Ladies and gentlemen, welcome to the Q3 2023 Results Conference Call and Live Webcast. I am Alice, the conference 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 in writing by 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 IR. Please go ahead, madam.
Good morning, everyone, and thank you for joining us. I'm Ingrid McMahon, Head of Investor Relations, and with me today, hosting the call, is Samuel Sigrist, CEO, and Jessica Spence and Dmitry Lebedev, our interim CFOs. 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. I'm pleased to report a solid financial performance for the third quarter of this year. The Aseptic Carton business continued to successfully recover cost inflation through price increases. After a very strong start to the year for Bag-in-Box and Spouted Pouch, the business saw a slowdown in revenue growth in Q3. This was against the prior year growth rate in the low teens. We remain pleased with the performance of the business. The Chilled Carton business in Asia continued to deliver excellent growth. Being part of SIG is enabling the business to build much stronger relationships with customers. We're also working on new innovations, such as one-step opening spout, leveraging our knowledge from Aseptic Carton . Our improved cash generation was in line with the normal seasonality of the business and ahead of Q3 2022.
It's always exciting to see the commercial introduction of our innovations, and we were delighted to launch SIG Dome Mini, our single-serve carton that is shaped like a bottle, with our first customer in China. We are also successfully rolling out our Alu-free packaging in China with two of the region's largest customers. We see significant potential for Alu-free in China as these projects ramp up. I'm very pleased with the technology synergies being realized between our Aseptic Carton and Spouted Pouch business. We have launched the second generation Aseptic Spouted Pouch filling machine with the same sterilization process as we use in our Aseptic Cartons, and we are already working on the third generation. This ensures we continue to improve the total cost of ownership for our customers, which is key to ensure the successful adoption of our Spouted Pouche s at scale.
I'm delighted that SIG has received approval for our group-wide net zero Science Based Target from the Science Based Targets initiative . We have committed to reach net zero greenhouse gas emissions across our value chain by 2050. Of the 2,000+ companies globally with a public net zero pledge, SIG is among the first 325 companies to have its targets validated and approved by the Science Based Targets initiative . Group revenue at constant currency grew by 7.7%, while Aseptic Carton increased by 8.1%. Adjusted EBITDA was EUR 190 million, and the adjusted EBITDA margin was 24.8%, 160 basis points ahead of Q3 2022. Adjusted net income was in line with last year, as higher adjusted EBITDA was offset by an increase in interest expense.
Net capital investment of EUR 59 million was in line with Q3 2022 and reflected the normalization of CapEx spend, following a higher rate of investment in the first half of the year to support our growth plans. Free cash flow generation was EUR 133 million for the quarter ended September 30, a 31% increase compared to Q3 2022. This strong turnaround, compared with the outflow of EUR 213 million in the first half year, is in line with our usual seasonality. Turning now to the key figures for the nine-month period. Revenue at constant currency grew by 24%. This includes the acquisitions, which together contributed EUR 569 million to revenue. Organic revenue growth of 7.1% at constant currency relates to the Aseptic Carton business, which continues to perform well.
Year to date, adjusted EBITDA is EUR 582 million. The adjusted EBITDA margin of 24.9% is just shy of 100 basis point improvement compared with the first nine months of 2022, demonstrating our ability to recover cost inflation through price increases despite additional dilution from the acquisitions. Free cash flow was negative EUR 80 million as of September 30, which reflected an increase in net capital expenditure of EUR 162 million compared to the prior year. For the nine-month period, our net capital expenditure as a percentage of revenue was 9.8%. We expect this percentage to fall to the lower half of our 7%-9% target range. Turning to the quarterly performance by region.
Europe delivered strong revenue growth of 7.5% at constant currency for Q3, driven by Aseptic Carton performance with price increases to recover cost inflation. Europe's margin was the most impacted by higher raw material and energy costs in 2022. The region continues to gain share in Aseptic Carton market due to new filler installations and a broader regional presence. This includes a system solution with our digital offering for a large dairy player in Finland, as well as further expansion in Romania, where we have gained share from both carton and PET. Middle East and Africa report a constant currency growth of 6.7%, reflecting a solid recovery after a weaker quarter two. This included the ramp-up of new Aseptic Carton fillers in South Africa and Saudi Arabia, in line with our regional strategy to increase the share in the liquid dairy segment.
There was also an increase in demand in Algeria. The region's growth reflected price increases to recover cost inflation. Asia reported Q3 revenue growth of 14.4% on a constant currency basis. Southeast Asia saw increasing Aseptic Carton volume growth throughout the quarter, particularly in India and Vietnam. In China, chilled carton delivered a strong underlying growth rate of high single digits for the quarter. There was also solid demand for Aseptic Carton . The region is particularly benefiting from our strong R&D capabilities as we continue to innovate in terms of packaging, shape, and compound structures, as demonstrated by the rollout of SIG Dome Mini and Alu-free packaging. The Americas delivered Q3 growth of 1.9% on a constant currency basis, against a strong prior year comparison. In Aseptic Carton , Brazil experienced softer demand in July and August.
However, growth picked up in September with a recovery in liquid dairy demand. Mexico reported a strong performance in liquid dairy for Aseptic Carton, gaining share of wallet with its largest customer. In the U.S., there was a ramp-up of Aseptic Carton volumes with two new customers in the non-carbonated soft drink sector, which offset lower sales in broth. Revenue growth for Bag-in-Box and Spouted Pouch was above market growth as the business continued to gain market share, but lower than Q3 2022. Growth in 2022 was particularly strong due to market share gains and the elevated demand post the COVID-19 pandemic. We continued to realize cross-selling wins, including full system solutions for Aseptic Spouted Pouch and Bag-in-Box. An example during the quarter was for Spouted Pouch with an existing large Aseptic Carton customer in Brazil. Turning to the Adjusted EBITDA bridges for Q3 and the nine months.
We continued to see positive developments in Q3, in line with the first half of the year. Growth in adjusted EBITDA was driven by a top-line contribution of EUR 30 million, reflecting the strong organic growth of 8.1%. There was a positive contribution from raw material costs, as we benefited from lower spot prices for our unhedged portion of polymer and aluminum. We also achieved a positive result on production costs due to a strong operational performance during the quarter and lower freight rates. SG&A reflected investment in growth, including higher R&D expenses and regional expansion, as well as wage inflation. Overall, the Q3 adjusted EBITDA margin was 24.8%, compared to 23.2% for Q3 2022. For the nine-month period, adjusted EBITDA increased by 27% to EUR 582 million.
The Adjusted EBITDA margin was 24.9% compared with 24% for nine months in 2022, despite dilution from the acquisitions. A higher revenue contribution, driven by price increases in the first nine months, more than offset higher SG&A, raw material, and production costs. Turning to capital expenditure and free cash flow. Year-to-date, capital expenditure reflects investments in global capacity and an increase in filler CapEx, given our strong win rate. As expected, our free cash flow generation is gaining momentum and was ahead of Q3 last year. Year-to-date, our cash generation is below our prior year, largely due to the significant increase in capital expenditure in the first half of the year. Also, the proportion of upfront cash payments from customers has been relatively low, with the majority of payments expected now in the fourth quarter of the year.
Pro forma leverage was 3.2x as of September 30th, an improvement compared to 3.4x as of June 30th. A strong Adjusted EBITDA performance over the last 12 months has positively contributed to the improvement in the ratio. We remain committed to reducing gross debt by year-end, and we expect net leverage to be clearly below 3x as of 31st of December this year. Turning now to the guidance for the full year. Year to date, SIG has demonstrated a very resilient financial performance, with strong revenue growth and Adjusted EBITDA margin performance. We maintain our full year guidance, which includes revenue growth at constant currency of 20%-22% and organic revenue growth of 7%-9%. The Adjusted EBITDA margin is expected to increase by up to 150 basis points to 24%-25%.
Guidance on tax, CapEx, and the dividend payout is also unchanged. Lastly, we reiterate our commitment to reduce gross debt by year-end, and we'll remain on track to meet our target of 2.5 x net leverage ratio by end of 2024. We believe these results demonstrate the resilient, resilience of the business and our ability to grow. That concludes the formal part of our today's call, and we will be very happy to take your questions. Before doing so, I'd like to remind you that we are hosting our Capital Markets Day on the evening of the 21st of November, with a dinner in Düsseldorf, together with our senior management team and a site visit the following day at our operations in Linnich. A link to register for the event is in today's media release.
We look forward to see you there, and with this, I would open up for 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 the touch-tone telephone. You will hear a tone to confirm that you have 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 for asking a question. Webcast viewers may submit their questions in writing by the relevant field. Anyone who has a question or a comment may press star and one at this time. Our first question comes from the line of Charlie Muir-Sands with BNP Paribas Exane. Please go ahead.
Yes, good morning, gentlemen. Thank you very much for taking my questions. I've several, but I'll stick to three maximum. Firstly, just on the Scholle IPN business, I realize it's obviously been open for more than 12 months, but not within your organic growth disclosure yet. Could you just give us what the organic performance was for that business in Q3, and give us some insight as to whether the resin escalators were a positive contributor to that, or whether they're now flat or even down? Secondly, on the filler installations, are you still expecting to install around 90 this year, and do you have any kind of early visibility on next year?
Lastly, I just wanted to clarify: did you say that you expected this year, your net CapEx to be at the lower half of 7%-9% of sales, or is that more progressing into 2024? Thank you.
Morning, Charlie, and thanks for your questions. Scholle IPN growth. Organic year-to-date growth for the Bag-in-Box and Spouted Pouch business is just shy of 6%. So I think that's a growth that is largely driven by volume growth, and it's kind of coming from the global basis, obviously, the U.S. business still being the largest business. The Q3 growth rate was rather flat, and this is a function of Europe, which had a significant start into the year with very strong growth in the first half, saw a weak quarter three. The same was true for South America, and I would say to some degree, similar, like our Aseptic Carton business, but also then I think tomato season shifting a bit into Q4 as the drivers for that.
So rather a flat Q3, and the business is now tracking just slightly shy of 6%. And with that, obviously, also keeping in mind strong comps for the last year, Q3 last year in the, in the low teens, where we saw growth rates as obviously a function of share gains, but also the rebound after COVID-19. And this is a business that obviously historically has tracked rather, growth rates of mature markets around the 2%. So I think we are very pleased and in line with expectations with the performance there. The filler installation, yes, we still look, at the similarly, a similar number as what you said earlier.
This year, compared to last year, if I look to the gross number of fillers placed, and, I think that is a testimony to the continued demand for SAT technology, but also for the beverage carton as a substrate in general. I mean, our filler pipelines, they still look solid into next year. We haven't yet kind of contracted the full year demand, but we're positive on the outlook into next year. And we will update there also then on, on, the full year numbers with the outlook for next year. The net CapEx, just to clarify, indeed, that's the guidance for this year, where we said we year-to-date track now at the upper end of the corridor or above 9% even, and, we say we're going to bring that into the lower half of the 7%-9%.
That's indeed this year.
Great. Thank you very much.
Thank you for your questions.
Our next question comes from the line of Yujing Zhang with Bank of America. Please go ahead.
Morning, everyone, and Ingrid, thank you for the presentation. I think I've got two questions. First one on organic revenue growth. By region, it seems like a good growth in Europe and MEA. APAC was particularly quite strong, whereas Americas seems a little bit light because the kind of comparison year-over-year. If you could give a little bit color around these two regions and also like how should we think about the growth momentum into Q4, that would be really helpful. And my second question is: How should we think about the upfront cash payments in Q4? If you could help us understand, you know, why did it come through in Q3?
Are customer kind of pushing back or under the high rates environment, that kind of impacts the ability to, to push cash a little bit forward? So that would be helpful. Thank you.
Thanks for your questions. So let's start with the organic growth. I mean, walking through the regions, Europe, obviously, and we said it in earlier calls, benefits most from the price increases, and that also explains a large part of this growth rate. That said, we are very pleased also with the underlying share gains, and I think we're doing very well in Europe on the Aseptic Carton business. Middle East and Africa, we all talked about Q2 and the expected slowdown there, and we are pleased to see now that we are back on a decent growth rate for the third quarter. Also, we have seen those markets that reflect that we saw some issues with access to hard currency have eased and rebound this quarter.
In Asia Pacific, in line with expectations after a very, very soft start in China in Q1, we said, you know, we see for the remainder of the year a solid demand, and I think that's what also is reflected in the growth rate now of the third quarter, and it was also of the second quarter. The Americas, and I think you characterized that well, obviously, have a slowdown, especially South America started very strong into the year, but now we really see their strong comps for last year. And we have seen in Latin, or maybe South America, a bit of a weaker demand in July and August.
I mean, in general, I would say if you ask for the outlook for the remainder of the year, we obviously maintain our guidance to this of 7%-9%. I mean, at this stage, I wouldn't expect a significant acceleration versus the year-to-date growth. I mean, we said it on earlier calls, also in our category, which is this entry-level of processed and packaged food, a category that is characterized through resilient demand. But, you know, with food prices and the inflation for food products on shelf, we do see that also consumers of our products need to kind of think twice before they spend their money. And there is a bit of a elasticity element in there, which led to a slowed down demand, and that's also what we see in our numbers.
But the 7-9, obviously, maintained, and I would say from a today's perspective, probably not a significant acceleration into Q4. So your second question is a good one, and I think we should elaborate on that. Why is the upfront cash backloaded this year? So it's not related to customers pushing back. What triggers the upfront cash collection for us is really bringing the fillers online, means up and running, and that's just how kind of this year's fillers deployments are on the way, so they are also backend loaded. And we have a number of fillers that now in the third quarter were installed, that need to be commissioned in the fourth quarter, and that will trigger the upfront cash. That's gonna happen.
That's very helpful. If I can squeeze one more question relating to GLP-1. Do you think that, you know, in the longer term or in the near term, have any impact on, on the business in terms of kind of revenue growth and volume?
I'm sorry, I didn't catch your question. What was the first part of the question? What has an impact on us?
Relating to, relating to GLP-1, the anti-obesity drugs that kind of reduce people's consumption on high calorie.
Oh.
Consumption.
Got you. Got you. I mean, we operate in many markets where we saw similar regulation kicking in early. You know, sugar tax that did trim demand, where customers had to change recipe. As a reference point, where we saw that, that was in the Middle East, that was in the Nordics. That hasn't impacted the demand for our products because customers, obviously, they find ways to adopt that. That's what we see, and I think the same also goes on the soft drink side. There are substitutes that obviously are conformed with those regulations.
That's very helpful. Thank you very much.
Thank you very much.
The next question comes from the line of Alessandro Foletti with Octavian. Please go ahead.
Yes, good morning, everybody. Thank you for taking my questions. I wanted to ask a couple as well. Maybe, on the Q4, let's say, when I look at the run rate today and your targets for Q4, can you maybe be more precise on the free cash flow? Is it all coming from, so to speak, this, upfront payments that you will receive? Or what is the contribution, say, of the margin and, and then the working capital?
Yeah, I think it's, it's all of the above, but definitely, Alessandro, the, the upfront cash plays an important role. I mean, we, we said on earlier calls, we, we're comfortable with the, with the consensus for the free cash flow, and, that means there is a significant contribution now, coming out of the fourth quarter, which is in line with our seasonality. And, as it is normally a, a very strong quarter for sales, that also leads to a reduction of inventory. So we're gonna see, the same this year. We're gonna see the upfront cash collection, and we're gonna see kind of, obviously, the EBITDA translating into cash contributions. I would say it's all of the above, but definitely more pronounced is the element of the upfront cash this year.
So if I understand correctly, this year, really, the only outlier or exceptional fact is this upfront cash payments. You're not banking in specifically stronger end rally or, or, or anything like that, right?
No, I think it's a fair way to put it.
All right. My second question was on what you mentioned on the Aseptic Spouted Pouch machines. If you can give a little bit more details on that. What are the capabilities of these machines? What kind of business model are you pursuing there? And is this product still sort of a beta test version, or is it commercial, meaning at some point you really start to roll it out and offer it to all your clients?
M aybe to put some context around that, that's a good question. So generation one is, let's call it a slow speed filler, which is in line, I would say, with what the filling speed is today in the market, but against our ambition to deliver fast speed, I would call it now a slow speed. That is a pre-manufactured Spouted Pouch that needs to go for sterilization purposes offline. That means to another place where it's gonna get gamma radiated, and it comes to a customer for filling. So that has higher total cost of ownership, but it works for applications where even the end product has decent margins. That's the first generation, which is already out there. The second generation I referred to, that hits now the market, and that's a prototype that we're gonna launch with the largest banana producer in the world.
That is a machine that is not yet faster in speed, but that does and still comes with pre-manufactured Spouted Pouch , but it does in-line sterilization with the same technology that we use on our Aseptic Carton line. So that's a big step forward because you cut out the whole transportation and external radiation for sterilization purposes. Then the third generation, which is on the way, is gonna move from pre-manufactured to Spouted Pouch that are produced on customer site, as well as a higher speed. And that is gonna help us then to bring total cost of ownership down further. Does that answer your question?
All right. Yes, it does. Maybe if you can tell me when you plan this, this Gen 3 will really be fully commercial and then offered.
Yeah, we have.
Global.
Yeah, we, we aim to have a prototype in the market in late 2025.
Okay. Okay, great. That answer, that answered my question. Then maybe the last one, in the Middle East, I see that organic growth was solid. Are there foreign exchange issues that you had flagged at the beginning of the year now resolved in that area, or, you know, with certain countries forbidding conversion?
Yeah, at least for now, Alessandro. I mean, we saw them.
Mm-hmm
C ome and go, right? And we did see now that, especially North Africa, two countries, they have access to, foreign currency a bit again. And also it depends, you know, what kind of products they kind of limit from importation. I think that's where we saw in the past, this fluctuation. You're familiar with that, and I wouldn't exclude that also going forward. But for now, we see them resolved. But let's see how that is evolving.
All right. Okay, thank you.
Thank you.
The next question comes from the line of Joern Iffert with UBS. Please go ahead.
Good morning, and thanks for taking my questions. The first time would be please, on the margins, and sorry, when I missed something, I was disconnected. Just to double-check, this is significantly higher volumes in Q4. This should be nice operating leverage, and I was asking if margins in Q4 can come back to the good Q2 levels? This will be the first question, please. The second question is on the first views on pricing for 2024. What are you hearing, what you are seeing on the customer side and across your peers? What is your best guess regarding pricing for 2024 on group average? And this would be the first two questions, please.
Thanks for your questions, Joern. So I mean, Q4 margin, we talked about the Q2 margin back then and said it was influenced by positive mix effects. And we talked about that in earlier calls, too. You know, mix can vary from quarter to quarter, and in Q2, it just happened to be that the set of customers we did more revenue with was more positive than in other quarters, and that normalized now in Q3. Absolutely, I think in Q4, we normally see a bit of operating leverage. We need to see where raw materials are. That's always a function of spot price and what we have hedged already. I don't expect so much positive there for Q4.
But I would also say, you know, at this stage, where we stand, I mean, we maintain guidance, and I think, I expect us for the full year to come in at the top end. And I guess that gives you a bit, an indication for what we expect Q4 without now, giving specific guidance on Q4. Then, 2024 pricing. I would say in any year, it's difficult, on the Q3 call to already talk about pricing, because that's exactly the period of the year, you know, where we all put our puts and takes together, and we do the budget, get kind of a view on our cost structure. But, I think in the current environment, maybe even a bit more difficult.
Now, we're gonna obviously come with an indication with the guidance for next year, but as everyone recalls, we were late in following the cost increase. And I always say, you know, we also gonna be slower on the way down. I mean, that's the principle that hasn't changed. Now, for next year, we already know there are a number of input cost factors that gonna continue to go up, first and foremost, wages. And then I think the other input cost factor is gonna be a bit of a function of how the world economy looks like. But I think that's too early to tell, and also from kind of competition, we haven't had a kind of full and representative indication yet.
But what also I want to remind everyone, I mean, pricing for us, definitely a function of input cost changes, but also of FX, but also very important for us on the value-based side. You know, what is the value we create for the customer? To what degree do they use our, USPs? And I think that all comes together. So, stay tuned. But, we definitely don't expect significant price increases into next year. But it needs to be mapped out now, what that exactly mean.
Thank you. And the last question, if I may, as it's also a topic discussed in the capital markets. Can you tell us what roughly is the margin benefit in 2023 coming from R&D capitalization and inventory provision releases?
In 2023, you are asking?
Yes.
I mean.
Roughly, a ballpark.
Well, I don't know the margin impact, but last year we had about EUR 15 million capitalized R&D. You recall, that was the year where we launched our fourth generation platform, and I think it was an exceptionally high capitalization. And that came really in line also with the step change innovation that we delivered, you know, with this new vita filler, which was the first of the fourth generation. This will be the platform for future filler innovation and also packaging shape innovation. And this year, ballpark, I would expect maybe half of that impact to be capitalized. Also there, again, a big part still for this fourth generation. But, you know, we haven't changed the way how we capitalize R&D, and we do that, obviously, if there's significant innovation coming along, like with this fourth generation, and then you do the math.
I would say about half this year for the full year expected, roughly.
On the inventory provisions, a rough ballpark?
Inventory provisions, I mean, the nature of our business hasn't changed. In terms of obsolescence risk, you know that in the Aseptic Carton business, we have a semi-finished material which is basically customer neutral, and then we produce against customer order when we print it. So there is a kind of small obsolescence risk. And as a function of the acquisition, you know, when you do the kind of initial purchase price allocation, the fair valuing of the assets, it's normal that you kind of net that together, that you don't have provisions yet for the acquired business, because you're asked to do a fair value valuation. And that's why probably on the group, the average has become lower, but it's just simply the nature of the beast when you do acquisition accounting.
I would expect that to go up a bit with normal course of business, also in the acquired business. I don't think that's actually even a point to discuss here.
All right. Thank you very much.
Thank you, Jan.
The next question comes from the line of Christian Arnold, with ODDO BHF. Please go ahead.
Yes, good morning, all. Question on the Middle East, Africa region. Could you elaborate a little bit on the development within the Q3, as we have this unfortunate development in that area? Have you felt any impact in September from the situation we see there?
Well, I understand your question, Christian, and obviously we all, shocked about those events. In terms of implication for business in Q3, I would say we didn't see some. In terms of what we can expect for Q4, I mean, obviously our key markets are, you can say, ballpark, the Arabian Peninsula and then North Africa and South Africa. So we, we have seen that in earlier situations where, situations got difficult in the Middle East. You know, this portfolio effect of having revenues kind of across multiple different countries has always protected us, and, and frankly, I expect the same, especially because now, the, the most recent events are not in markets that are very relevant for us from a business perspective.
Okay, thank you. And my second question would be on, for the IPN. You explained well the performance in Q3, so rather flat, but there were reasons that, H1 was very strong, probably eating into Q3 and maybe some push into Q4. So we had this rather flattish development, which doesn't sound dramatic at all, to me. If I now look at your adjustment, we have seen that in the first half, we had a change in fair value of contingent consideration of +EUR 12.3 million, and now, after nine months, there's actually a -EUR 5.6 million. So that looks quite, significant change here. But given what you told us before, I shouldn't read too much into that. Is that correct?
At least that would be my recommendation, yes, because I think we have a bit of unwanted, but I think it's obviously in line with accounting rules, fluctuation in this provision that obviously is driven by a Monte Carlo simulation of kind of how you get to a fair value recognition, then of this contingent liability, of this contingent consideration. And what did drive it up, I think were kind of the growth rates that you saw. You remember last year, second half, the first couple of months of ownership, very strong as a function of share gains and the rebound of COVID. We back then already said, don't expect that's a normal growth rate.
I think with now where we stand with kind of the close to 6%, we show a very decent growth in this business and which is in line with those expectations. We always said, you know, over time, we will be able to accelerate the business growth, and we do see that already in those quarters that business is under our ownership, and that's where we continue to work on bringing those substrates on the emerging markets platform.
Okay. Thank you very much.
Thank you.
The next question comes from the line of Pallav Mittal with Barclays. Please go ahead.
Thank you. I have a couple of them. Firstly, if you could help us understand if there is any increase in securitization and factoring versus what it was at H1, I think the number was around EUR 136 million, and if that has impacted the free cash flow positively in the third quarter. That's the first one. Secondly, can you please help us understand the effects, headwind that you have faced in Middle East and Africa and APAC? Specifically, which countries are you facing this headwind in? Thank you.
Thanks for your questions. Securitization, just, I mean, to, to explain a bit the context and the principle, we use securitization across the business for many, many years, as we deem it a very attractive means of financing, if you so want. And, the way it works is that we put it in place by defining basically geographies that fall under the umbrella of this securitization, which comes down to a set of customers that are basically subject to be securitized. It's non-recourse, and once it's set up, it's an automatism. It's not a choice of management at the, the end of a period, whether or not to, to sell off those receivables. That's just something that mechanically is executed through.
So the use of securitization obviously is a function of how much revenues we do see in those geographies that fall under that fall under the securitization umbrella. We have expanded the securitization over the past two years by having put more geographies on it, you know, with kind of putting now a plant into Mexico last year. We have, or this year came on stream. We have also expanded the umbrella for securitization into that market. Also in Oceania, we did a bit. And I think this year we have put it also the acquired business in North America under the under this umbrella. And from that perspective, I think versus the year- end, we have a higher portion of receivables that are part of the securitization, and that also obviously helps for for the full year cash generation.
But I think overall, we see, and that is also important to be seen in the whole financing discussion, the securitization as an attractive means of financing. FX in the Middle East, I think just to remind everyone, we do sell in the Middle East, basically in euro and US dollar. And as a function of that, that explains, you know, why once in a while we have those topics where people don't get access to our currencies. That's where we don't see significant implications from Middle East on FX development. Does this explain or answer your question?
Yeah. Thank you very much.
Thank you.
The next question is a follow-up from Mr. Joern at UBS. Please go ahead.
Thank you. I just wanted to have a quick follow-up question on the earn-out. With Scholle IPN now having a weaker exit rate in Q3 and maybe Q4 is not as strong as year to date, can you just remind us what are the implications for the potential earn-out payments for 2023?
I mean, the earn-out kicks in if there is growth above the 6%. You recall, we always said, we have a view on how fast this business can grow, and, our own growth corridor, we always refer to it, the 4%-6%. And, but we said, you know, if this business, is able to deliver growth above this, corridor, we are happy also to pay a different price for the business. As said before, and that also links back to Christian's question, where we have released now part of this, consideration for the contingent consideration. We now track year to date, slightly shy of 6%, so not in the territory for earn-out payments. And I would say it's not unlikely that we also end the year without, reaching the earn-out territory.
Thank you.
Thank you.
The next question comes from the line of Miro Zuzak with JMS. Please go ahead.
Good morning. Thank you for taking my questions. I have three. I take them one by one, if I may. The first one is, you had like a EUR 13 million adjustment, which you named other. Would you please explain what these EUR 13 millions were? That was the first one.
Good morning, and thanks for your question. Absolutely. We had a provision for, let's call it a customs matter, that we didn't use, that we released, because the problem was resolved differently, and that's why we were able to release this provision.
Okay. Thank you. Then the second one is a bit more difficult one. You mentioned that you expect to be at the top end of your guidance range when it comes to adjusted EBITDA. Considering the Q3 revenues were a bit lower than consensus estimates, and considering that your 20%-22% growth guidance implies a significant uptick in sales in Q4, could you please tell us, firstly, which regions that you think are going to perform better or is especially strong? Also, given the different base effects for Q4, I mean, it's a diverse picture, I think, and yes, that's the second question, please.
Sure. I think if you look at the guidance, the growth guidance, 20%-22%, and then for the organic, 7%-9%, I will end the margin 24%-25%. I think from a two days perspective, I would expect the total revenue growth to come in really at the, at the low end of the 20%-22%. That means, obviously, the aseptic well in the range of, the guided, corridor of the 7%-9%. But, I mean, I said it before, I wouldn't expect a significant acceleration there either. Now, for the margin, I would say, it gets more and more difficult to argue why we should not be at the top end, and given what we see also for Q4, I think that's a realistic assumption.
That's how I would calibrate it within this guidance range, you know, that we say really at the low end for the revenue and at the top end for the margin.
Okay, thank you. The third one would be specifically on Asia Pacific. I remember from the past years that there was always the question about, you know, year-end rally, yes versus no. And maybe this also matters a bit on the year to date business, because clients, basically, or customers can still reach if they still can reach at the bonus levels or not. Can you give an indication there, please? What the chances are that you're gonna have, like, these year-end rallies this year in Asia Pacific?
You know, I mean, couple of thoughts. We always said, you know, when we had this very soft start into the year, the customers are eager to hit their bonus thresholds, and also from a today's perspective, that is in reach. And, I don't expect there necessarily a significant year-end rally for that to happen. As I said, you know, I don't expect a significant acceleration of the overall growth for the Aseptic Carton , but we expect a strong, again, a strong quarter out of Asia for Q4. And, of course, this is against a market that is discussed before. We also do see some elasticity, I think, so that would be a very good performance also from our team in Asia Pacific.
Cool. Thank you.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Star followed by one. We have a follow-up from Mr. Foletti with Octavian. Please go ahead.
Yeah, I just wanted to come back to this securitization issue. Can you put a number? Is it relevant?
A number, you mean for what the program was?
For the securitization of your receivable.
I think that depends on the, on the use of it. You know, one thing is the program that we can do, and the other one is then kind of what the effective revenues are in those respective geographies. I would say for the expansion, we have a volume that can be, you know, in the, I would say, in the lower double-digit million EUR amount, if that makes sense. And that also is a contribution that would use the cash flow for the full year.
Okay. Thank you.
Thank you.
That was the last question. I'd now like to turn the conference back over to Mr. Sigrist for any closing remarks. Please go ahead.
Excellent. Thank you very much for joining us this morning. We look forward to see you at the Capital Markets Day, and please stay well. Thank you very much for your time. Have a good day, everybody.
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