you, Mr. Rinska. The next questions are coming from RTL, Pil. Mr. Pil, you should now also be able to unmute your
Yes. I hope you can hear me well. Good morning, everyone. Thanks for taking my question, actually. First of all, housekeeping, just to be very clear on this, EUR 10.7 million from Britishvolt that you mentioned. Accounting-wise, you did book this as revenue, and that was obviously falling then through to the EBIT line. Is that correct?
Actually, yes.
Okay. And a question into that: I understood that was for the first phase of the contract, right? Should we expect additional effects like this coming up in the current quarter?
That's right, but not in this huge amount. This will be much lower.
Right. like what? EUR 2 million-EUR 3 million maximum or something like this?
Roughly. Roughly. A little bit higher, but roughly.
Okay. Then you said something on IPCEI inflows. I'm not quite sure if I got this correct, but should we expect inflows from the program anytime soon, or in the current quarter or only in Q4, or what, what is the additional money that you might be getting?
Normally, this is paid on a regular basis, quarter by quarter. We can, we can, yeah, hand in the cost, which happened in a quarter before, and then it is, yeah, checked and then paid according to our subsidy ratio in the following quarter. Due to some internal delays in executing these tax on the side of the government, we had a delay, so this was a late payment which we received, and these were roughly EUR 6-7 million, which we got now, and there will be another amount coming up in the first quarter or so.
Okay, 6.
On our progress of the project.
Right. EUR 6 million-EUR 7 million have already been booked in the first half.
It's not yet in the cash. It's not yet in the cash. This happened in, in, the after, after June, now, beginning of July.
Okay.
It's authorized, but it's not yet, yes, visible in the current cash, cash position.
I mean, you showed your net debt has increased quite significantly. Obviously, I mean, clearly, when looking at your cash flow statements, actually, you've been burning cash in the first half, quite substantially. Could you give us an idea of the free credit lines that you currently still have, and at what cost are you refinancing yourselves at the moment?
On a group level, we have still enough credit lines free, so that means in an amount to EUR 20 million-EUR 25 million. In addition to that, we have, as at the end of June, and as we already mentioned during our presentation, we have received additional orders from customers in running projects with additional cash impacts there. This has overall not yet been seen in the cash position at the end of June. That overall, of course, we see, as you have recognized also, that this delay order intake has a negative impact on our cash situation.
For sure, this is nothing which we can, which we can not discuss. Nevertheless, given the perspectives which we have in order intake in the second half of this year and given the additional payments we received, so we are on a still stable level. Nevertheless, as I said, the influences are negative impacts of customers is, of course, visible in our cash flow from operating activities.
Can I then ask, and I think that's probably the most important part? Actually, what are your financing options, actually, besides the EUR 20 million-EUR 25 million? Because, well, at the end, I think even liquidity is coming down to more than EUR 7 million, let's say, on, on, on, on cash that you showed at the end of June. It's not a very comfortable situation. Are you discussing alternatives to increase the liquidity? Because, I mean, long term, it's probably not an option to just increase that, step by step, but maybe there has to be a more structural solution to that. Are you also contemplating changing the structure of the group to some degree? Is it too early? Is now the time right to do that?
You know, I'm just getting my head around how you could improve the situation, because you rightfully said, I mean, obviously, you are expecting more orders, but I'm a little bit concerned, despite the fact that you are getting prepayments, if, if business revives as you desire, that you are in a position to, to pre-finance working capital and associated items that come with that.
One important remark, we do not have to pre-finance working capital because we only order new materials when we get new orders. This is a big advantage of our very volatile business, that we do not pre-finance any orders or even start doing construction works or design and engineering works before we get the necessary down payments from customers. That's very important. No pre-financing necessary. On the other side, you're absolutely right. Of course, it's my task, and I'm working on that, to improve the overall structure of financing the whole group. These are the typical ways. There's nothing extraordinary. These can be, let's say, a bank consortium with syndicated loans. This could be some bonds. This could be capital increase. This could be some smaller financing lines.
That's a healthy mixture of all the options which we have now, and so therefore, this is ongoing discussions, but it's on our also further development, which see in our business. It's not yet done, of course, as you have already mentioned, but we are on a good way to, to restructure and to, to bring the whole financing situation of the group in a stable manner, step by step.
Are you already contemplating selling some assets or some businesses you might not necessarily consider as core going forward? Is that something you think about?
Well, of course, not at the moment. Of course, this could be an option later on, but this is nothing which is right now on the table.
Right. And finally, last, last question on this, on this topic. Actually, given that you said you have EUR 20 million in credit lines, I mean, given the cash situation and the negative operating and free cash flow is gonna prevail for some time, I mean, obviously things are getting quite tight by whatever, you know, just before Christmas or whatever. There has to be something significant coming up, I guess. Are you in talks with your shareholders also when it comes to additional support, which you have seen last year, for example, in terms of additional financial backing?
I mean, you said already, obviously some, some measures you are considering, but, I think at the end, the, the, the pressure must be quite high on you at the moment, right?
Well, at the end, it all comes down to the necessary order intake, which we need. As we have mentioned already, the pipeline is pretty strong, so we see a growing interest in the market. We have our cooperation ongoing, so this is, this is focus number one here, not only on the board level, but also on the level of all our employees here in the group. We have seen some delays, but we think currently, at, at least what we, what we recognize from the market, that this delay is getting solved step by step. In parallel, we are working, working on, on some background financing, as I mentioned, in order to stabilize the situation, in, in regards of order intake and in further progress of our business development.
That's key number one here.
Right. Very last question. Sorry for torturing you a little bit on this, but I think it's, it's quite important. Is there a plan B, actually, if the order intake is not coming in as desired in the second half, and you finally find. Well, obviously, there's additional postponements we have to face, probably not only for Manz, but maybe in the, in the market. Economy is turning a little bit more sour. Is there a plan B, actually, if that happens?
Well, in our, in our kind of business, so project business, volatile, not really, or let's say, only to a very small amount, recurrent customers, we always have to have a plan B in, in our drawers, in, in our, in our desk. This is nothing extraordinary. This is normal business behavior here. And also in this situation, we have plan Bs.
Yeah.
Nevertheless, as I said, we expect new order intakes, coming in the next Manz, and, in case they don't come, as I said
Thank you.
In business, we always have plan B...
Much better.
In the drawers of our desk.
Yeah, much better. Yeah. Okay. Well, surely wishing you, the best on, on getting fresh orders, and thanks for taking my, critical questions. Thank you.
You're welcome. Thanks.
Thank you, Mr. Pil. Next questions are coming from Stefan Bauer. Mr. Bauer, you should also be able to unmute yourself now and ask your questions.
Yes. Hello, everyone. I also got a couple of questions. The first one is a follow-up on the order intake or your expectations about the order intake. I mean, in your press release, what you stated right now in the conference call, is that you're quite optimistic that orders will pick up significantly in the second half. What is actually the basis for this assumption? Is it fair to assume that you are very close to signing new contracts with more than one or two customers in the next few weeks? Is it also fair to assume that we will already see a clear pickup in the order intake in the third quarter? That would be my, my first question on the order intake.
The, the second question is based around the margin quality of your order backlog. Are there any loss-making or zero margin contracts still included in your order backlog? If so, when will these orders be completed?
Okay, thanks, thanks for your question. Maybe, maybe first one for the order intake situation, and give you some insights. I, I don't know if you can remember, a few quarters ago, I mentioned that we have a clear strategy to go our growth path with three to five core customers. Unfortunately, Britishvolt disappeared, but two or three are still, still ongoing. There we have quite deep insights on the development structure, and have also quite close discussions with them for further investments. Also, sometimes here, postponements are on the table, but that's our business. That's, that's life. At least we have some assurance, like for the projects you have seen in the past with Daimler Truck.
Some of them were, were postponed, but we have a clear view what will come and if this is reliable or, or not. There are some, some others where we have the same focus and same insights in, in that one. In parallel, we are working to, to replace some, like Britishvolt, which unfortunately didn't make it at the end of the day. Also here, we are already in, in deep discussions. To give you some insight how this, how this normally works, first of all, it's always about giving the, the customer really the, the, the competence level of Manz, giving them really the trust that we can solve their issues, and doing some test examples of welding processes, and so on.
Based off this feedback, we get a quite good picture, how are our chances? We get deeper in contact with our customers, seeing how they plan, how they develop their steps. With interfaces they have, we can support them on the planning level, and then so we come deeper and deeper into the connection with our customer, getting more and more information. There we have actually two new customers, which we see a huge growth potential with them, and to go along with them in. This is now really directly with Manz. Additionally, we have the same thing in the cooperation.
A clear signal is always if we get into discussion about terms and conditions, which we try to do always before we do the final negotiations, we see then if customer is really highly interested to get these things clarified with us, this is also for us a clear signal that there is another decision-making process and also the board meetings on the customer level on the, let's say, a really short, short time ahead. For sure, also here, some postponements are always possible, and it's not really that we can say the exact date, but also for these two customers, we are really here in deep discussion, in final negotiations.
We are really see this positive that we can here generate in the next weeks and in Q3 a much, much better order intake than in the last 2 quarters, what we have seen. That's, that's the way how we do it and why we are here quite, quite optimistic. As well, as I mentioned, the existing customer, long-term customers, we have also they have some investments ongoing, which we are actually in final discussions. This gives us here a clear picture and also a clear, clear view into the future, at least from our part of the assumption, that the necessary decisions will be made quite, quite soon. To your, the, question of the margin.
So actually, no really big, big pain projects which are not already reflected in our margin level. The projects which we have are mainly going very well, and are on a good margin level in most divisions. The one or two projects, like you always have, which are somehow critical in regards of some single processes, we have under control, and we see that we can close them quite soon. Actually, there is no further risk coming out of project, projects with less or low margins.
Okay, perfect. I would have two more questions. One on the Industrial Solutions business. I mean, if I got it right, competition looks quite intense here at the moment. Is it fair to assume that you're seeing above average price pressure when negotiating with customers about new contracts? The second question would be on the material costs. I mean, the material cost ratio looked quite promising in the second quarter. What's your expectation about material cost development in the next 12 Manz, especially given that we are hearing from other engineering companies that material costs and component costs are declining?
Regarding competition, like always, yeah, there's, there's always, competition. Due to the actual situation in, in the machinery business, which you can see on the VDMA numbers, there's also, for all the others, a high pressure on the order intake, especially for, for these companies which are coming out of the combustion technologies of the main, automotive industry. For sure, they need to search for, for new playgrounds and, and, fields for, for bringing their tools and their equipments in. As I mentioned before, we, we have now made it really that we are competitive to the tier ones, really on a, also good margin level. What, what helps us here is our really, front-leading technology, advantage, we have, let's, let's point it that way.
We already did here really some, some good developments with different customers. We have a huge experience, which gives us then the trust to also reduce sometimes the process machines and the amount of machines, which others cannot do, as we can rely on the processes and the experiences. This gives us some, some advantage and also tailwind in these directions. Then we also have here with our suppliers and partners, very good contracts. We also were able really to push back some of the additional costs coming from our suppliers with our clear focus on growth and the industry we are- we are in. This is of huge interest for our suppliers and also the big players here in the region for components.
See, see Manz here really as, as one of the leading players they want to go with, and they are also taking some of the burden of the, the lower margin and, and costs. Actually, I'm, I'm not afraid in the area of, of margins. In, in the main fields, we, we can keep our margins, and if not, then our team here is quite capable to have the right answers in the design to cost and further negotiations of our purchasing team with the suppliers to bring them to the level which is needed, that we can, can supply. The, the third point why I'm actually not afraid of this is because we, we have now really here a good team, which is capable to handle these projects in cost, time, and quality.
They are also here now, quite good experience to handle these projects. That's normally where you lose money in the projects. If you have longer timelines, if you have problems on site, this is where you lose money at the end of the day. In the most of the projects, for sure not all, but in the most of the projects, we did here a very good job, and the team did here a very good job, and this makes me confidence that this is also then in the future, in this direction, the truth or the situation we will face.
On, on the supplier side, as mentioned, as bigger the projects are, are getting, so the lines in, in increasing and the more competent, competent components you have inside this products, which we have contracts with our suppliers, the more we can reduce the prices and also out of our cooperation with Manz. We, we have here a huge interest and also, as you can imagine, also a huge pressure to the suppliers and to the market out of the cooperation to reduce further the prices.
This is also beneficial for our other division Industry Solutions as for sure, for us, it doesn't matter if we negotiate with a, with a supplier the price of a component, if it's for Mobility & Battery Solutions or Industry Solutions, it's for Manz, and then therefore, it's also beneficial for the other division we have in Manz.
Okay, perfect. Very helpful. Maybe, one last question. Let's assume that you receive the orders as planned and the related down payments. How shall we think about the free cash flow development in the second half of the year?
Well, I think, that's pretty straightforward. Of course, then contract liabilities will increase again. This will have a positive impact, on our cash flow from operating activities. Of course, it depends, on the size and the amount, of the projects, but of course, you see this immediately. New contract liabilities bring the cash flow, of operating activities out of this heavily negative region, towards a much healthier development then.
Okay. Thank you very much. Have a good day.
Welcome. Thank you.
Thank you, Mr. Bauer. We have currently questions open from Mr. Spahn. Mr. Spahn, also you should be able to unmute yourself and ask your questions now.
Yes. Hi, good morning, everyone. The discussions were now a lot about cash, cash flow and order situation, but maybe we can get a little bit more concrete. In terms of cash flow development in the second half of the year, in terms of operating cash flow, do you see it as a possible chance that operating cash flow will be positive in the second half of the year?
Well, of course, as it depends on the order intake, and you see that the main driver of the negative cash flow is coming from a decrease of contract liabilities. This is the most significant position in the cash flow statement. Having a look on this again, you see that the decrease in trade payables and contract liability is EUR 43 million. If we get down payments in such an amount, of course, then the cash flow would be much better. It would be only enough to be EUR 28 million of down payments from the size of the order which we have in our pipeline.
This is not unlikely, but nevertheless, it has to be signed first, and we have to receive the customer down payments before first of December, so that it really turns into positive figures, is today not really predictable, but for sure, it will improve significantly.
Yeah, but for second half, alone.
The second half only. Yes, I think so.
Yes.
Yeah.
Okay. In terms of order momentum, in, in July, did you see already some, some pickup in, in the order situation in July, or, is it still pending?
Some, some projects already smaller projects already decided. We see here really a pickup of, of the decision-making process. Two, three bulk orders we are actually discussing with the customers are not yet decided upon, but as I mentioned, in final stage, and hopefully we can make it before the summer break of these customers. If not, it will happen then in early September.
If you talk about, about bulk orders, these are in an volume of low to mid double-digit million EUR area?
Correct.
Okay. Okay, thanks.
You're welcome.
You're welcome. Thank you, Mr. Spahn. Currently, there are no further questions. If you wanna ask further question, then please raise your hand. We'll wait for a couple of seconds, I wanted to say, Mr. Pil has another question. Mr. Pil, go ahead.
Yeah, thank you for taking this follow-up. Just to be clear, also, on the remaining order backlog that is in the books related to Britishvolt, how much is that actually?
Everything has been removed because we terminated both contracts.
Okay, I got it. That's already cleared. Fine. Thank you.
Welcome. Then we have a question from Mr. Popp. Mr. Jürgen Popp, you should also be able to unmute yourself now and ask your question.
Yeah, you can hear me?
Yes.
Yes.
Okay. As an additional question to all the others before, I just wanna focus on the share price. The company value, without debt, is now almost 1 time half-year revenues. As I remember, Daimler Truck signed a capital increase at EUR 34, and the Chinese investor even paid even more money. Do you see the idea of these guys pushing you into another capital increase so that they can have a cheap takeover in the long run? Because it's very surprising that even the family Manz, obviously, is not willing to buy shares at that very low level. That's my concern. The drop-down every day, very low volume, nobody seems to care about the share price.
I'm sorry to say that. That's my question. What are your plans about this?
Mainly, for sure, we are also not happy with the development of the share price. We, we also don't see that the, the share price actually, or the, the value of the company is really reflected. I think, our potential and even the market size and the technologies Manz is capable to handle and, and to deliver, normally needs to be reflected in a much, much, much more higher, higher share price. Needless, needless to say, so, we, we will not accept this in, in this direction. With the good outcome of the half-year figures, we will have several roadshows, and we'll, we'll have here also more action from, from our side to, to explain this more detail to the market.
I think it's not really well understood from, from everybody outside what potential is in it, especially also, like mentioned, with our cooperation ongoing and really the, the high-class customers we, we have in, in our portfolio. I think this is not reflected, and we are not well, let's say, balanced from, from the capital market, and this is something we will improve, also with our capital market day, which will, will happen also in, in the fall, in parallel with, with our open house, which I mentioned before, where we show some, some new technologies. I, I think it's due to this really, roadblock we had with, with Britishvolt, which was, not, not our responsibility.
If this project normally will develop with the plan they had, then further gigawatt scale lines engineering done, we would have a complete different picture. It's now up to us to show that other customers will replace, like I mentioned. This needs some times. You need to build up trust, you need to understand the business model, you need to develop the necessary process or at least sharpen them. That's our view we have in this direction, that with coming orders, we also will see here a different evaluation of our share price and the value of the company. Actually, you can believe me, all shareholders have a lot of discussion with us because nobody is happy about the share price.
For, for sure, we will take all the necessary measure to, to improve this, but all, all shareholders are calm and see the, the future and the potential of, of our, our company, especially you mentioned Daimler Truck, and they are still planning to have their increase in investment of equipment. In fact, they see the additional value of, of Manz in, in other directions. I'm, I'm not afraid that they, they will not support Manz in, in all potential ways, and we are working in all directions to improve the situation on, on the share price.
Okay. Thank you.
You're welcome.
Thank you, Mr. Popp. Currently, we do not have any further questions. This doesn't seem to change.
Okay.
Since there are no further questions, we will close this conference call now. Thanks a lot for joining our conference call. Hopefully, we see all of you on our capital market stage on October 18th, here, at our site in Reutlingen and also in Tübingen. I wish you a good day from our side. Thank you.
Thank you so much.
Thank you.
Bye-bye.
See you. Bye-bye.