All right. Good morning, everybody, and welcome to Victrex's full year results presentation for 2022. Welcome also to those that are joining us on the call today. Firstly, some introductions. I'm Jakob Sigurðsson, CEO of Victrex. We also have our relatively new CFO, Ian Melling, with us here today. As you know, this is Ian's first outing as the CFO for Victrex, and we're really pleased to have him on board. Also joined by Martin Court, our Chief Commercial Officer, and Andrew Hanson, our Director of Investor Relations, is also in the room. Firstly, a couple of housekeeping advices. The slide presentation is on our website at www.victrexplc.com under the Investors tab. By clicking on Reports and Presentation, you'll find it there.
We'll make sure we call out the slide numbers when we are speaking today to aid your navigation through the presentation. Secondly, we will have a Q&A at the end. I will open up the questions to those in attendance here first, and then we take any questions from those on the call thereafter. So turning to slide three, I thought it would be useful to summarize our key messages for FY 2022. We are really pleased to have delivered a record revenue and record volumes in FY 2022, with revenues up 11% to GBP 341 million and sales volume of 4,727 tons, so up 8%. I like to put this in the context of where our core business was in 2015.
Feels like ages ago, which was at the height of the last consumer electronics contract, meaning that we have now seen our core business grow from 3,200 tons approximately to over 4,700 tons this year. A near 50% increase, which represents a CAGR of around 6% over these seven years, despite the impact of COVID and despite the fact that there's still quite a bit of unmet demand out there from pre-COVID times. More importantly, as I said, we have a number of end markets which have not fully recovered to COVID, and are therefore yet to show up in these numbers, and I'm particularly thinking about aerospace, automotive, and medical as three examples.
It's also interesting to note that we continue to diversify our core business with new applications across both industrial and medical. For example, we're making some really good progress in applications for wind turbines in medical. We've seen advances into e-mobility as well in wire coatings. In medical, we see a very good progress in craniomaxillofacial applications and in emerging applications in cardio also, including in artificial hearts. This is really before we turn to the progress of our mega- programs which have seen a significant advancement during the year. In summary, we're really pleased with our progress across the top line and most of our end markets.
We know we have ongoing challenges from inflation, with the impact levered to the bottom line. The growth opportunities for Victrex remain sizable, and we're making really good progress on improving the bottom line in correlation with the great advances that we've seen both on volumes and revenues. Moving to slide four. Before we cover the 2022 highlights, just want to spend a minute on what we're doing on sustainability in ESG. I think it's fair to say that sustainability is integral to everything we do and actually always has been that way at Victrex. It's a part of our purpose to enable transformational and sustainable solutions to our customers. It's a part of our business model as well.
Remember that our sustainable products enable environmental and social societal benefits through supporting both CO2 reductions, energy efficiency, and patient outcomes. A brief word on FY 2022 sustainability highlights. Our sustainable product revenues are at 48% now and tracking towards 50%. Although I have to point out that this excludes the volumes that we sell value added resellers because those are difficult to track still. We know that a good chunk of auto volumes go through VARs, some electronics too, particularly to semicon. The actual number is probably quite a bit higher than this number would indicate. In resource efficiency this year, we achieved 100% renewable efficiency for all our U.K. sites and at 97% globally. We also completed a life cycle analysis and the initial Scope 3 emission project.
The good news here is that Victrex PEEK is indicatively lower on CO2 global warming potential than the industry average. We will have more details on this in our annual report that is due shortly after Christmas. Finally, social responsibility is a key area for us. Continue to see employee volunteering at various charity work. We also support STEM activities, and I'm pleased to say that our focus on diversity, equity, and inclusion is progressing well with our female in leadership roles increasing this year, and our target there is 40% by 2030. Turning to slide five. I signaled that our sustainable products were 48% of our revenues. At the current time, we do exclude oil and gas value added resellers from this definition.
Given the emphasis that value added resellers are placing on ESG these days, I'm confident that we can get added granularity on the what fraction of what we sell to them actually ends up in sustainable applications. As I said before, this number is likely to be significantly larger than this number that we presented today would indicate. We include auto, aero, medical and some energy and industrial applications. We also include some products within electronics where we have a quantifiable energy benefit associated with the use of PEEK in certain applications. As you can see from the slide, some really good examples. Headlines. You know, for example, we save 3x more CO2 annually in aerospace through our sales there and replacing metal compared to what we produce in our own entire operations.
In medical our materials are supporting better patient outcome and therefore social benefit. One example is the brain study done using PEEK in cranial, cranio-maxillofacial applications rather than metal, as an example. Really strong and broad portfolio of sustainable products. Moving on to slide six, looking at FY 2022 highlights. Ian Melling will cover the financial details shortly, but overall, we've seen really good progress across the core business in our mega-programme . We also saw a much better average selling price in the second half as our price increases started to kick in more materially. We have broadened the range of options for pricing as well. Including surcharges as a part of a mechanism to recover what has been an unprecedented magnitude and speed of input cost rises.
We are well aware of the macroeconomic challenges from inflation and how that has held back EBITDA and gross margins. Importantly, we have seen better pricing and we've also seen much better operating efficiency. In our mega-programs, I will cover the detail later, but some very, very notable progress. Remember, our mega-programs have all proven that they are technically feasible, and we're building a commercial traction now, they're already well on their journey to greater revenues. Sales from new products, which includes mega-programs and new polymer grades, are 6% of sales versus GBP 19 million this year, versus 4% and GBP 12 million last year. Good progress. Really notable progress in medical with trauma and our In2Bones partnership, which I will speak a little bit about later.
With knee, we have 30 patients implanted now, 12 of them past the one-year mark with no intervention. Really happy to talk about and announce a major development collaboration with Aesculap, which is one of the top five knee players in the world, where we can look forward towards commercialization of a product line with them. On the industrial side, we saw really good progress in gears and in e-mobility, particularly around wire coatings. In aerospace, you know, the first large structural PEEK parts are now real and starting to emerge the demonstrated parts for the Airbus Clean Sky 2 program. These are being exhibited as prototypes, and alone offer the potential for 10x PEEK content increase compared to what we have in aerospace today.
Really a fruit of a lot of hard work for many, many years, starting to show up in large structural parts that we think will make a significant contribution for our business going forward. Finally on Magma, the bid programs have now been submitted, and TechnipFMC is awaiting the outcome from that and are actually actively working on scaling up the production facilities in Brazil right now. Hopefully we will have more news flow through TechnipFMC in the first quarter of next year.
I'll now hand it over to Ian, but I would also like to say that, none of the progress we've made would have been possible without us maintaining a strong financial position, with high levels of cash generation, which also allows us to invest for growth, like in China as an example, or increasingly now in medical, as you've heard us talk about in recent times. On top of that, also being able to pay dividends to our shareholders. Ian, over to you.
Thank you, Jakob. Good morning, everyone. Firstly, I just wanted to say how pleased I am to be here with Victrex today. Having been here for nearly six months, I can say that what I saw from the outside looking in is true within the business. As you'd expect from the CFO, I'm gonna start with the strong financial position, It's also important to note the significant growth opportunities, the culture of innovation and growing ESG credentials through our sustainable products. Clearly, like many companies, we also have our own shorts and challenges which we are managing. I look forward to meeting you all and keeping you updated on our progress. Starting with slide eight and our P&L, an overview of our results for FY 2022. As Jakob said, we are pleased to report record revenue and volume.
At the revenue level, we reported full-year revenues of GBP 341 million, up 11% on the prior year, with revenue up 10% on a constant currency basis. We saw some benefits on revenue from currency during the second half as sterling weakened. We saw particularly strong growth value added resellers, electronics and energy and industrial. Each of these saw double-digit growth during the year. VAR had a record quarter during Q3, 646 tons. We did see some sequential softening in our final quarter, primarily a normalization within VARs, although we note our Q4 is typically seasonally weaker than Q2 and Q3.
As we note in our outlook statement, several end markets have still to fully recover from the effects of the pandemic and continue to offer good growth opportunities, even if the near-term macroeconomic outlook is uncertain. Gross profit increased by 6% to GBP 174.5 million, or by 10% on a constant currency basis. As we measure the future success of our polymer and parts strategy, the focus on volume will diminish in favor of gross profit and driving value from our solutions, while continuing to measure return on capital. Our reported gross profit is stated after the impact of currency hedging, where we reported a net loss of GBP 2.8 million compared to a GBP 4.9 million gain in FY 2021.
The higher cost of manufacture continues to impact us and consequently hit our gross margin, which we signaled will be lower in the second half and was 51.2% on a full year basis. Currency and sales mix also impacting us here. We also show here FX hedge adjusted gross margin, a measure which treats the hedging as within revenue rather than COGS in determining the margin and which was 51.6% this year. I'll come back to this later. Overheads, excluding exceptional items, were up 7% on the prior year, with innovation and growth investment driving this. As previously communicated, we also had to build up overhead to support the preparation and commissioning for our new PEEK manufacturing plant in China, which was approximately GBP 3 million over the course of the year.
This was offset by GBP 3.4 million lower bonus accrual. Our underlying profit before tax increased by 4% to GBP 95.6 million, or by 12% on a constant currency basis. Reported PBT was down 5% to GBP 87.7 million, which reflects the GBP 7.9 million exceptional item incurred for our ERP system. This investment is progressing to plan. We expect the total investment for our ERP system to be in the range of GBP 15 million-GBP 20 million, with completion in FY 2024. As signaled previously, Software as a Service accounting rules mean we have to treat this as an expense rather than it being capitalized.
Our effective tax rate of 13.9% was materially lower than FY 2021's rate of 21.3%, which is primarily as a result of the restatement of deferred tax balances in the prior year. Our guidance for the effective tax rate remains in line with our previous communicated long run average range of 12%-15%, which increased slightly from the previous 10%-13%, reflecting the changes in U.K. corporation tax rates. We also continue to benefit from the lower rates available through the U.K. government's Patent Box scheme with the patents in place since 2017. Earnings per share increased by 14% to GBP 0.95 per share on an underlying basis, and by 4% to GBP 0.876 per share on a reported basis. Finally, a brief word on our dividend.
Whilst we see an uncertain macroeconomic outlook, we've seen a steady start to the year, as noted in our outlook statement. The board is therefore pleased to recommend a final dividend of GBP 0.4614 per share, giving total dividends of GBP 0.5956 per share for the year. It should be noted that the FY 2021 dividend number shown on the slide reflects a GBP 0.50 per share special dividend. Turning to slide nine and the underlying year-on-year profit before tax movements. We can see the effects of strong volume growth and the recovery in medical as elective surgeries return in greater numbers. As I will come to on a later slide, sales mix was slightly weaker year-on-year, which impacted margins. This is mainly the effect of VAR and the other industrial end markets driving growth.
We should note that within medical we saw stronger growth in non-spine, which is now 50% of medical revenues. We have a significant range of growth opportunities as we have diversified the medical business over recent years, with the mix now shifting towards non-spine, although we are making good progress in spine areas such as Porous PEEK, which offers us an attractive opportunity. The first round of price increases kicked in more materially within the second half to support inflation recovery, with a benefit in the year of GBP 6.5 million, the large majority of which was in the second half. We expect a full annualization of this benefit in FY 2023, along with further price increases, in part in response to the further increased energy and raw material costs.
We have broadened the range of options for price increases, including surcharge pricing, and we have begun to implement these. Two remaining key items to flag are operating efficiency and inflation. Under recovery of our fixed manufacturing costs was the principal cause of the decline in PBT during FY 2020, and we have been seeing improvements since. Remember that in the prior year we unwound a significant amount of inventory built up for Brexit, meaning our production volume of around 3,500 tons significantly lagged our sales. In FY 2022, we saw a GBP 10 million improvement in under recovered fixed costs through much better operating efficiency, with the production volume of around 4,600 tons much closer to sales volume. We do have some remaining under recovered fixed costs, primarily in our downstream assets, manufacturing product forms or parts, and are tackling those.
Energy and raw material inflation was in line with our expectations of GBP 18.3 million i n the profit and loss account, with approximately 60% of this being driven by U.K. energy costs, which as most commentators have noted, grew amongst the fastest in Europe. For FY 2023, as we note in our announcement today, we are anticipating a further year-on-year cost inflation impact of potentially up to GBP 20 million between raw materials and utilities, even with the government, the U.K. government's price cap for six months. As I mentioned, we are already progressing a further wave of price increases to support recovery. I've already touched on startup costs to support our China investments, which will be higher in FY 2023, with investment for growth being in support of mega-programs and innovation.
As Jakob will cover later, we're also seeking to prioritize investments in our medical business, with the intention of this becoming a larger proportion of our revenues over the longer term. We saw GBP 6.7 million headwind from currency at the underlying PBT level. Moving on to slide 10, pricing. Our full year average selling price was GBP 72 per kg, some 3% better than last year as we saw price increases kicking in during H2 and benefited from currency on revenue. In H2, our ASP was GBP 73 per kg, up 4% sequentially from H1 and also 4% versus H2 2021. Just to be clear, our sales mix was slightly weaker over the year with VAR driving growth. Quick word on ASP guidance for FY 2023.
With an anticipated normalization within valves, but further improvement likely in medical, as well as the indicators we are seeing for the aerospace end market and build rates increases, we do see the opportunity for ASP to improve close to GBP 80 per kg, reflecting mix, price increases and the benefit of currency, even if volumes do not progress much versus FY 2022. Getting to gross margin. Gross margin declined from 54% in FY 2021 to 51.2% for FY 2022, a 280 basis points movement. FX hedge adjusted gross margin, which treats the hedging impact within revenue, showed a more modest decline from 53.1% to 51.6%, a 150 basis point movement.
I'll cover the major movements on the next slide, but the key message here is how the unprecedented energy and raw material inflation impacted our cost of manufacture. We've been recovering that through price increases and efficiency, it's been with a lag effect reflecting the timing of contract renewals. Our intention remains to recover our gross margin percentage above the mid-50s once energy and raw material inflation starts to stabilize. For FY 2023 specifically, margin will remain challenged. With shutdown work for our U.K. asset improvement program, we won't see the same asset utilization improvement we saw in FY 2022, although mix and currency should be supportive, the higher cost of manufacture will remain a challenge in the short term. Moving to slide 11 on the gross margin bridge, including the effect of currency.
This chart is intended to show how gross margin is impacted by market conditions despite progress on price and operating efficiency. In FY 2021, the principal drivers on margin were under absorption of overheads, inventory provisions and mix, as previously explained. Although sales mix was softer in FY 2022, we saw a bigger improvement in the under recovery of fixed costs this year, which benefited us by 780 basis points. Price increases helped improve gross margin by 450 basis points. Mix was slightly softer, as I previously explained, but unfortunately the biggest impact on our gross margin was cost inflation equating to 10 percentage points or 1,000 basis points. This means that improvement in our gross margin from efficiency and price was held back by energy and raw material inflation. We're making progress on inflation recovery.
As I signaled earlier, margin will remain challenged in FY 2023. We do see an opportunity to improve gross margin over the medium term based on operating efficiency, inflation recovery, and mix once energy and raw material prices start to stabilize. On slide 12, we cover currency. The impact of currency hedging is shown on the face of the P&L in line with IFRS 9. Note that the offsetting currency impacts on underlying trading are embedded in the other lines, most significantly revenue. We saw a net GBP 7 million headwind at the PBT level during FY 2022, which was largely the impact of the strengthening of sterling in the prior year. A loss on forward contracts was GBP 2.8 million compared to a GBP 4.9 million gain in FY 2021.
Sterling depreciated against the U.S. dollar quite materially during the second half with the year-end rate at 1.1. Our effective rate was 1.38 for FY 2022, including the effects of hedging. Against the Euro, the effective rate was 1.14, unchanged from FY 2021. We look forward into FY 2023, given the depreciation of Sterling and the current effective rate of around 1.27, our guidance at this stage is for a currency tailwind of approximately GBP 4 million-GBP 6 million at the PBT level. We are largely hedged for FY 2023, any change to this will be limited. We're starting to hedge FY 2024, we'll update as we go through the year on the currency implications which at current rates will imply a modest tailwind.
Moving to slide 13 on CapEx. Total cash CapEx was GBP 45.5 million, slightly ahead of FY 2021. Beyond maintenance CapEx, our largest slug was in support of our China investments in assets and capability. As you can see on the slide, we made good progress in getting to mechanical completion by the end of FY 2022, and this new facility in Panjin is in commissioning with the end of commercial production later in 2023. I'd also like to mention safety performance, as we saw over 700,000 hours worked during FY 2022 with no recordable injuries. In fact, we've seen 1.7 million hours worked on the project to date, again, with no recordable injuries. For FY 2023, with our investments in China still to complete, in addition to our U.K. asset improvement CapEx, we anticipate a similar level of capital expenditure.
On slide 15, on cash, we're pleased to report another solid cash performance. Although the higher capital expenditure, higher inventory and receivables, and payments of the FY 2021 special dividend meant that free cash flow was materially lower than the prior year at GBP 34.5 million. Operating cash conversion was 49% as a result of the higher working capital and CapEx. This follows two years of 100% conversion. We are focused on maintaining Victrex's excellent record of cash generation.
Our working capital movement of GBP 27.5 million comprised an inventory increase of GBP 13.4 million from recovery of inventory from lower levels during the pandemic and the higher production costs driven by inflation and an increase in receivables of GBP 16.9 million from stronger sales performance in FY 2022, offset by an increase in payables, GBP 2.8 million. Our net tax outflow was GBP 2 million higher at GBP 10.6 million in total. We received the proceeds of TechnipFMC's acquisition of Magma, which we were a shareholder in, of GBP 4.5 million. Total dividends paid of GBP 95.2 million reflects both the regular and FY 2021 special dividend of GBP 0.50 per share. This was materially higher than the GBP 51.6 million of dividends paid in the prior year.
As previously signaled, we did take on some bank borrowings in China to support investment in our assets there, with GBP 14.5 million drawn down in the year. This gave a closing cash position of GBP 68.8 million, which includes GBP 2.8 million of cash ring-fenced as part of our China investments. Excluding the cash for China, total available cash was GBP 66 million. As I've touched on working capital, it's worth flagging the impact of higher energy costs on inventory during the year, and this will likely also be the case in FY 2023. We will need to add some inventory to support us as we shut down a proportion of our polymer assets for the U.K. Asset Improvement Program.
This means, together with rebuilding raw material inventory to comfortable levels, total inventory could be above GBP 100 million in the coming year. Moving to slide 16, before I close that section, I'd like to briefly flag that we intend to engage with shareholders on capital allocation, specifically around special dividends and buybacks. To reiterate, Victrex's priority is to invest to support growth. That can be in capacity, in capability, and in innovation. We've benefited significantly from previous investments, particularly in how they have supported our mega-programs. As signaled previously, we do expect normalized CapEx after FY 2023, which will remain higher to be slightly above historical levels at around 8%-10% of sales. This incorporates our ESG plans and potential costs to transition to renewable energy.
In terms of excess cash, we will assess the options for both special dividends and buybacks whilst retaining flexibility following some shareholder interest through FY 2022. We've historically paid special dividends when we have no other use for that cash, at the minimum GBP 0.50 per share level. We think that level is still reasonable to make a special dividend special. We will also consider buybacks, and we do already have shareholder approval to buy back up to 10% of our shares via our AGM resolutions. Recent feedback from shareholders supports buybacks, particularly reflecting valuation at recent levels. These may well be smaller buybacks to ensure we retain flexibility. For example, a buyback could be utilized with less cash than that for a GBP 0.50 per share special dividend. We will take time to engage with our proposals.
In summary, the key message is that we will continue to retain flexibility to ensure that investment for growth can remain the priority as we see CapEx nudge down in future years following the recent major capacity expansions. With that, thank you, and I'll hand back to Jakob.
Thank you, Ian. We now move to slide 17, turning to our business performance in more detail. Firstly on medical, happy to report a strong growth performance here with revenue up 14% and growth in all regions, and Asia up 14%, EU 11% and U.S. 6%. If you go back a few years, the question was always whether we could diversify enough into our medical business, which had then opportunities both in spine and non-spine. I think we're now proving that we can do that, and that's really, I think, obvious in the numbers. Spine itself was up 2% year-on-year, but non-spine grew 28%. Non-spine is now half of our medical revenues.
Remember that, this year we also faced the impact of the Omicron variant in the U.S. and China because of lockdowns. This is why medical is still not back at pre-COVID surgeries, and we do see a good growth set of opportunities for the business in the short, medium, and actually long term as well. Progress was driven by new application growth in a number of areas within non-spine. CMF, so, skull plates using PEEK, which support better brain function than using metal plates. We saw 30% growth, and this business has now doubled in five years, and it's now at roughly GBP 8 million, this business alone. With further potential in both Asia and the U.S. Arthroscopy was up 30%. Cardio was up 11%. Drug delivery was also up in double digits.
The innate nature of PEEK seems to serve as well in this space. If we move to slide 18. The opportunity for acceleration in medical. Medical revenues in FY 2022 were 17%, 17% of the group. If we go back 10 years, they were at 23%, and had been in the mid-20s since the late 2000s. Yet in the past 10 years, we've seen much stronger growth in the industrial division, all end markets with aerospace, value added resellers, and electronics being notable highlights. However, our intention now that we see increased interest and pull-through in our medical mega-programs from both tier one and smaller companies, is to focus on how we can accelerate our medical revenues as a proportion of group revenue to around 1/3 of our total revenues in the next 10 years.
This will definitely help our earnings stability with a less cyclical business in medical, but also medical tends to be stickier business, if I can phrase it that way, even if the adoption time or development time is a bit longer. How we do this will be driven by all of the segments on this slide, but from trauma and knee particularly. We're getting close to an inflection point in trauma, having signed up a key player, and with further partnership opportunities in the pipeline. In knee, potentially the largest of our medical programs, with around a $1 billion addressable market opportunity for us. On trauma specifically on slide 19.
Really pleased to have secured U.S. FDA approval, and seen the first patient implants of our PEEK composite trauma plates as a part of our In2Bones partnership. Remember we've seen PEEK-based trauma implants before, we've built up the capability to make plates over several years. What In2Bones gives us is access to a much wider market, and it is also the first plate that Victrex makes entirely. In other words, we make the polymer, we make the tape, and we make the plate itself. The picture on the slide is of a foot and an ankle with PEEK composite-based plates. Some of these using PEEK have demonstrated better union rates and revision rates that are lower compared to metal-based implants, given the modulus of PEEK as being similar to the bone.
We're extremely pleased to deliver this milestone this year, and we'll probably be reporting on a few other ones as we progress to the year ahead of us. Also seen a number of partnership opportunities in Asia to help us scale up the manufacturing of the plates. I will come on to our mega program revenue tracker soon, but we do see the opportunity now for revenue to start building from a trauma program, reaching double digits over a period of the next 2- 3 years. Moving on to knee. Knee is probably the program that has the greatest revenue potential of all of our mega-programs, at well above GBP 50 million a year in its peak sales year.
After some challenges during the COVID pandemic, the clinical trial has really accelerated over the past year with a total of 30 patient implants now, including 12 who have had their PEEK, PEEK-based knee for over 12 months with no clinical intervention needed. These implants were conducted in India, in Belgium and Italy with our partner Maxx Orthopedics. It's good to keep in mind that the reason for change within the knee market is already there with one in five patients not happy with their metal-based implants, which are typically based on cobalt-chrome. Metal knees can be heavy, they can be cold, the most important part of the value proposition is the fact that PEEK-based knees will demonstrate and will lead to much lower bone loss over time, which is a big issue.
Interest in metal-free implant is also growing on the back of increased awareness of sensitivities associated with the use of certain metals. The signs look really promising for our solution and for some patients we'll be coming up to two year milestone already in early 2023. What I'm really pleased to announce today is the fact that we now have a new collaboration with Aesculap, one of the top five knee companies globally, which is obviously a significant milestone for us as we've been working hard on for a number of years. We're incredibly pleased with the fact that we have a new collaboration with Aesculap that will aim at giving them PEEK-based knees as a significant part of their product portfolio.
Now we're just, not just working with the tier two players, but we're also working with tier one players. Remember also, we make the knees and we have developed a significant amount of IP around them as well as know-how. That is a part of our value proposition to our customers and partners, along with the clinical data that we accumulate over time. Whilst the clinical trial is progressing nicely, we're really working on the pathway towards commercialization in what we identify as an addressable market of around $1 billion a year. Pathway to commercialization. A brief word here on how we will increase the commercialization of these medical opportunities. Firstly, we've been building up our capability in parts over several years by now.
It's been a long journey, which requires a lot of patience and resilience, we're extremely pleased to see particularly these two programs now getting rapidly towards the inflection points of commercialization and adoption. For example, in trauma, our composite tape facility plays a part not just across trauma, but also for Magma and aerospace. It is really a platform technology for us now for several mega-programs. In medical, the IP is held by Victrex, we have the opportunity to either manufacture ourselves or license the technology with partners, which is what we're doing with trauma as an example. The new news today on this slide is that we have opened or will be opening shortly, a new product development center in Leeds within the U.K., which is close to many medical device companies and academia.
We'll have in excess of 20 highly skilled employees there to meet the increased demand for specific engineering and design requirements from our partners, both in knee and trauma. This will support how we move forward to catalyze early adoption to a greater market over the coming years. Moving to industrial on slide 22. Overall, the majority of our end markets performed well this year, with the exception of automotive, though the market indicators for this end market do look slightly more encouraging into 2023. IHS data now forecasts around 79.6 million cars to be produced in 2022, but stepping up to roughly 83 million cars in 2023. You know, it's worth putting in context that in 2019, there were around or in excess of 90 million cars built.
We know that there is some pent-up demand within automotive, but semiconductor chip shortages have held back this business. We did see 2% growth in the second half over the prior year. Good medium-term opportunity, and together with our progress on gears and in e-mobility, which I will talk about shortly, there's plenty of opportunities here. Aerospace, w hilst volume growth was 2%, revenues were up 21%, reflecting a better mix and price, driven by gradual recovery in this end market, with film and composite tape, creating new opportunities for us. Build rates are increasing on a number of models. We know that Airbus deliveries year to date are up 8%. We also know that pre-COVID build rates have still not been reached within Airbus.
Airbus probably about 15% lower than pre-COVID builds on the A320 models and Boeing over 30% lower on the 737 MAX based on their published build rates. I will talk about our aerospace structures program on a separate slide later on. Energy and industrial, 9% volume growth. Energy within that was up 19%, one-nine, reflecting the buoyancy of this end market. Energy is less than half of this segment. Global Rig Count was up 111 rigs in the last year to 911 at the end of this financial year for us. We're also seeing some really good progress in renewables, TPQs used in varying applications reflecting its durability, mechanical strength, and less maintenance requirements. Relatively small revenue still. Currently some exciting opportunities here.
We continue to explore and make progress on some potential applications for PEEK within the hydrogen supply chain. Electronics, 10% volume growth and well spread across the segment. Semicon did perform well, although industry forecasts of 4% growth in semicon for the current year, 2022, are then expecting 4% decline in 2023. Finally, value added resellers, they're up 12% year-on-year, it's a record performance there. We continue to build closer relationship with our long-standing partners here in both substrates and in compounding. Whilst the visibility is never great value added resellers, we're getting a greater line of sight to volumes here.
As we noted in our outlook statement, we're seeing a few signs of markets normalizing, and I stress that word, normalizing, where we come off Q2 and Q3 with record volumes here. Still good opportunities, but the industry's vast sectors like electronics and energy, manufacturing and engineering may see what you could call a cruising altitude as opposed to the takeoff slope that we have seen in the past couple of years. Moving on to slide 23 on gears, and talking about the mega- programs in general. Firstly, gears after delivering over GBP 1 million in revenue last year, we now see over GBP 4 million in revenue delivered, which is based on the parts that Victrex makes, but also on what we call resin-plus, where Victrex has a key role in the development of the gear application.
This is classic innovation. As I've said, you know, countless times before, we do not intend to make the whole world's demand of PEEK gears. It's about seeding the market and driving up adoption with our own relationships that we have. When it comes to actually producing the gears, you know, we have created partnerships that allows us to execute and meet demand with different partners across the globe. On e-mobility, slide 24. While gears has moved ahead nicely and, you know, has a fit, you know, across combustion engines and electric vehicles, we also made some really good progress this year on our e-mobility applications. PEEK does offer a number of benefits in wire coating applications. It is very durable. It has dimensional stability. It is a great insulator for both electricity and heat.
It also is less intensive to manufacture than the enamel that is used in the lower voltage motors. It also brings ESG benefits because of the absence of solvents used in the coating of the wire. Remember that, you know, we are really focused on the next generation of motors. The 800V motors, where the performance requirements are higher. Overall revenue in this segment now is less than GBP 1 million. We do have the opportunity to step this up significantly in the next couple of years. With an opportunity of on average getting to weigh more than 100 g of PEEK per vehicle, where we're now at around 10 g per vehicle.
We also secured some new business here on a number of platforms in Europe and in Asia this year that will start to have an impact in the years to come. Slide 25 on aerospace, this is probably one of my favorite ones. If you remember back in 2018, which feels like ages ago, we signed an agreement with Airbus for development collaboration as a part of the Clean Sky 2 program to focus on the wings and the fuselages of tomorrow. The approach is based on using our A250 low melt PEEK. We can deliver time savings compared to thermoset composites with that polymer, where you still have to secure the structures in an autoclave, as an example. Thermoplastic composites enable much bigger structures to be made.
They are formed through in-situ curing, don't need the autoclaves, as I said before. They also have the major benefits of being able to be welded together as parts and strengthened with stringers and structures that also can be welded to the skins and the structure as shown in the picture there in the middle, and the picture there on the right as well. Thermoplastics offer around 60% weight savings, which translates into fuel savings and of course, then CO2 savings as well. It also allows the planes to be built faster, which is an important feature given the backlog of single-aisle planes that are still out there. Thermoplastics offer a great potential for recyclability as well. ESG benefits, time savings, and ease of manufacture all contribute to the value proposition here.
It's really pleasing to see, you know, the parts, the last parts that are now starting to emerge as demonstrated parts for a variety of different parts of the plane in various trade shows, you know, around the world, and in some of the published material from our collaboration partners on Clean Sky 2. If we consider that on a wide-body Airbus model, we might have currently over half a ton per plane, scaling the opportunity suggests that we could increase that by an order of magnitude going forward, and that's probably a relatively conservative estimate at this stage. So a great opportunity, u nlikely to see revenues in the short term or before 2026, but in the meantime, we will be securing some prototype revenues over the next few years on the back of these programs. Slide 26 on Magma.
The new news this year was the bid program has been submitted by TechnipFMC for the packages with Petrobras in Brazil. Remember that Technip is looking to utilize a hybrid flexible pipe with PEEK, with PEEK at its core, using our PEEK in a composite tape as well, backed up by steel armoring. In a hybrid flexible pipe like that, typical weight savings is around 50% versus steel and water for a hybrid pipe. Technip did visit our board this year. We already moved ahead to support them with scale-up with new pipe extrusion facility being built in Açu in Brazil. That's Technip that is doing that. Victrex has licensed its extrusion technology through TechnipFMC.
Also remember that all the qualifications are based on a Victrex-based PEEK core and a Victrex-based composites pipe that is then laser welded onto the core. As it relates to this opportunity it's for TechnipFMC to share sort of further news flow on this following the purchase of Magma Global last year. They are very positive on this opportunity, 2024 is likely to be a key year for them. We will play our part in supporting them in the pathway to much bigger revenues. That, if everything goes according to plan, like I said, should start to show up in 2024. Slide 27. Pathway to GBP 10 million in revenues.
I'm afraid, the bubble chart fans from the past might be a bit disappointed, now we have a new version of showing the progress and the potential associated with our mega-programs. What we want to show here is the next step on the journey for our mega-programs. Aside from knee, which is making good progress in clinical trials, all of our mega-programs have the technical and commercial feasibility now proven. The reason that I exclude knee is because we cannot really claim that until the clinical trials are completed. They're no longer just a bubble, they are real. What we wanted to show you was the potential roadmap to the GBP 10 million revenue opportunity with some focus on that in the next couple of years through particularly Magma and Trauma.
Some might have a longer adoption time, often driven by qualifications like the aerospace opportunity and knee. Knee, which is the biggest opportunity of all of them, will probably take us a few years to get there still. In summary, we thought it was the right time to show the next step of the journey, now for our mega-programs, and we look forward to keeping you updated on progress. It's interesting to note that, as I've said a number of times before, you know, we've always known that these programs are technically doable, and we've proven that. We've done a number of analyses and assessments on the economic viability. In other words, if you can do the a knee replacement technically, is it at a price and a cost that is acceptable for a given application?
We know that these are the two questions that we always have to answer with this type of technology. We've been absolutely convinced that we could answer them positively, and we have. That doesn't automatically guarantee you adoption and commercial success. I think what we're seeing now is that we are really accelerating towards the inflection point of commercialization. Now we have blue-chip companies lined up with almost every one of them, creating the pull through for that demand. That is, I think, a milestone and a set of milestones that we've actually delivered on most of those throughout this year. Significant progress on these. If I move now to slide 28 on the outlook, then a brief word on our initial view on the end market for 2023.
With unmet demand and performers not yet back at pre-COVID levels, relatively optimistic on aerospace with build rates sort of steadily anticipated to increase through the next 12 months. We're also optimistic on medical, with surgery rates still below COVID levels in many regions and the impact of further lockdowns in China having had an impact this year, and therefore impacted the total number of surgeries conducted there. We are neutral on electronics, energy, and automotive. Electronics, as I noted before in my talk, we note that WSTS forecasts focusing decline in semiconductor shipments in 2023. Though Asia is dragging the overall global picture down.
On the energy side, whilst, you know, still, we're expecting buoyancy there, we note that rig count increases have slowed down. For example, Canada was down a few rigs last month, and the U.S. has been relatively flat now month-over-month. You also know that in the industrial part of energy and industrial, or what we call manufacturing and engineering, we see signs of CapEx being reined back as companies are conserving cash and trying to maintain a healthy balance sheet in view of the anticipated recessions in key markets. Whilst IHS data suggests growth in both car production to around 80, 85, 83, 85 million cars next year, I think we need to see further signs of the backlog coming through.
Finally, as I signaled earlier, we have seen some signs of normalization in VARs in the current quarter. Nothing drastic, but certainly not the run rates we have been seeing in the previous, let's say, 18 months or so. Clearly, you know, they are sensitive towards industries that are considered CapEx by many customers around the world, whether it's in food production or chemical industries and the like, where as I said, you know, the focus on cash conversation is quite high these days. We had a record Q3 in 2022 with 700 tons with VARs and a record year of 2,100 tons roughly with them as well. Really fabulous year with value added resellers and a true testimony of the strong relationships that we enjoy with them.
They have not been in a position yet to return their inventory, but as I said, based on the set of macroeconomic exemptions, assumptions that we are making and they are making, we're expecting to see this reaching more kind of a normalized level of demand in the year to come. In summary, a really, really good year for Victrex. Record revenues, record volumes, and further opportunities for growth in our core and in our mega-programs. We are mindful of the macroeconomic outlook and the potential uncertainties that are associated with that. We have seen a steady start of the year.
I think, you know, we have shown resilience through previous recessions or pandemics, and we've always emerged from those stronger than we were when we went into it, with a strong customer focus and with a strong focus on preparing ourselves for the upsurge. Wanna say as well that there are still challenges with inflation, as you heard Ian talk about before. You know, have been mitigating that with both price increases, with surcharges to cut off the huge spikes that we have seen, with contract modifications as well, and through efficiency gains, you know, within the company. Overall, as we look towards the bottom line next year, we're focused on modest revenue growth and PBT.
Even if volumes may be relatively flat, based on the normalization of VARs and the uncertainty in oil and electronics, as I mentioned before, Modest profit growth assumption is based on the benefit of pricing, the benefit of a better sales mix, as Ian suggested. Average selling prices now could be closer to the high GBP 70s or around GBP 80 this year. Clearly the benefit of the tailwind from currency in FY 2023 and a likely tailwind into FY 2024 as well. As you heard today, our long-term programs are particularly strong and have made a significant advance during the year.
Whilst navigating the periods ahead might be challenging, I think the resilience of the company and the financial health with the strength of the core business, with pent-up demand still out there from pre-COVID, and with the fact that some of the mega-programs will start to add significantly to our top line towards the end of what could be a recessionary period, should bode well for us in the future. Thank you all for listening, and we'll now open up the floor for questions. We'll start with questions from the room. Alex.
Hi, morning. Just a couple of things. First one is probably more on the pricing, comments you just made, and I think Ian referenced the delay in recovering costs through FY 2023 as well as what you see in 2022. Can you tell us where the delays are? Is that mainly in the longer term contracts in medical and in aerospace, or are there other areas I'm missing in that? That's the first question. The second one is in knee, probably a question for Martin, actually. I saw there was a recall from Zimmer in the current knee implants after pretty serious rejection rates by patients in the U.K. I think I saw a number of 20%. Is this an opportunity for you, or is that quite a niche area? Thank you.
On the pricing side, it is quite widely spread, you know. The long-term contracts have been quite widely spread, I should say, you know, for our product. You know, consider the fact that, you know, we are quite often, a single source of supply for PEEK into certain, qualified and certified applications. That can be aero, auto, medical in particular, energy as an example. That essentially has, in the past, brought up the need for longer term contracts. With all kinds of contingency planning as well to secure, you know, to secure security of supply.
And it's not just on the medical side, you would see it typically in the contracts on the automotive side, on the aero side with the VARs, because remember also that they are exposed to the same end markets as I'm referring to directly. It is a significant part of our volume. And the part of our mission this year has been to change these contractual elements as well as we go through price increases. I think that will allow us to deploy a greater number of measures to meet such sudden spikes and such high spikes as well.
We're reflecting on it a number of times this year that when we did sensitivity analysis to all kinds of factors a few years ago, we tested the impact of energy price rises to the tune of doubling and more, it didn't really move the needle at the time. It certainly has moved the needle this time. This has called for a change in the way we construct our contracts. We have chosen to honor our contracts, and that's important to us. I think that's truly taking a long-term view on the partnership and being a solid business partner to your partners. It's during times like this when it matters the most. It's easy to be kind and nice when the sun is shining.
It's a bit more difficult at times to support your customers when times are tough. We have chosen to honor the contracts. We will, and we have been modifying our contracts to allow us greater flexibility to meet such dramatic changes as we have coped with this year. On the knee side-
Any disturbance of any industry space that we're trying to get into is, you know, potentially an opportunity. It's a bit early, we're not far enough through the trial now to be ready to do anything very timely. I actually think it's more a warning for us to say, make sure that you do the trial properly, because the last thing we want is a recall on something as radically different as ours. If that happens in three years' time, then that will be a very nice opportunity for us to provide a sound alternative. We just don't have enough evidence yet. Really, yeah, to get to enough. Yeah. We need to do a broader trial than what we've got at the moment. Yeah.
If you could introduce yourself when you make the question, that would help the callers on the line as well, please.
Hi. Thank you. Good morning. It's Adrien Tamagno from Berenberg. I have two, please. First on the Value Added R eseller volume comment, can you please maybe help us understand what are the current trends that you see on the demand front, with slowdown in Europe and maybe the prospects for reopening in China? Secondly, on the gross margin bridge, you've showed a 7.8% improvement from operational efficiency.
How should we think about this for next year as the inventory build up might mean there could be more debottlenecking to come next year? Thank you.
You wanna start with the gross margin bit, Ian?
Sure, yeah. I don't, you know, I don't think we can expect to see the level of improvement we've seen this year going in 2022 going into 2023. Clearly we saw a big efficiency benefit. Some of that was in our monomer production as well as our polymer production. We do have some shutdown time planned for the current year, so I wouldn't expect to see the same benefit year-over-year going into FY 2023. We'll then there will be some buildup ahead of a shutdown towards the end of the year as well. I think it's much more balanced going into FY 2023 as opposed to a big improvement in FY 2022.
Sort of on the key volume assumptions, Adrien, and we clearly look at some of the published data, obviously, that I've been referring to throughout my presentation, mixed with our market intelligence as it relates to new product launches and/or product discontinuations. If you look at it at a high level, you know, we are anticipating a recession in Europe, and we're in recession in the U.S. actually. I think we are as well, and I think that's the increasingly sort of adopted view that we might see a recession in the U.S. although I think in general the talk there is about a relatively mild one. The question then is always about the duration of those.
I think, you know, we're looking at, you know, something in China that is most probably gonna be, you know, in the mid, 3%-4% range in terms of GDP. If we look at it, you know, on auto, as I said before, you know, we do follow IHS, with our own sort of algorithmic interpretation of that. You know, that should indicate a modest growth there next year from roughly 75.9 million cars made this year to probably 83 million-85 million cars produced next year. Still hear those, you know, rumors around issues in the supply chain, not just coming from the back of chip shortage but on other things as well.
You gotta wonder whether there will be a dampening effect on that by the fact that people will be having less disposable income in the most sort of economically mature markets in the world. Energy, yeah, energy prices will still be high, that's good for our energy business. Manufacturing and engineering, I mentioned it in my comments here. You know, we look at PMIs, they have a strong correlation with our business in manufacturing and engineering as we look at those, you know, across the board. Those are relatively subdued right now, that's not a surprise given the focus on conserving cash and maintaining healthy balance sheets as we sail into a more sort of uncharted territory, if you would.
Clearly on the medical side, I think, you know, that's where we have started to feel much more confident about the upside than in any of the other sectors, which is clearly an important part for us given the pricing and the impact that it has on our bottom line. That's in a nutshell how we go about it and sort of the key assumptions at a very, very high, lofty level, if that helps you.
Hi, David Farrell from Jefferies. A couple of questions, please. Firstly, just to focus in on the gross margin again, I think you're talking about 10% average selling price increases, which is about GBP 35 million, GBP 36 million incremental revenue. You said energy costs were probably GBP 20 million higher along with raw materials. What prevents gross margin going up next year? What am I missing in that calculation? My second question, can we just delve a bit deeper into kind of the semiconductor market, kind of what your exposure that is there? I think you talked about 4% decline. You know, the wafer fabrication equipment, they're talking about 20% declines next year. Where are you positioned?
I'll start with the semiconductors, the 4% that I was referring to is in chip manufacturing rates. Capacities going down further. We are a much bigger part of the consumables than we are in the CapEx side, you know, where PEEK is used in the polishing process of the wafers in CMP rings in particular. You could look at what we do much more as a consumable as opposed to a CapEx for 11 usage.
Yeah, I think if you know, I don't think we quoted a 10% price increase, but there is the GBP 72-GBP 80, around GBP 80, potential on ASP, which is probably what you're referring to, David, I think. Well, just bear in mind we're at the 50-50%+ gross margin business. If you wanna maintain that gross margin with GBP 20 million of cost increase, you have to pass on GBP 40 million of price, right? GBP 35 million price on GBP 20 million cost would still be a declining margin percentage. Clearly be improved gross profit, the margin percentage is declining at that point. Yeah, I think, you know, I think we're more confident of gross margins going up when we see energy prices stabilize.
The methodologies we're using to pass those prices on now, including surcharges, will run as a lag to those energy prices. When energy prices stabilize, then I think we can be more confident that, y ou know, we can kind of finish our price increases associated with energy prices on a sort of 6-12 month lag, which is the kind of that we have a lot of 12-month contracts, as Jakob spoke to earlier, and then see energy prices rise from there. I would say, you know, we have our factory in China coming online later in FY 2023. Margins from that are likely to be under pressure initially, as they often are with any kind of startup. Starting a only factory that's starting up. That pressure is in overheads at the moment prior to startup, but post-startup will move to gross margin.
Hi, this is Maria Katachos from Bank of America. I've a question about your pricing and your decision to include surcharges . I'm just wondering how sort of sticky you think these can be going forward, and more specifically, what is the lag between you sort of, maybe normalizing the surcharges in a deflationary environment?
Martin, you want to take that?
We're dealing with the price pressures and, well, cost pressures in two different ways. We believe there's an underlying escalation in our cost base based on inflation, and we're clearly trying to pass that through in consolidated price increases. We believe the way in which we're doing that in a way which should be able to bring our customer base with us. We expect that we will hold on to those price increases. When it comes to surcharge, then we're looking very carefully at what's our energy bill, what is our real energy bill, and how do we translate that across into a surcharge that we can then build against the changing energy costs. We're separating the two very clearly. Will surcharge stick? No, because it's not supposed to.
It will work against what the energy costs are. Will price stick? We think so.
Okay, thanks. My second question is about VAR more specifically. You said you've seen a normalization. I'm just wondering into sort of the first few months of this quarter, has that normalization sort of extended to indicate that maybe customers are destocking a bit more into the calendar year end?
I will take that one. This is a classical phenomenon, though, and if you look at our performance from a historical perspective, the first quarter is always the lowest quarter of the four. I think we're seeing sort of a steady-state versus what we saw in the first quarter of last year. Maybe a slight decrease, but nothing drastic there, I would say. It's a classical thing towards the end of the financial year that people will run down inventories. That effect, I think, is probably increased given the economic circumstances that we're seeing, where the focus is really on conserving cash and minimizing inventories, you know, across the whole supply chain around the world.
Morning. Kevin Fogarty from Deutsche Numis. Just going back on pricing, I think at the half-year stage, you know, you outlined pricing would kind of follow the contract renewals cycle. I just wondered if you can help us kind of where are you sort of quantifying just in that process, i.e., sort of how many more or what percentage of contract renewals might sort of fall into FY 2023? You know, are you up to date currently, excluding any kind of surcharges? I guess just to sort of quantify what that might look like for 2023.
Just going back on inventories, when you look across your industries in terms of end markets, I just wondered sort of how much of your sort of caution or nervousness in end markets is around sort of customer inventory positions currently, on what they've, how they build that perhaps.
Martin, you want to take the pricing one?
Yeah.
I'll take the inventory one.
We're probably into quite a busy period of negotiation there. You know, there are a number of contracts that come at the end of the year, at the end of the calendar year. We've got a busy period coming, and then after that, we should be through the process.
Some of those will be the second time around, right? We'll have done some things in the last cycle, and we're doing something more this time around on the annual contracts.
Okay. Maybe sort of Q2, we should be fully complete.
Well, I think that we will be thinking about our pricing on an ongoing basis, that's why we've adjusted our contracts in the way we've adjusted our contracts.
Okay. Okay. Just I guess on that frequency, kind of what would that look like then in terms of your ability to raise prices on a more frequent basis going forward?
We tend to have annual contracts. If we've got contracts longer than that, we're making sure that we have more flexibility than we've had in the past because you have to recognize the inflation environment we're in there.
Sure. Okay. Thanks.
I think, you know, there are, there's a number of sectors and segments where we've gone more than twice to increase prices. I want to state that. I mean, the ones where we have the annual pricing mechanisms, we've really been working on changing those for the year that's just ahead of us. That's what Martin is also referring to, that we will be negotiating these, and we are, for an effect from the 1st of January.
Okay. Gotcha.
You know, on your question on inventories, I'm not concerned about high levels of inventory in the supply chain actually. I think that you are seeing a destocking effect. You know, I can trace, you know, this probably all the way back to 2018 almost or let's say 2019, when we had the mini recession on the back of Dieselgate and all of that, followed by COVID, followed by the energy crisis right now. I think inventories in the various channels that we serve has by and large, not recovered. I think they've been running relatively thin. I think they'll be running thinner as we head into the year and right now because of what I mentioned before.
That is, you know, you know, a classical pattern, if you almost study lectures from this inception, that in the lead up to, to subdued economic conditions, people will again conserve cash to maintain a healthy balance sheet and some safety margins and reduce inventories, particularly towards the year end. We see that. We're kind of a canary in the coal mine to that effect. When the situation turns around, you know, we see this rapid surge sometimes ahead of many others as well. If your point was whether I'm worried about too high inventory levels, no, that's not my concern right now.
Great. Thanks so much.
Thank you. Matthew, madam?
Hi, it's Maggie Schooley from Stifel. You've been alluding for a while to growing the medical business quite significantly on a longer term basis. I think the chart on page, can't see it, but 18.
Mm.
It is actually relatively interesting. We know knee is a billion dollars, but can you give us a greater understanding of what you think the total addressable market is for those various applications? Point one and then i s this slightly like a flywheel in terms of the medical industry? Once a material gets into commercial acceptance, then you can quickly or more quickly drive adoption in other applications. Those are the two. The last question, sorry, on knee, I know the trial is going on, but in terms of the qualification of a med tech partner, how long would you anticipate once it's, it being picked up in commercial production, that you need to have those qualification processes for the actual device itself?
I'll take the last one, Martin. I'll give you more assumptions about the potential.
On the flywheel, there's clearly credibility that comes from having a material in somebody's body and spent a long time there with no adverse reaction. We sit in a very nice place with that, having had, you know, 15+ years of experience and never having any type of allergic reaction or any problem. We start from the fact that are people comfortable sort of PEEK in people's bodies? Yes, they are. In each application you need to go through a safety demonstration, a proof of concept, and also to make sure that you're not in a situation where you're putting patients at risk. Flywheel is probably a bit strong on the amount of momentum.
You probably reduce the amount of resistance by the more things that are done with your material, the easier the actual adoption is. In terms of the process to get certified, it makes no difference.
What do we think the addressable market is?
If you look at it right now, I think, the total number of operations per year is roughly around $4 million a year. It did grow 30%-35% between 2009 and 2019. I think it's actually anticipated to grow at a faster rate going forward given the aging population and the increase in knee-based drivers, as an example. For, let's say 4 million procedures a year, you know, roughly probably 3 million of them are cement-less, maybe 1 million of them cemented. Cemented clearly commands a premium. The overall size of the market of this market is probably well in excess of $10 billion.
I think it is reasonable for us to assume that we will get, you know, let's say at least low single digits in revenue from pieces in there. That may differ based on whether it's a tibial part or a femoral part. I think it is a sizable opportunity for us, but it will take time to get into it. I think we all know that once you've got a proven solution that works in this space, it's gonna stay there for a long time because there is not a real incentive to change. If I believe that, you know, this will be a game changing solution. Actually I failed to mention as well when we're talking about medical in a broader context, you know. You see the progress on CMS, which is really growing rapidly.
You see the progress on cardiovascular and drug delivery devices. Spine, where we have the first generation, we have a second and the third one, you know, we are aiming at filing an application with the FDA on four 3D printed cages next year. That's our aim. Not saying, you know, absolutely there, but that is something we're aiming at for the current financial year. You couple the very tangible progress and the opportunities within trauma and knee. I think that's a very credible proposition for being able to change the mix and the proportion of medical within the overall revenue base on a growing industrial business at the same time. I think that's a, you know, an obvious great opportunity for us, and that's why we're very focused on building up capabilities in that area.
We've been focused on that for years. I think now we're really starting to see the sprouts sort of, you know, popping up in a very tangible way.
Something else to say about the flywheel as well. Once you're approved in a particular application, the whole predicate system works pretty well. Once you're into a particular application space, then you begin to get a more like the snowball rolling down the hill type.
I didn't know if you could use any form of the data with which you've gathered to then apply to something else, or do you have to recreate the data?
Yeah. Cytotox data you can use, but the actual specific for the application then is ensured.
You need to do your clinical work after that, which is not gonna help.
Thank you.
Yeah. Andrew Stott, UBS. Can I just follow up on China, on the comments on the commissioning? Am I right in thinking that's six months delayed or not?
Yeah, it's about six months delayed.
Yeah. Is that to do with COVID and lockdown? I assume so, right?
Yeah.
Did I miss a guidance for this year on OpEx? You have the GBP 3.1 million for the year just finished. Is there a guidance for this year?
I think it'll be higher this year.
Yeah.
It's gonna get worse before it gets better, I guess, is the guidance. Expect a little bit more this year than in the previous year in terms of startup costs through the P&L. I would say no significant revenues in the current in FY 2023.
Okay. The order book, how's interest in the project?
I think all the assumptions that we made when we started are still holding up. Remember, it is our focused approach. It's a product line extension and sort of very much focused on China, for China, with some of our largest customers, wanting to be supported by us over there. That set of assumptions still holds.
Could you characterize the customer industries in China that are coming to you?
Sorry?
Could you characterize the customer industries that are coming to you for the China project?
Electronics, auto, and I would say energy and industrial. The three would be the key ones that would be the end beneficiaries, if you wish. Main channel to the value added resellers.
Thank you.
Maybe we open up for questions from those who are participating via the phone, i f we have.
Thank you. We will now begin questions from the phone line. To ask a question on the phone line, please signal by pressing star 1 on your telephone keypad. We will pause for a moment to assemble the queue. We will take our first question from Chetan Udeshi of JP Morgan. Please go ahead.
Yeah. Hi. Thanks. Maybe a quick one, but a bit more difficult one, I guess. You know, Jakob, you mentioned in your, you know, in your discussion, you know, record revenue, record volumes, which is great. When we look at the profitability, it's well below the record level. I'm just curious, when do you think we can see the kind of profitability that Victrex used to do in 2017, 2018 again? I know there are, you know, headwinds, but, you know, we've seen headwinds now for a period of time. I'm just curious, when do you think we can see Victrex going to those levels of profitability, GBP 110 million, GBP 120 million, GBP 130 million, given the kind of momentum that you're talking about from a pipeline and demand perspective?
Thank you, Chetan. I don't think you'd expect me to put a year on that. I mean, you gave a quite a broad range of potential outcomes there as well. What I would say is, you know, we're focused on driving that profitability, but at the same time we're not gonna compromise on investing in the, in the programs that we've got and the, and the significant opportunities that we think are out there, such as those in the medical space that we were just talking about. We're focused on driving the profitability. Clearly, there are gonna be challenges this year, and we've talked about that. Our guidance is for modest profit growth this year.
I think in a world where inflation stabilizes a little bit and we can, you know, benefit from our price increases kind of normalizing, if you like, we can drive the volumes and the end markets are strong, then we can look to drive profitability from there. Yeah, I don't think I can put a specific year on a specific number at this point beyond the guidance we've given.
No. If I may add to it a little bit as well, then, and I've partially sort of mentioned it in my talk that when we enter, I think the turbulent times that are ahead for global economies, we will be at a point where we've made the lion's share of the investments that we need to make to be able to support the volumes of the future. By that I mean China, I mean debottlenecking, you know, Hillhouse as an example. We will be seeing the benefits of the leverage of, I think the volume that will come our way at that point in time from a growing core that will start to roll again and command greater volumes, which will be proportional to GDP and maybe GDP plus.
From the fact that we have the unmet demand from pre-COVID, number two, and from the fact that it's likely to confluence with some of the inflection points associated with some of the mega-programs. That's when I think you'll start to see real leverage that will have an impact on profitability that could take us to a, to the profitability of the periods where we're not investing a lot. Remember that these investments are skewing, you know, the bottom line quite a bit these days, whether it's in capabilities and/or hard assets as well. I think once we sail out of that, I think, you know, we will emerge quite rapidly, not just on the top line, but on the bottom line as well.
Thank you.
Thank you, Chetan.
There are no further questions on the conference line. I will now hand back over to the room.
Thanks for all of you that attended today. Thanks for those on the phone as well. We wish you all the best for the upcoming testing period and the new coming year. Thank you. Thank you.