Ladies and gentlemen, welcome to the SIG Q1 2024 Results Conference Call and Live Webcast. I am Moira, the call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions or comments in writing via the relevant field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ingrid McMahon, Director of Investor Relations. Please go ahead, madam.
Good morning, ladies and gentlemen, and thank you for joining us. I'm Ingrid McMahon, Director of Investor Relations, and with me today, hosting the call, is Samuel Sigrist, CEO, and Anna Atkins , CFO. The slides for the call are available for download on our investor website. This presentation may contain forward-looking statements involving risks and uncertainties that may cause results to differ materially from those statements. A full cautionary statement and disclaimer can be found on slide two of the presentation, which participants are encouraged to read carefully. With that, let me hand you over to Samuel.
Thank you, Ingrid, and welcome everybody. Starting the key business highlights in the quarter. We were pleased to see good volume growth in both aseptic and chilled carton. However, the bag-in-box and spouted pouch performance, while acknowledging strong prior year comps, came in below our own expectations. During the quarter, we commenced the planned transfer of our chilled carton manufacturing from Shanghai to alongside our aseptic facilities in the Suzhou Industrial Park. This new state-of-the-art facility allows us to accommodate the strong revenue growth and market share gains that we are seeing in chilled. We believe the business will benefit from the modern and efficient facilities that we have built in Suzhou, as well as from shared infrastructure, existing R&D resources, and our customer testing facility. We were delighted to launch our speedup kits in India during the quarter.
This innovation allows us to increase the output on our installed single serve fillers by 10%. This with a minimal associated CapEx for either SIG or the customer. By accommodating 10% more sleeves per filling machine, we can achieve very nice returns on this innovation. Lastly, we have kicked off our refinancing program ahead of our 2025 debt maturities. This got off to a great start with an upgrade of our outlook by Moody's to Ba positive. SIG has already rated investment grade with S&P. In March, we launched a Schuldschein offering, and we have seen strong demand. As we stated at our 2023 full year results back in February, we expect the overall business performance to be weighted towards the H2 of the year as end market demand recovers.
We did see encouraging signs of recovery in parts of the aseptic carton market, notably in Europe, Southeast Asia, and Brazil, and we are continuing to see growth in chilled carton. Revenue at constant currency was in line with the prior year. While the resin escalator had a varying impact on regional revenues, at the group level, there was no impact for Q1. Adjusted EBITDA was EUR 155 million, and the margin was 21.5%. Compared to Q1 2023, the margin reflects foreign currency headwinds, mix impacts, and increased investments in growth. Free cash flow was negative EUR 101 million in the quarter, reflecting seasonal working capital outflows, including payment of volume rebates for performance in 2023. It also reflects net capital expenditure of EUR 63 million, clearly below last year.
CapEx is expected to reduce during the course of the year as we complete some key projects. Our new chilled facility in China will ramp up from Q2 onward, while our new Indian sleeve plant is on track for completion by year-end. Capital expenditure also includes investment in filling machines, given our solid order book. We continue to expect a large number of filler placements in 2024, although not as high as in 2022 and 2023. Net leverage was slightly above year-end 2023, at 2.9x, but below a year ago, when it was above 3x. Turning now to the performance by region. Europe delivered strong growth of 5.8% at constant currency. Performance was driven by good volume growth in aseptic carton, partly due to a low base effect in Q1 2023.
The region continues to win new filler contracts in liquid dairy and food. Revenue from bag-in-box and spouted pouch declined against the strong prior year comparison, which included equipment sales that were not repeated in Q1 of this year. As a reminder, the current structure of the bag-in-box and spouted pouch businesses include standalone equipment sales. This can lead to quarterly fluctuations in growth. We see it as a strategic opportunity to convert these sales into system solutions, and we have achieved good progress to date. We will continue to develop this over the short and medium term. In India, Middle East, and Africa, quarter one revenue on a constant currency basis declined by 4.7%. India experienced strong aseptic carton growth. However, shipping disruptions in the Red Sea affected deliveries to customers in North Africa.
These shipments will now take place in the Q2, subject to no further escalation in the region. We are pleased, though, to have secured our first bag-in-box contract win in Saudi Arabia in food service. This is for a full aseptic system solution. Revenue in Asia Pacific on a constant currency basis increased 7.9%. Sales in China saw strong volume growth for both aseptic and chilled cartons, following a decline in Q1 2023 due to the outbreak of COVID-19. Both categories are gaining market share, especially in 200 ml and 1 L packaging formats for milk. Following a slower start to the year, Southeast Asia saw good volume growth in Indonesia, Thailand, and Vietnam, especially in March. There was a strong demand for new filling lines during the quarter.
Americas' revenue declined on a constant currency basis by 10.5% in the Q1. The decline in bag-in-box and spouted pouch revenue for the quarter reflects a strong prior year comparison and a temporary decline in out-of-home dining due to higher menu prices in response to increasing wage costs. We expect this to recover as quick service restaurants increase promotional activity. In Brazil, aseptic carton volumes saw good growth in March after a slower start to the year. The group continues its regional expansion in non-carbonated soft drinks and flavored milk. This brings me to the end of my part of the presentation, and I will shortly hand over to Anna. To summarize, the Q1 showed a robust revenue performance in aseptic and chilled cartons, offset by the impact of lower volumes for bag-in-box and spouted pouch.
As previously stated, our full year results for the business as a whole, we expect volume growth to accelerate throughout the year as consumer confidence improves. I will now hand you over to Anna for a more detailed review of the financials.
Thank you, Samuel, and good morning, everyone. Let's start by looking at the Q1 Adjusted EBITDA bridge. Adjusted EBITDA for the quarter was EUR 155 million, compared to EUR 175 million a year ago. The performance was impacted by unfavorable currency movements, which reduced the margin by just over 110 basis points compared to the prior year. Raw material tailwinds from lower hedge prices for polymer and aluminum offset a negative mix effect, which reflected phasing of country and product sales. The production includes lower freight rates, net of a small impact from the Red Sea shipping disruptions and the non-repeat of ramp-up costs for the new plant in Mexico, offset by wage inflation. SG&A reflects growth investment, R&D, and wage inflation.
Going forward, we expect the usual seasonality effects to reduce and the top line contribution to Adjusted EBITDA to gain momentum. On the next slide, we have the EBITDA reconciliation. Compared with the adjusted number, reported EBITDA is lower by EUR 21 million and primarily reflects two impacts. Number one, the usual net movement in non-cash, unrealized commodity and foreign currency hedging positions. The movement in the quarter was a small positive compared to the prior year. And two, restructuring costs and impairment losses of EUR 19.1 million, mainly related to the closure of the chilled carton plant. The impairment was mostly due to the decline in the Chinese real estate market. On the next slide, we detailed the reconciliation from profit for the period to adjusted net income.
Other than the adjustments I just described to the EBITDA bridge, the largest adjustment to net income is, as usual, the Onex PPA depreciation and amortization. This arose from the acquisition accounting when the group was acquired by Onex in 2015. This amortization will cease after the Q1 of 2025. Turning to free cash flow. Free cash flow was negative EUR 101 million in the quarter, broadly in line with Q1 2023. As usual, cash flow in Q1 reflects the payment of volume rebates. Net CapEx as a percentage of revenue for the period was 8.7%. Overall, net CapEx decreased by EUR 25 million compared to Q1 2023. PP&E CapEx was EUR 37 million compared to EUR 51 million in the prior year.
The lower CapEx reflects the completion or near completion of several of the group's projects to expand our global production network. PP&E CapEx for the year is weighted to the H1 , and we expect a slowdown in spend in the H2 of the year. Net CapEx for the construction of filling lines decreased by EUR 10 million compared to the prior year. This reflected both an increase in upfront cash payments and a slight decline in filling line expenditure. Payment of lease liabilities for right of use assets was EUR 15 million in the period. Turning to leverage and financing. Net leverage at the end of the quarter reflected the business seasonality and increased compared to the 2023 year end. It remains, however, lower than a year ago, and we expect it to further decrease to around 2.5x by year-end.
We commenced the refinancing of our 2025 maturities during the quarter, well ahead of the scheduled repayments, and we see very good progress here. Now let's turn to guidance. We are maintaining our full year guidance. We expect total revenue growth to be at the low end of the 4% to 6% medium-term guidance range. This is on a constant currency and constant resin basis. As a reminder, the resin escalator is for the bag-in- box and spouted pouch businesses, which passes on movements in resin costs directly to customers. As stated at our 2023 full year results, we expect the H1 performance to be below the full year guidance and the H2 performance to be above the guidance. For Q2, we expect a sequential improvement over Q1 for both revenue growth and Adjusted EBITDA margins.
The profitability in the H2 will benefit from top line growth, and we expect an increase in the full year Adjusted EBITDA margin to within the lower half of the 25% to 26% range. We aim to achieve this while continuing to invest in growth and in innovation. The guidance is, of course, subject to input costs and foreign currency volatility. That concludes our presentation, and we are now happy to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment, may press star and one on their touchtone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Webcast viewers may submit their questions or comments in writing via the relative field. In the interest of time, please limit yourself to one question. Anyone who has a question or a comment may press star and one at this time. The first question is from Joern Iffert from UBS. Please go ahead.
Yeah, thank you for taking my questions. The first question would be, please, on the guidance. Struggle a bit to follow it for the full year. Let's assume Q2 is improving somewhat on organic sales and margins, but remaining below the full year targets. This would imply in the you need toH2, have top line growth of 5% to 6% and then even EBITDA growth of 15%, which would drop through of around 60% above your gross profit margin. So can you share with us if there's anything coming on cost savings or lower input costs, which is helping the H2 margin? This would be the first question, please.
Thanks for your question, Joern, and let me just open the bracket. The operator just said one question maximum. I mean, that's not instructed by us, so please ask as many questions as you have. So to your question, Joern, yes, I mean, we expected, and we said it also when we presented the 2023 results, a year that is going to have a seasonality geared towards the H2 , and that meant the top line as well as the margin, including also the free cash flow generation. Now, specifically to the margin profile, obviously, you saw the hit we took from FX now in Q1. We believe, and that's not what we kind of, where we bank on, but we believe that the FX impact is going to ease a bit.
We're going to also see as, if you look to the raw material impact in Q1, where we still experienced hedged prices, that we hedged Q1 2023, that were above spot rates, that the raw materials become more and more of a tailwind for the full year. And then, obviously, operating leverage kicks in. SG&A is obviously a phasing topic. So all of these reasons in combination together is obviously an acceleration of growth, make us support the guidance as we issued it at the beginning of the year.
Thank you. And then maybe two quick questions, and one would be, please, I mean, looking into Q2, do you expect significant improvement versus Q1 organic sales and, and margins, I assume, but can you help us a bit, to which corridors roughly, that we have a little more confidence also for the full year outlook?
Yeah, we definitely expect an improvement, basically, along all metrics for Q2, but I think it's going to be really gradual. You know, when we talked about the full year guidance with the low end of the 4% and the lower end of the 2025 to 2026, that's the full year guidance. So I expect H1 to be below this guidance and H2 to be above this guidance.
Thanks. And the last question is, please, on aseptic carton, very strong performance, mid-single-digit volume growth in Q1. Is this run rate something we should expect for the full year? And then can you also remind us on the comps for Scholle, going into Q2 and Q3, please?
No, we were very pleased with the start on the aseptic carton, which was indeed a bit stronger than we even have expected at the beginning of the year. That's a function of obviously Asia, especially China, doing well. We also saw signs of recovery, as I mentioned in the script, in Southeast Asia and to some degree, Brazil, especially in March, where volumes picked up. We obviously guide for the combined group at the low end of the 4% to 6%. We don't provide specific guidance for the substrates, but I think as we had a good start into the year with the aseptic carton, we expect also that it's going to be a key driver to support the guidance.
In terms of the comps from a bag and box and spouted pouch perspective, you recall Q1 last year was the tough comp, and that starts to ease now with the Q2, Q3, and Q4.
All right. Thank you.
Thank you, Joern.
The next question is from Charlie Muir-Sands, from BNP Paribas. Please go ahead.
... Yes, good morning, everyone. Thank you for taking my questions. Firstly, on the, the currency impact that you called out on the margin on, on Q1, can you just elaborate a bit on the mechanics of that? And you said you hoped it was gonna be better from here. Is that based upon just assuming market spot rates hold or, you know, just to try and understand the sort of the upside and downside risks on that? That's question one. And then the second question relates to the shipping delays due to the Red Sea congestion and risks. Can you just sort of give any kind of quantification as to how much that might have impacted your IMEA revenues in Q1?
For Q2, should we just assume it's sort of back to normal, or is it back to normal plus that catch-up effect? Thanks.
Yeah, good morning, Charlie. Let me take the first question on FX. So as you know, FX always includes translational and transactional impact, so transactional including remeasurements also. And if you take a look at last year's Q1 EBITDA bridge, you would also see a significant positive FX impact from a favorable remeasurement in the baseline, which basically didn't repeat in this year. And with this also, that's of course part of our confidence while we would see this effect easing over the next couple of quarters or going back to zero and not having an impact anymore.
With regard to the Red Sea shipping disruption, yes, we expect a catch-up of the Q1 effect into Q2, Q3. I think, I wouldn't highlight now Q2 as where we expect it to be a very outstanding one. I think also last year was a good one. So from that perspective, we expect just the next three quarters to be good quarters in the IMEA region.
Great. And just one follow-up question, if I may. Are you able now, presumably all the negotiations are complete, to give us a rough indication at the group level around the price contribution you're expecting for the group for the year, excluding the resin escalator?
Yeah, we still guide for kind of a flat impact on the top line from pricing. You know, in some instances, pricing go up, but then we see volume growth, and that's offset by volume rebates. So overall, there is no impact from pricing on the top line.
Many thanks.
Thank you.
The next question is from Pallav Mittal from Barclays. Please go ahead.
Good morning. Thank you for taking my questions. Firstly, if you could talk about the impact of liquid paperboard cost on margins in Q1, and then how do you expect that to change in the remaining three quarters? Then secondly, if you are saying that the aseptic carton and chilled carton business have grown well around mid-single-digit volumes, so that is 80% of the business, and if total group volumes are flat, it would imply volumes in other down 20%. Is that the case?
Yeah. So good morning. Let me take the first question on liquid paperboard. So basically, we can absolutely confirm what we have said before, that we have a multi-year contract in place, which also wouldn't surprise us a lot, and the development is very much in line with this. And I think you have seen the total composition, the total basket of sourcing, which was favorable to the quarter.
With regard to your second question, absolutely. I mean, mid-single digit for both chilled and aseptic. That means, if you recall, we talked last year of bag-in-boxes, spouted pouch, revenue growth for Q1 in the high teens, and we have seen a partial reversal of that now in Q1. Not a full reversal, but to a large degree. So I think all the magnitudes that gets us to the flat top line that we see for the combined business.
Thank you.
Thank you.
The next question is from Patrick Mann from Bank of America. Please go ahead.
Good morning. Thank you very much for the presentation. The first one is just a little bit around the growth outlook. So, I mean, you've been deploying a high number of filler machines relative to your history, and you've done sort of two M&A deals, but we're still at the lower end of the growth outlook. I mean, is this a case of you've grown your footprint, but maybe consumption per machine is lower, and when we see a return of more robust economic activity, that growth could accelerate? Or do you think this is kind of the level of investment we need to run at to hit your 4% to 6% medium-term target? That's the first question. Thanks.
Yeah, and I think that's exactly the way we think about it. I think we had these acquisitions in 2022, fully consolidated in 2023. We did see in the acquired business that they delivered volume growth against declining markets. The aseptic carton business last year was flat in volume against declining markets. And the filler wins that we placed in 2022, 2023, they helped us to get to a flat volume. And I think especially, exactly like you described it, going forward, we believe in an environment where end market growth resumes, and we know what the fundamental drivers are of that population growth, disposable income growth, that this will help us to accelerate growth.
We always say, you know, we are comfortable to grow the business between the 4% to 6% and have CapEx at the low end of the 7% to 9%, and that hasn't changed.
Okay, thanks. Yeah, it kind of feels like it's hard to tell what the sort of growth impact is of the new filler machines when, you know, the overall market is declining. So I suppose it's one, one is going one way and one's going the other way. The other-
Yeah.
question is just around the leverage. The 2.5x by year-end, I, can you just remind us, is that mainly driven by, EBITDA growth into the H2 of the year? Or, I mean, I know free cash flow is seasonal, so we should see positive free cash flow in the H2 , but just to what extent the net debt to EBITDA coming down is sort of driven by the denominator and the numerator, if that makes sense? Thanks.
Yeah, thanks for the question. Also, here, no news as we have stated several times, our deleveraging is very much driven by the expansion of the EBITDA, and this is also what we expect for this year.
Great. Thank you so much.
Thank you.
The next question is from Alessandro Foletti, from Octavian. Please go ahead.
Yes, good morning. Thank you for taking my questions. I would like to ask you on Combibloc in Europe, when I sort of see the 5.8% organic or maybe even 6.2% without resins and Scholle being negative, I believe Combibloc must have been +10% or something like that. Is this sustainable for the rest of the year?
I think we were very pleased. Thanks for your question, Alessandro. We were very pleased with the start in Europe for aseptic. I don't think that necessarily that is gonna set the pace for the full year. And obviously, we also expect, bag-in-box and spout-in-pouch to contribute obviously over the quarters to come in a different way. Now, what I would say if you step back, though, I mean, purely looking at milk consumption, milk consumption or the role experienced it ourselves during COVID with increased at-home consumption went up versus baseline year 2019. And while we're obviously clearly out of COVID, we do see that, at-home milk consumption has, for now at least, kind of, flattened out at the higher level than 2019.
So that's that gives us a positive perspective in Europe also for the remainder of the year.
All right, but my calculation was approximately correct, so?
Well, I mean, Europe had a very good start, as I said, and obviously bag-in-box against the backdrop was the, the top comps obviously was a bit of a drag to the group, to the European growth rate. So I think directionally, absolutely right.
All right. Okay. Would like to ask a question for the U.S., but the other way around. But first, you mentioned the machine business.
Mm-hmm.
When I look at your machine business on group level, even including service, is 12% of your whole top line, and that includes also the leasing machines. So I tell only the sold machines, it's almost irrelevant to the group. So why does it have, as you mentioned now, such a big impact for Scholle specifically?
No, you're right. I would say it's a number of different things, right? On the bag-in-box and spouted pouch sales. I mean, I talked before about that we saw a partial reversal of the very strong growth rate we saw in Q1 2023. So let's remind ourselves what drove the Q1 2023. It was on the one hand side, that we saw a bounce back from COVID, which was a very strong one. We saw share gains in the U.S., and we had one-off equipment sales, as you rightfully said, these are the ones that are outright sales for equipment. They are maybe not relevant for the total group, but they're definitely relevant for bag-in-box and spouted pouch in a single quarter. And those three things came together, and that's where we saw the reversal now.
As you know, our strategy, especially by moving these systems to aseptic, by making it an aseptic business, by selling consumables and machines, we also wanna move it to aseptic business as we have it in the aseptic side, which also comes with much more smoothened out equipment sales.
Okay. All right, let's leave it at that. Maybe on the net interest, if I may. It was EUR 36 million for the quarter. Is it really just the interest expenses there, or is there some other effect, and, i.e., do we have to multiply that by four for the full year, or for the full year, the expected interest expense is maybe lower than EUR 120 million?
Yeah. So thank you very much for the question on the interest. I mean, there's always, of course, so it's not perfectly equal to in all quarters, those payments, that is for sure. And we still believe that for this year we're gonna be pretty close to last year's levels on interest overall.
You mentioned the refinances. Mm-hmm. Hopefully, it will have a positive impact on your interest expenses. Can you sort of quantify once you have concluded the refinancing?
Yeah. So I would ask you to wait until we really have financed everything. We are on the last meters with the Schuldschein, so that has progressed very well. We saw really very good demand, and then the other components will follow. And I think we would give an update when everything is finalized.
Right. And then, if I may, one last one on the filling CapEx. Can you give an indication for the rest of the year how that might develop?
We have full year guidance out, and we always said we are comfortable at the low end of the 7% to 9%.
Okay. So including everything, basically?
Mm-hmm. Mm-hmm.
But are both components going down, i.e., PPE and filling line, or is it like filling line going back up again and PPE going down?
... No, I mean, we said we expect a good number of fillers to be placed, but not as high as in the prior two years. So I would say, without providing a specific guidance on the different components, I wouldn't be surprised if both components go down.
All right. Thank you very much.
Thank you.
The next question is from Gaurav Jain from Barclays. Please go ahead.
Hi, thank you. This is Gaurav Jain. So, you know, two questions from me. So one is, you know, when you, you know, last year and even, you know, so far this year, a lot of packaging companies have talked about destocking, and now probably some restocking is happening. So when you are looking at volume growth, is it possible to, like, segregate into end demand growth versus any potential restocking that might be happening?
Yeah, I follow these discussions, too, and already last year, you know, we said what fundamentally drives our end market demand, and hence also our volume, is kind of consumption of the end consumer. And there is also a bit of a stocking effect in between, but I think it is not as material as it seems to be for all the businesses that we need to spell it out. So for us, it comes down to the end market demand.
Okay, thank you. Second is on leverage. You know, so clearly, you know, let's assume your financial projections are met, and you are, you know, will be in a very healthy leverage position by the end of the year. So then what would be the objective of the group? To do more M&A or to look at maybe additional shareholder returns, like share repurchases, as we go into 2025?
Yeah, I mean, first, we have a leverage target for this year, but you also recall we have one for the midterm, which is towards 2x, and we are committed to get there. And that also means that we continue to grow the business organically. We have expanded our platform. We have cemented our leadership position as the leader in sustainable packaging for liquid food and beverages, and from that perspective, we are comfortable to grow the business organically.
Okay, thank you. If I could just sneak in one last one on PPWR. Like, how do you think that impacts your business as this final regulation is getting drafted? Or it has passed already, so how do you think it impacts the business?
Yeah, we're pretty neutral, and it's—I think we can live very well with the outcome. From that perspective, you know, we look at also in general regulation more as kind of creating a level playing field. Obviously, what would be a super tailwind for us would be something like a carbon tax, but that's not on the horizon. But with the PPWR and the outcome, we can live very well with. We have now one more year of, you know, further detailing and specifications, and obviously we continue to watch that, but from today's perspective, we're very comfortable.
Thank you so much.
Thank you.
For any further questions, please press star and one on your telephone. The next question is from Ng Su Xian, from Deutsche Bank. Please go ahead.
Thank you very much for taking my question. So three questions from my side. The first one is on the short-term growth outlook. So you indicated that the H2 growth should accelerate compared to H1. I'm just trying to understand here, on which ground is the confidence coming from on the volume recovery? Is it that customer indicating that they will hit the volume threshold, and how much visibility do you actually have at the current stage? And the second question is, a follow-up question on the FX impact on the margin. Can you give us more color on the accounting mechanism? How does the remeasurement impacting the transaction effect? And the last question is on the first bag-in-box order win that you got in the MEA region , in the food services. Can you quantify that order, please?
Thank you very much.
Thanks for your questions. Yes, we expected, said before, an acceleration of top line growth over the quarters to come, and I also said, before that while we look at the full year guidance at the low end of the 4% to 6%, I think H1 is gonna be low and H2 is gonna be above this guidance. Definitely in the aseptic carton side, where we have this volume commitment from our customers, that gives us visibility, and that's also factored into this guidance, as are also kind of signs of recovery that we see in the end market demand.
We know that in many markets, prices for food products or inflation has slowed down, and we also know that wage inflation in many markets is underway, and we believe that's gonna bring the disposable income more back into sync as what we have seen prior to this inflationary period. So these two factors kind of support our view for the quarters to come. Now, Anna, on the FX?
Yeah. So how do the remeasurement mechanics work? So basically that is a reassessment of the balance sheet positions in foreign currencies. So, where you would, for example, when you think about net working capital, then revalue, your inventories and receivables or payables accordingly. And, the two major currencies, that played a role here, especially in last year's baseline, were, the Thai baht as well as the Mexican peso, if that helps.
Your last question was on the system sales in Saudi, which we are excited because it goes into food service, it's aseptic, it's an all-encompassing offering with the machine, the consumables and the service. We haven't quantified that though, as we didn't do it in the past. But, you know, for me, it's a continuation of the synergies that we were able to bring home in the last year that confirm the industrial logic of the combination. The customers see a value in having this expanded offering, and so we will continue to report on that. It was especially a breakthrough as historically, the Scholle business had no physical presence in the Middle East, a bit of export out of Europe, so we're really now building that up. That's why we're very excited about that win.
... Thank you very much.
Thank you.
We have a follow-up question from Alessandro Foletti from Octavian. Please go ahead.
Yes, thank you for taking my follow-up. Just on the impairment in China, I imagine you mentioned the real estate market and valuation there, so I imagine you are probably selling the plant that where you were doing the Evergreen business. I wonder if the selling process is, how far you are, i.e., if there are further potential risk of impairment or if this new value now already reflects, I don't know, your agreements or whatever?
So I mean, that's gonna be a transition. I think you're spot on with what you described. We indeed intend to sell the site, the building in, in Shanghai. It's gonna be a bit of a layover now, you know, as we need to move some equipment. So, the process is gonna, the sale process for the land is gonna take place in parallel of now us moving equipment out and basically bringing, operations in Shanghai to a stop. Obviously, we looked at, the market and also did some more work around valuations, and we felt that with the current impairment, we took a realistic view of what is, what we can expect for the sale of this land.
Timing-wise, I mean, I don't know, by the end of this year, by end of October?
By end of this year, by end of this year, we wanna be done with producing there, everything moved, and then obviously it's gonna be a function of when we find the right buyer. But it's a land which is placed in a very attractive zone because it's mainly residential also around it, but obviously there is a bit of a, an impact on the, on the overall market.
Right. Okay. Thank you.
Thank you.
There are no more questions on the phone.
Then we appreciate your time this morning. Thank you for joining us, and we look forward to see you in either one of these investment engagements that are scheduled yet or then latest in the H1 call later this year. Thank you very much, everybody, and have a very good day.
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