Good day, ladies and gentlemen, and welcome to the Victrex Q3 IMS conference call hosted by Chief Executive Jakob Sigurdsson. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and the instructions will follow at that time. I'd like to remind everyone that this call is being recorded. I will now hand over to Jakob Sigurdsson to open the presentation. Please go ahead, sir.
Thank you very much. Good morning, everybody, and welcome to Victrex's call for the Q3 Interim Management Statement, which covers the period from the 1st of April through the 13th of June 2022. I'm Jakob Sigurdsson, the CEO of Victrex. I'm pleased to have Andrew Hanson as well on this call, our IR Director, as well as Mike Ward, our Finance Director. Additionally, with us on the call today is Ian Melling, who is our new CFO and who just joined us earlier this week.
Ian will not be answering questions at this stage, given that he's only four days in the role, but he will be meeting with many of you later in the year, and we're really pleased to have him on board, particularly as we look to build on our good progress in medical and aim to make medical a greater part of our mid to long-term revenues. I will first turn to the highlights of today's announcement, then I will cover the financial detail and followed by the outlook. We will then open up the call for Q&A towards the end. If we turn to the highlights, really pleased to say that Q3 has seen continuing strong growth, with group revenues up 16% and group volume up 10%.
In fact, this has been a record quarter for Victrex, and we continue to expect that this will be a record year for the company as it relates to volumes. We note that the analyst consensus is currently showing just over 4,600 tons for FY 2022. Importantly, we remain on track for full year expectations and our guidance is unchanged. As a reminder, and you can see the analyst consensus on our website, PBT pre-exceptional for FY 2022 is sort of listed there around GBP 95.4 million. If we look at revenue and volume. Q3 group revenue was up 16% to GBP 93.4 million. Q3 2021 was GBP 80.7 million. Q3 group volume was up 10% to 1,323 tons.
Q3 2021 saw 1,202 tons. On a year- to- date basis, group revenue of GBP 253.5 million is 9% ahead of the prior year. 2021 year- to- date had GBP 231.6 million, with year- to- date group volume of 3,586 tons being 9% ahead of the prior year, where for the same period last year, we saw 3,289 tons. A brief word on inflation, recovery and pricing before we look at the end market performance. I'd like to say a few words on that. Firstly, in Q3, we started to see benefits from price increases to help offset, you know, what is an unprecedented increase in energy and raw material costs in the first nine months of the year.
If you recall what we talked about at the half year results back in May, customers have been seeing price increases within contract and this has been across all our end markets. The timing of contract renewals meant that there has been a lag in recovering past inflation via price increases, but it's good to see that this is coming through now. The second half is starting to see the run rate effect of price increases with full annualized effect of this coming through in FY 2023. We're also mindful of the ongoing inflationary environment and we'll react accordingly should we need to. It is worth noting that pricing improved across end market compared to Q2, and the blended average selling price was up 2% versus the previous quarter and up 5% on the prior year.
This includes the effect of currency, but despite mix and temporary impact of the China lockdowns that we saw late in the second quarter and extending into the third quarter. That particularly had an impact on our medical business in Q3. Growth in Q3 was driven primarily by value-added resellers and electronics as well. Other industrials also had a strong performance. We continue to expect the benefit of price increases to come through during the remainder of the second half. If we now turn to our end markets, value-added resellers, electronics and energy industrial continue to be the main growth drivers with double digit improvement in Q3. Growth was held slightly back by automotive, where performance continues to be variable, reflecting the ongoing semiconductor chip shortages in this industry and obviously the impact of the Ukraine crisis.
In aerospace, build rates increases from the major manufacturers towards the end of 2022, and that should support continued recovery. Within medical, as I've already noted, despite a temporary headwind from COVID-19 lockdowns in China during the earlier part of Q3, we saw solid growth, with performance being broad-based across Asia-Pacific and the U.S. medical piece of our business, which also improved versus Q2 actually. We also secured our first regulatory clearance in China for PEEK-OPTIMA HA Enhanced for spine, to further support our commercialization efforts over there. Maintaining our strong core business is our primary objective, but as you know, we have a very attractive and differentiated growth pipeline. Large scale of products which are sustainable and bring environmental and societal benefits that are part of our Polymer & Parts strategy.
These are our mega programs, and we continue to deliver good milestones on our pathway to greater commercial revenues. If I touch on a couple of things there, we've made further strong progress in PEEK Knee clinical trials with 22 patients having now received PEEK-based implants, six of them passing the 12-month stage with no intervention. We're also closing in on a partner agreement with a top five knee company. On trauma, our partner, Innotere, has secured a 510(k) regulatory approval in the U.S. for trauma plates based on our PEEK composite materials. On e-mobility, following the recent new business wins, we're partnering with Jaguar Land Rover and other industry players in academia as a part of an innovation program to support work on materials for e-mobility applications in the U.K. A quick word on our financial position.
As you know, Victrex has a highly cash-generated business model with our cash position supporting the high CapEx this year, principally in our China manufacturing facilities with our new PEEK polymer facility set to start commissioning during our final quarter of the year. Cash at the year end of at the end of Q3 was GBP 50 million, which excludes GBP 3.6 million cash we fenced in China for that particular investment. CapEx for the year is now expected to be slightly lower than our previous guidance would have indicated, at approximately GBP 50 million, reflecting some expenditure phased into FY 2023. We also have ERP system investment, which under accounting rules has to be treated as an expense rather than being capitalized. This covers the main points of the announcement.
Before we turn to Q&A, I'll add a few points on the outlook. In summary, we're seeing a healthy core business right now, with growth in new applications and further milestones in our mega programs. We're also starting to see the benefits of price increases to help recover the unprecedented increase in energy and raw material costs. For the final financial quarter, our historic run rates typically see a slight step down during our final quarter. Our order book is still very robust and overall this is expected to be a record year of volumes for Victrex. However, we are mindful of uncertainty in the global economic outlook, and we do retain some caution in our outlook, particularly in end markets like auto, which have been variable.
Overall, for FY 2022 as a whole, we remain on track of delivering full year expectations and our guidance is unchanged. At this point, I think it's appropriate to turn to Q&A.
Thank you so much. Ladies and gentlemen, to ask a question through the phone lines, please press star then one. We will now pause for a moment as callers join the queue. Thank you. Our first question is coming from Alex Stewart. Please state your company name, and go ahead.
Good morning, Alex.
Alex Stewart, your line is open now.
Hi there. Sorry, can you hear me?
Yeah, bit faint, but let's try. Go on.
Okay. Sorry, I have that problem. On the price increases that you're pushing through, could you give us some idea of what proportion of your contracts have reset at a higher price? Just a rough gauge. Is it 10% or 60%? Perhaps associated with that, are there any markets where you're seeing more or less resistance to those price increases? Would be very helpful. Thank you.
Yeah, happy to do that. I think, you know, we are now probably through close to a significant majority of our contracts as it relates to price increases. You know, there are sectors that tend to have longer term price contracts than others, and that sort of relates mainly to the medical side. But I think, you know, we're through, I would say the lion's share of our contracts in terms of price increases. On some, you know, we may have gone more than once. Sufficient to say, you know, we're ready to go again, you know, towards the end of the year should there be a need to do so. As it relates to resistance to price increases, well, I've yet to meet a customer that receives a price increase with this, with any pleasure.
I don't think I can say that there is any difference in terms of the reactions to price increases by sector, if you wish. Sure enough, you know, price increases have been going through, you know, the industry for most polymer families to a different degree, depending on the nature of the technologies. I don't think I can see any sort of patterns or symptoms, you know, across sectors as it relates to relative resistance to that.
Very helpful. Thank you.
The next question is coming from Andrew Stott. Please state your company name and go ahead.
Yeah. Morning, Andrew Stott, UBS.
Morning, Andrew.
Morning, Jakob. Thanks for the commentary so far. I just wanted to tackle a couple of smaller items balance sheet and cash flow wise. I think you said back in May you thought that your inventory requirement would be somewhere between GBP 70 million and GBP 80 million. Does that still hold? I was just thinking of, you know, given what's going on with all the discussions on gas embargo risks, do you wanna actually build more inventory now in order to cope, or are you fairly relaxed on that side of things? That's the first question. Now the second one is much more straightforward. CapEx, GBP 50 million not GBP 60 million. Do we just push the 10 into the delta into FY 2023? And can you remind me of what that would mean for FY 2023 CapEx? Thanks.
Yeah. On the numbers specifically, I'll ask Mike to cover those. As it relates to strategy, Andrew, I think you know, we have, you know, through COVID downturn, through COVID upturn, you know, one of our key principles has been to ensure that we never leave our customers high and dry.
Yeah.
We're well aware of, you know, what it means for them to have material to be able to be making critical parts and to meet their obligations. We have sort of flexed our inventory policy to deal with that. I think that's very much a part of our strategy going forward as well. We will not let our customers sit high and dry, and we will flex our balance sheets to be able to cope with that. In that, as we alluded to, I believe in May, will probably lead to a slight inventory increase both on raw materials and finished goods as we end this year compared to where we ended last year.
I think, you know, but that's probably an implication that we'll see in global supply chains, definitely in the near future, you know, as many industries have been burned by all kinds of logistical and supply chain issues in recent quarters. I'll let Mike comment on the numbers specifically, but the strategy for us is clear. We will not leave our customers dry.
Yeah. Jakob, sorry, just to be a bit more direct on this.
Sure.
Is there anything that concerns you about your ability to source raw materials in a gas embargo scenario, or are you relaxed on that?
We're never relaxed, you know. It was a good man that said, "Only the paranoid survive." I think it was Andy Grove. You know, you have always to be prepared and allowing a certain flexibility to react. You know, as soon as you start to relax, well, guess what? That's a recipe for not such a good outcome. It's fair to say, Alex, Andrew, sorry, that there is a number of things that need to be juggled in supply chains today, and I think we're actually doing it very well. We're clearly mindful of all the potential curve balls that could be coming our way and taking mitigating actions towards that. There's never a time to relax.
All right. You haven't received any sort of red flags from suppliers at this stage?
No.
Numbers-wise, Andrew, as Jakob said, yeah, we've looked to maintain a inventory, both sort of quantity-wise and also acknowledging the inflationary price impact on the current value of inventory as well. You know, we are likely to be, you know, at the top end of the range you noted, if not slightly higher by the end of the year.
Okay, thanks.
I think.
A bit on CapEx. Do you wanna touch on CapEx in terms of guidance? We talked about sort of GBP 50 million, isn't it GBP 50 million for this year and probably similar for next year in terms of how it phases at the moment.
Yeah.
Perfect.
That's right. Obviously with some of the larger projects, you know, get lumpier payments, but they may see the shift between the years as we saw last year. You know, across the two years, that's a reasonable guidance level.
Great. Thanks, everybody.
Thanks, Andrew.
The next question is coming from Kevin Fogarty. Please state your company name and go ahead.
Oh, hi there. It's Kevin Fogarty here from Numis. Good morning, everyone. Just a couple of questions if I could.
Morning, Kevin.
Mark, good morning. Just back on the price increases. I think you previously sort of guided in terms of the kind of cost recovery you'd need, and if you guided a kind of price increase of 3%-5%, is kind of what you'd need. I mean, it appears you're sort of tracking on that level given Q3, albeit, you know, some of that will reflect an FX impact in Q3. But I just wondered, you know, the situation obviously remains reasonably volatile in terms of the cost backdrop. Has anything changed in terms of your assessment of the level of, you know, price increase you think you'll need going forward? So that's just a sort of first question, I guess.
Just secondly, in terms of the kind of strategic progress you're pointing to in these, and the kind of imminent signing of a new partner there. I just wondered, does that sort of bring, you know, just kind of scale benefits, I guess, in these as you roll forward, you know, and is it sort of complementary to what you've got already in these in terms of relationships? Just wondering if you could add a bit more color on that, please.
Yeah. Thanks, Kevin. Really good question. I think price increases going forward, I mean, this is quite a dynamic picture.
Yeah.
I think, you know, with what we have in the pipelines, you know, we are well covered in terms of what we wanted to recover from the existing increases. Now, that being said, as I think I stated in my outlook questions, you know, we're ready for further price increases should we need to.
Sure.
I think you know, that is probably something that businesses in general have to get used to. I think we might see inflationary pressures of various nature be with us for quite a while, even if many are expecting there to be sort of or this sort of being a transitory sort of inflation peak that we're going over right now. I think you know, given the many things that we are seeing around global economies, you know, we and other businesses are well advised to prepare ourselves for an environment that could be characterized by inflation and inflation spikes for you know, as a more regular thing in years to come than we've seen probably in the last 20 years.
Sure.
That implies, you know, we're gonna be implementing greater flexibility in terms of how we contract our business or how we do our contracts to allow us to cope more rapidly with things that have actually in the past 10-15 years been relatively stable, but I think we can expect being much more volatile going forward. On the knee side, this is and will be, I think, a significant validation point for us. If you look at sort of major disruptive technologies in almost any kind of industry, it's really the market leaders that embrace them, you know, from the outset. There's a variety of recent school item has been meters of literature written on it as well. This will be a major, I think, strategic validation for our concept.
I think will lead to a significant ramp up in terms of our development activities as well, to develop in tandem with our partners, a specific line of knees, if you wish, that meets their detailed requirements. That I think is the key thing. The main driver here is, you know, the desire to be able to move towards metal-free knees, but also knees that are likely to cause a lot less bone erosion than materials that are have a higher modulus actually can result in. This is a significant strategic milestone for us and a validation point. It will lead to a ramp up in customer design-specific activity.
I think it also has the potential to bring up, you know, some of the material revenues for this opportunity for us as well, even if they're probably out there in the 2026, 2027 time frame. I think it really acts as a strong validation of what we've been driving for a number of years right now.
Okay. No, that's really helpful. Thank you for that. Thank you.
Thanks, Kevin.
Thanks. The next question is coming from Chetan Udeshi. Please state your company name and go ahead.
Yeah, hi, Chetan from JP Morgan. You know, I had a couple of questions. First, on price increase, I'm curious if you can provide us, like for like increase, you know, if you sort of take into account or actually disregard any effects and mix benefits, if you were to say on a, on a same product, same currency basis, what was the price increase achieved already in Q3? That was the first question. The second question is, you know, given all the progress around knee and trauma, like what, when are we still talking about any material revenue in this sort of part of the business or pipeline still more into 2024, 2025? Or is it sort of moving more into 2023? And sorry if I can squeeze one more.
It's very interesting to see, you know, 10% volume growth on a base of last year, which was quite high already. I was wondering if you usually have any visibility into how much of that is actually going into new applications versus older applications. What I'm trying to get to is, again, especially with VAR, we've already seen that in the past. You know, there's always this cycle of restocking, destocking, et cetera, et cetera. I'm just trying to assess how much of this might be real versus just stocking benefit in the chain, et cetera. Thank you. Bye.
Yeah. Let me start with the second and the third one. I'll leave Mike to comment on the pricing one. On knee and trauma, you know, trauma is clearly earlier in the cycle. I think we'll start to see very meaningful revenue from trauma in 2024 and potentially, you know, mid-single digits, and I say potentially in 2023 if everything goes according to plan. Trauma is a bit ahead of the curve there. Knee, you know, with a new contract or with a new JDA, you know, we will start to see sort of qualification volumes going through, but that will only be, let's say a few hundred knees, let me say, you know, a year, you know, for the next probably two or three years.
You know, we shouldn't expect to see commercial revenues there until probably 2026-2027. It's still a marathon to run here, but I think we've shown that we have the resilience to run that. You know, with this validation, as I spoke to before, of signing a JDA with one of the top five, then that gives us, you know, even greater resilience and motivation to continue that run. On this perennial question around growth and how it's comprised, you're absolutely right. You know, this is an impressive growth on what was not an unsubstantial volume last year. I think it shows, you know, the value of the core here.
Remember that, you know, only, let's say, you know, five to seven years ago, you know, a substantial part of our volume was attached to a single contract. You know, that contract went away as expected. In the meantime, the business has still grown. That void, if you wish, has been filled with a number of small niche opportunities across a number of different industries, where we have been finding new applications, small applications, niche applications that we've identified, and nurtured into good business alongside with increased penetration into existing applications as well. It is clear that a lot of the volume growth that we're seeing right now on the value-added reseller side is on the back of the excellent conditions in the semicon industry.
Excellent, I mean, I'm referring to the added CapEx that is going into that industry and the great demand for chips as well. I mean, you know, fab spending, you know, was way above $100 billion, you know, last year, in all corners of the world. I think the value-added resellers, particularly structure producers, are seeing the benefits of that. We're seeing that through them. We also see it in our own electronics business as well. So that is really fueled, you know, by good conditions in that industry.
As it relates to what inventory build and what's not, I think you're well aware of the fact, Chetan, that, you know, downstream from our value-added resellers, you sometimes have a long supply chain that functions almost like a sponge at times. Our immediate customers are still going flat out. Their sense is that there's not been much inventory correction yet, but I think everybody's belief is that we will see, you know, a point reached where things will reach a what can be defined as a more or a greater normal equilibrium. We might be approaching that point. Nonetheless, I think that the growth prospects there are relatively healthy.
Still being mindful of the notion out there that there might be an economic slowdown in some of the key industrial markets looming around the corner in the next six-12 months. On pricing, you know, I'll hand it over to Mike.
Thank you, Jakob. Chetan, yeah, you're right to point out that there's a number of factors at play within the year-on-year ASP numbers. As you just said, we're monitoring this very closely. You know, what we can say is that, you know, as on the industrial side of the business, where the contracts tend to be shorter, you know, we are seeing the benefits coming through. You know, we said there was a minimum increase of 3%, and in many cases we're achieving more than that, and seeing the benefit from that, you know, increasingly month-on-month. You know, obviously, medical is where there's longer contracts, it's taking slightly longer to come through.
Certainly where we've renegotiated, then the benefits of that, you know, it is coming through and is forecast to come through, you know, on a progressive basis over the next 18 months or so in the medical business. We're not kind of giving specific numbers in terms of the benefit in the quarter. Rest assured, you know, we are seeing it on all the renewals that we have put in place already.
Thank you. Jakob, if I can follow up with one very simple question, is within your electronic business, which has actually become quite big now, can you remind us what is the split today between semiconductor and consumer electronics? And also which sort of consumer electronic devices are you most exposed to? Because we've already seen signs that that particular market has started to slow, if anything, even weakened year-on-year. I'm just curious in terms of the mix within electronics now.
Semiconductor is probably getting close to half these days. You know, on the appliances that we are exposed to, it is smart devices for sure. That's where, you know, our recent developments on the film side, you know, have had a great year actually. We're also quite a bit in household appliances as well. You'll be well aware of vacuum cleaners, hair dryers, refrigerators and things like that. Semicon is a substantial part of it and, you know, just short of half roughly these days.
Understood. Thank you.
Thank you, Chetan.
The next question is coming from Martin Evans. Please state your company name and go ahead.
Thanks very much. I'm Martin Evans, HSBC. Yeah, just I guess following on from Chetan's comments really, big picture on demand, Jakob. Because his, and visibility. Because in the past, whenever there's been a, as you say, sort of economic squeeze and economic slowdown, you tend to feel it, or you tended to feel it very quickly. You know, visibility was anything from 24 hours to one or two weeks in some of your order books. Obviously, there's a slight danger that we talk ourselves into recession. They say, I think, that economists have forecast 20 of the last five recessions, so it may not happen. Do you think this round? We are seeing weakness already in consumer electronics. I heard yesterday areas of construction are slowing.
If your end markets, if your customer base begins to soften and therefore order books weaken, do you think your portfolio is now broader and more defensive than it was before? Or because PEEK is obviously a very expensive product and therefore customers tend not to hold high inventories, you also guarantee to deliver within 24 hours, do you think, again, you're at risk of a sudden shock in terms of volume data? Thanks.
Thanks, Martin. I mean, it's kind of a curious situation in the markets today. Because on one hand, you know, you see a certain upside, and I'll cover that, you know, based on certain market indicators in the various sectors. Yet everybody is obviously worried about the impact of rate increases, interest rate increases and the general inflation, you know, around the world and the ultimate impact that might have on the consumer and their buying patterns. We are still a cyclical business.
You know, our portfolio, even if it is changing, and even if, you know, I can see a significant change in the portfolio mix, you know, from the mid to longer term, you know, on the back of our medical programs, whereby we'll see a significantly different Victrex ten years from now than we see, you know, actually at the moment. We are still a cyclical business, although we're doing a lot of things to reduce that cyclicality. But, you know, face the facts, we are still a cyclical business. However, when you look at, you know, some of the indicators, around, for instance, auto, aero, and let's take electronics as well, and medical, you know, you might be led to believe that there was still a certain upside there. How on earth could I say that?
Well, if you look at auto, you know, the forecast for this year is, you know, just around 80.4 million to be produced, which is flat year on year compared to 2021. Compared to where passenger cars were back in 2018, they were at 96 million. We all know that there's a significant backlog for new cars in all the major markets of this world. The market is forecasted to grow between 8%-9% in 2023. There appears to be an upside there still. Who knows what happens if rising interest rates and inflation start to significantly impact, you know, the backlogs. It's difficult to see auto get much worse than this, given where it's coming from and where it has been.
If you look at aero, you know, it's been sort of growing slowly from the troughs of, you know, around sort of early 2021, mid-2021. You know, we're seeing Airbus talking about being at close to 90% of pre-COVID build rates for their single-aisle planes, you know, by the end of this calendar year. Boeing is a little bit behind, sort of working through their inventories of the MAXs in particular. I think it's a reasonable assumption that we will see, you know, at least a better year there next year than we've seen this year and certainly than the year that we saw in 2021. On electronics, you know, and I touched on it briefly before, I mean, semicon, you know, has been growing nicely this year.
I think you know, 16%+ in 2022 forecasted and next year, you know, in excess of 5%. That will bode well for our electronics business. You know, then look at smart devices within electronics. Yeah, it's been actually three consecutive quarters of decline in smartphones, you know. I think the overall outlook there is expecting a recovery in 2023 as well. We also know that on our side, the medical piece, you know, we're not fully at pre-COVID levels. You know, we have been impacted by all kinds of different kinds of challenges as of late, the lockdown in China being the last one. I think there should be an upside in medical also.
It's this dichotomous view where, you know, there are certain indicators in these markets that are looking very favorable. At the same time, you know, everybody seems to be quite concerned about the looming recession. To your point, you can easily talk yourself into it. I mean, in our case, you know, we're just preparing the ship for being able to deal with that should it happen. I think the ship is well prepared to actually sail through what you're modeling like that. Sorry, it was a bit of a long-winded answer, Martin, but I think it gives you a flavor for, you know, the dichotomous situation right now, where business is very strong, certain indicators are very favorable, but everybody's worried about the impact of a potential recession.
Sure. That's very clear. Just in terms then, roughly, I know it's difficult across the business. In terms of visibility, your order books that you can see, you can see ahead, are you sort of.. H ave you got predicted revenue up until, what? We're looking at the end of August, possibly or even into September now, or is it not that far advanced?
Yeah, I mean, what's happened, I think, you know, through COVID and a number of the things that we have been working on with our customers is that our visibility is slightly longer. You know, we will have probably a higher volume on our books at the start of the month than we've ever had before, and the same thing applies to the length of it. Not seeing really, you know, further out than September, and September order book is maybe currently, you know, at a third of what we would expect the outturn for that month to be. That's higher than it used to be, you know, a few quarters ago.
Okay. Got it. Thanks very much, Jakob.
Thank you, Martin.
The next one is coming from David Farrell. Please state your company name and go ahead.
Hi, it's David Farrell from Jefferies. Apologies, I've had a few phone issues and come out a few times, so if these questions have already been asked, I'll follow up later. Two for me. Firstly, just in terms of the oil and gas mega program, I think there was a kind of major qualification process going on with Petrobras for risers this year. Can you give us an update on that? Then my second question, it's great to see kind of the progress being made in the medical part of the business. Can you just remind us how important is the revenue mix between medical and everything else in getting back to the 60% gross margins, please?
Yeah. Good morning, David. Happy to shed light on that. On the Magma program, you are right. You know, we are now in a phase that is characterized by two things, I would say. On one hand, you know, qualification of various kinds of pipes with various kinds of end fittings and what have you. That's ongoing right now, and that's a source of sort of relatively small but healthy volume at Magma. The second piece there is clearly, you know, the preparation for Technip and ourselves helping them with that to set up facilities in Brazil to be able to make the pipe on site.
That means both investing in facilities to extrude the pipe, and facilities to laser weld the UD tape onto the pipe and then armor it as well, you know, post those processing steps. I should point out, we are not investing in those capabilities, but, you know, we are assisting Technip in so doing. That's the status of that, and we're expecting commercial revenue, based on plans with Technip in the calendar year 2024. In the meantime, you know, we'll see moderate revenues, you know, single digits, low single digits for both PEEK polymer and UD tape that goes into making qualification pipes.
On the medical side, medical mix right now is lower than it has been in the recent past, and it's simply explained by the fact that industrial markets have recovered faster and stronger, and there's been a greater impact from COVID on elective surgeries mainly than there has been on industrial markets overall and potentially on some other medical applications. We're not really at pre-COVID levels yet, even if we're approaching them. I think in the short term, you know, we shouldn't expect medical mix to improve. I think there's every reason to believe that. As I alluded to in a comment before, excuse me. You know, it is our vision that in the medium to long term, medical will be a much higher mix when you look at Victrex.
Mainly on the back of the opportunity that we see, not just around the core business, but also around the significant opportunities that are associated with both our technology in trauma and in need in particular. Both of these have the opportunity to significantly change the face of Victrex, you know, as we look to the next 5-10 years.
Sorry. Can I just kind of follow on then? Is it possible to get back to the 60% gross margins with the revenue mix as it is now, or actually you need to see that mix actually change towards medical?
Well, I think there's a number of things that will happen here, but the answer is yes. We are aiming to get up to the mid-50s%. Mid- to high 50s%, I should say. Close to 60%, and that is possible, you know, without a major impact from any of the mega programs. Absolutely.
Okay. Thanks very much.
Thank you.
There are no further questions in the queue, so just a quick reminder everyone, please press star then one to queue up for questions. Thank you. There are no further questions on the conference line. I will now hand over to Jakob Sigurdsson for closing remarks.
Excellent. Thanks everybody for attending the call and listening in, and thanks for your outstanding questions as well. In summary, you know, we've got a very healthy core business, with good growth and new applications and also further penetration into existing applications. Also some significant milestones that have been reached in our mega programs and will be reached in the coming quarters as well, further validating the value of that portfolio. Starting to see the benefit from the price increases, and I'm sure you've seen them coming through in the numbers. We'll see more of it as we go through the fourth quarter, helping us recover the input inflation.
As discussed, very mindful of the uncertainty in the economic outlook, but the key thing here is what are you gonna do about it and how are you gonna action it should that happen, as opposed to worrying about it. I think, you know, we're well prepared to tackle that, you know, where that to happen. Overall, you know, let's keep in mind that, you know, we're coming off a record quarter year for Victrex. We're expecting it to be a record year for the company as well. We are on track for full year expectations. We will update you again at our full year results presentation, which will take place on the 6th of December.
In the meantime, stay well and enjoy the summer wherever you may be. Take care.
Thank you so much, Jakob. Thank you, everyone. That marks the end of your conference call for today. You may now disconnect. Thank you very much for joining, and enjoy the rest of your day.