Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Semperit AG Holding report on the first three quarters of 2023. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Karl Haider, CEO. Please go ahead.
Thank you very much, and good afternoon from Vienna, and welcome to our results presentation on the first nine months of 2023. We appreciate your interest for our company, Semperit. As always, with me in the call is our CFO, Helmut Sorger, who will take you through the financials in some minutes. On this occasion, I would like to start with a brief strategy update, present to you revised ESG targets, and provide an operational review of our two new divisions: Semperit Industrial Applications and Semperit Engineered Applications. The first chart on slide three nicely summarize the starting point of today's strategy update, as we have delivered on what we have promised before. With the acquisition of RICO Group, announced in April, we took a step forward towards transformational growth and announced the completion of the takeover on 31st of July this year.
Exactly one month later, the sale of Sempermed was completed, the so-called Closing One, and our shareholders were able to benefit from the sales through a special dividend. Remember, we are still in a contract manufacturing situation with our surgical gloves. We produce it for the new owner, Harps, at cost for some years. Most importantly, I can report today that our refined strategy is on track, and we confirm our guidance, which I will come to later on. Over the page, we show the new divisional structure, which revolves around Semperit's two main business models. One being the commodity-driven, highly standardized volume business of Semperit Industrial Applications, where we aim for cost leadership and a high degree of unification of products, process, and equipment, supported by sales excellence.
The other being the innovation and technology-driven Semperit Engineered Applications, with a high level of customization and a focus on attractive niche markets. In contrast to the commodity-driven business of industrial application, here we are predominantly dealing with high-engineered product business, and embedding in the tender business, and have a sales team strongly involved with our customers and their needs. This new divisional structure aims to reduce complexity and to scale up our business for future profitable growth. The chart on the next slide illustrates how we want to take the company into the 2030s, based on three main pillars: operational excellence, strategic initiatives, and continuous innovation. At the time of economic uncertainty and top-line pressure, our operational excellence program focuses on right-sizing overheads, efficiency enhancement, and mid-size projects on automation and digitalization. Helmut will expand on that later on.
Looking beyond the current economic slowdown, however, we take strategic initiatives for substantial organic growth, like the DH5 plant in Odry, Czech Republic, complemented by inorganic growth project to diversify the company and, at the same time, pursue active portfolio management. The important point to make here is that we aim for geographic expansion and retain our goal growth-- global growth ambition. Close to my heart, as the CEO of the company, is innovation to support future business development. Here we are having a well-filled pipeline and focus on new products, as example, with recycled or bio-based materials that fit well with our strategic ESG commitments. At the same time, we are setting new KPIs for reporting and enhancing transparency.
Part of our refined strategy is also to develop a more open corporate culture, where our employees feel highly valued, inspired to make changes, and support diversity and inclusion. Turning the page and looking into the separate businesses of Semperit. Industrial applications in greater detail. For hoses, I would like to highlight the aim for cost leadership and an enlarged products range. The capacity expansion at our DH5 plant is not only crucial to maintain our global market leadership in hydraulic hoses, but at the same time, will set a new efficiency benchmark for cost leadership, which we plan to roll out to other plants as well. In addition to expanding our competitive product range, we also focus on new applications such as peristaltic and concrete pumps.
As to profiles, while we want to maintain our strong position in Central Europe, we plan to expand towards other regions, such as Scandinavia, and also increase our footprint in North America, in the industrial and construction markets, both to become the leading player and to enlarge our customer base. Important to note here is that our product positioning, engineering, and pricing are based on article classification, such as volumes, engineered specifics, and projects. From an ESG perspective, we started to use a portion of reclaimed materials for the development of ethylene propylene diene monomer rubber, so-called EPDM. We are on the verge of marketing this innovation and are concluding our first customer cooperation agreements. On the next slide, let me highlight the main strategic ambitions for each businesses within Semperit Engineered Applications.
Belting is currently doing extremely well, and we aim to exceed global market growth without expanding our existing capacity, by concentrating on the operational side and efficiency. We have a coherent product strategy based on heavy and medium-strength steel belts, as well as performance textile belts. We focus on strategic partnerships with international mining groups to increase our market share in mining application, excluding lignite. Within Form, the combination of portfolio streamlining and margin accretive product market combination should help to transform this business into an even more attractive and profitable niche operation. This can be scaled up through the extension of end-to-end application know-how in order to grow in our customized product market combinations, and of course, by automation and streamlined cost, as well as the geographic expansion within Europe, but also into the Americas and Asia.
Finally, RICO should become our engine for organic and later, possible, also inorganic growth, with its focus on engineered technology, innovation, and attractive growth niche markets. Since the announced acquisition in April, we have continued with the production extension in Thalheim, in Upper Austria, and we aim to explain in the future, new inorganic build on growth opportunities to leverage our tooling expertise in Europe, in the US, and potentially, Asia Pacific region. As the CEO of Semperit Group, I'm very encouraged by the integration of RICO so far, and all the support we have received from our new colleagues. The production extension at RICO's headquarters in Thalheim is on track, and we have expansion plans for the US and Switzerland.
Turning now into our revised ESG, ESG, targets on slide eight, which we had to adapt due to newly evolving divisional structure, notably, the sale of Sempermed and the acquisition of Rico. Below, we list some of the revised targets for energy waste and CO2 emission reduction by 2030, as well as the ambition to further improve our health and safety record, and to increase female employment and leadership. In this context, diversity and inclusion has become a new focal point of our ESG strategy. Please note that only a few days ago, EcoVadis recognized our effort with the Platinum Award for sustainability performance for the second time, which is a great achievement as we rank among the top 1% of more than 100,000 companies assessed.
As to the widely discussed supply chain screening, we have also set a more ambitious target of 75% total spend to be covered by EcoVadis by 2030, to improve our sustainability footprint further. On the next two slides, we list some relevant ESG initiatives, a specific example to illustrate the scope and depth of our current effort. I had mentioned the DH5 plant in Odry, Czech Republic, on several occasions before, and would just like to add here that the whole production will be exclusively powered by renewable energy. The new production facility requires neither oil nor gas as an energy source, and a considerable part of the electricity demand will be covered by our photovoltaic system. When talking about profiles earlier, I had also outlined our recycling effort through reclaimed waste and scrap from vulcanized EPDM.
This should help to continuously integrate our own waste into a new life cycle and keep the external internal recycling rate as high as possible. Overall, we set high priority to the integration of ESG into our decision-making processes and are implementing numerous initiatives to raise awareness among all employees. On the next page, we highlight, among others, the increased focus on diversity, that is more and more becoming a major pillar of our management effort. We have established those global councils for age, gender, culture, and disability, and introduced several initiatives for each side. Finally, we've scaled up photovoltaic installations at our production sites, ranging from Germany, Czech Republic, Austria, China, and Thailand. With this, thus, we can cover more than 10% of our energy demand, and help not only to reduce the electricity bill, but also to mitigate climate change.
Let me now turn to the operational review and start at slide 12, with Semperit Industrial Applications. As we anticipated and discussed in previous calls, the market environment has continued to deteriorate, particularly for construction-related products, due to the weakness of the construction industry. In the wake of further inventory reduction, there was a result in falling demand. Sales for the division were down by 24% year-on-year, and EBIT by 33%. For the hose business, we faced a low order intake and backlog due to the general economic slowdown, and customers very cautious inventory management. Similarly, for profiles, where we can still not observe a relief in the construction industry. While we report in this new structure for the first time, the 10.2% EBITDA margin for the isolated quarter, Q3 2023, is something to watch.
We have taken measures to further enhance operational efficiency and cost saving, which also includes the right sizing of headcount. In this context, I'm also very encouraged that our cost-saving measures have start to take effect, and we see first positive signs in our gross margins. Over the page, on Semperit Engineered Applications. Here, we were able to enjoy a much better macroeconomic backdrop, as Belting still benefits from the strong demand in the mining industry. There was also some tailwind from the ongoing European energy crisis, which resulted in strong order intake and backlogs. The order backdrop from Form was somewhat more mixed, with pressure from the construction industry, but very good demand for special applications. Demand for RICO Group products also varied, depending on the specific product range.
While healthcare and food showed stable, strong demand, and the mobility segment also remained at a high level, the segments assigned to construction faced a decline. RICO is included in the figures for August and September. The contribution to sales amounted to EUR 60 million. Although the contribution to earnings was more or less flat, due to the impact of the recognition of anticipated profits in the purchase price allocation and related transaction costs for the deal. Adjusted for these effects, the EBITDA contribution would have been EUR 3.6 million higher. Overall, this resulted in a top-line growth of 32% year-on-year, and EBITDA up by 46%, largely driven by Belting. Let me now hand over to Helmut to take us through our financials.
Thank you, Karl, and welcome, welcome to everybody this afternoon. I start on slide 15 with the main financial highlights for the first nine months of 2023. From my perspective as the CFO of the company, we have proactively adjusted our financial operation to our strategic needs as early as the end of the Q1 of 2023. We had previously talked about that. Since then, we went into a new modus operandi of lean management and overhead reduction to ensure sound operation leverage. Most importantly, our focus is on cash management and remains crucial more than ever for the implementation of our industrial growth strategies. With the acquisition of RICO and the sale of Sempermed completed, our balance sheet structure is now more balanced between equity and debt, with net debt being at EUR 98.5 million as of September 30, 2023.
As another sign of the strength of our balance sheet and management confidence to navigate through economic uncertainty, we paid the special dividend of EUR 3 per share in September, following the sale of Sempermed. At this point, let me emphasize that at the beginning of this year, we stated a cost savings program, and as mentioned during our half-year 2023 call, we've initiated further overhead savings to optimize our cost structure. The disciplined cost-cutting programs introduced have already reduced expenses by a total of EUR 2.7 million, of which about 85% was attributable to personnel expenses, and the remainder to other operating expenses. Overall, we assume a run rate for savings of more than EUR 10 million are already defined and established cost saving measures, which will be fully effective in 2024.
This will also help us to offset cost increases at other ends of the business and to weather market headwinds from the markets. Over the page, we show key financials, KPIs for the first nine months of 2023, compared to the same period last year, and adjusted for our recent portfolio changes. Karl already discussed top line and EBITDA performance of the divisions, so suffice to say here that while the revenue decline in SIA could be partly offset by the tailwinds at SEIA, the decline in EBITDA was higher. In this context, please note non-recurring effects of around EUR 6.6 million.
that originated in part from the RICO acquisitions, with transition, transaction costs of about EUR 3 million, as well as rewinding step-up effects from the Purchase Price Allocation of about EUR 1.1 million, as well as higher severance payments in connection with changes in the management board and the restructuring of personnel. Further down the line, EBIT has been impacted by higher depreciation charges as a result of the first-time consolidation of RICO Group. While the financial result has slightly improved year-on-year, the effective tax rate was significantly above last year's level, which is mainly due to the recognition of taxes, including from previous periods, as a result of changes in the Polish corporate income tax regime and the non-recognition of deferred tax assets on tax losses of group companies.
The free cash flow before strategic growth investments for the first nine months of 2023 amounted to EUR 111 million, after -EUR 19.6 million over the same period last year. This is mainly due to the proceeds from the sale of Sempermed, and the free cash flow was used for the RICO acquisition, as well as the payment of the dividends. CapEx for our strategic expansion projects in Odry and at RICO in Thalheim amounted to EUR 17.5 million euro. So the overall CapEx, also including maintenance, was at EUR 38 million, which compares with EUR 41.8 million last year. That still included EUR 15 million CapEx for commissioning of the P7 Plus plant expansion in Kamunting, Malaysia.
If we look at the revenue and the quarterly EBITDA performance at the next page, the 7.7% year-on-year top line decline converted into margin pressure as lower order intake, customer inventory corrections, as well as the general economic slowdown left its mark on our performance. While price levels, cost of materials, and logistics costs remain supportive, volume development has been impacted in line with our expectations and as we have communicated before. Hence, our continued focus is on simplification, on lean management, and on operational efficiency and operational excellence to achieve a more competitive cost base. This not only involves increasing the level of automation in our operative and administrative processes, but also streamlining our ERP landscape or a higher level of digitalization.
We have we can already show quick wins from projects in invoice digitalization and automated order processing, just to give you examples. When allowing for the one-off expenses and the effects of the Purchase Price Allocation at RICO, we are actually encouraged by the EBITDA contribution from RICO and remain very positive for the next quarters. Adjusted for one-off, RICO's EBITDA contribution for the first two months would have been around EUR 3.6 million, as Karl has already mentioned before. Overall, one-off effects on EBITDA amounted to EUR 6.6 million, also including one-time severance payments for changes in the executive boards and the reduction of headcount.
When compiling the last 12-month revenue development for industrial business, starting from the Q1 2020 and plotted against the EBITDA margin for the same period, now in slide 18, we see a consistent top-line growth since the Q1 2021, having reached its peak in the Q1 2023. At the same time, there was a continuous improvement in the EBITDA margin, with a time lag of about one year starting in Q1 2022 and renewed pressure from the Q2 of 2023. This provides us with confidence that our new structural and cost measures will not only result in better operational leverage, but ultimately in a more profitable and, over the long run, growing business.
On the next slide, I would like to provide the EBITDA bridge, providing the major moving blocks for the EBITDA year-on-year analysis for the first nine months. At the beginning of the year, we clearly benefited from price increases introduced step-by-step during 2022, but this was not sufficient to offset the volume decline as a result of lower order intakes. Lower inventories also added downward pressure. On the positive side, what made a real difference were lower costs for materials, purchased services, to some degree, energy and, on a year-on-year comparison, certainly logistics costs that normalized this year. We still faced, as we had previously explained, headwinds from higher inflation, particularly in personnel expenses. Given the first-time consolidation of RICO Group, we single out operational EBITDA contribution of EUR 3.6 million.
We have also singled out here the EUR 2.7 million cost savings, which we will track now on an ongoing basis. These two latter positions compare with EUR 6.6 million one-offs for the RICO acquisition, the aforementioned rewinding of step-ups in the purchase price allocation and the other personnel measures I had mentioned before. In total, EBITDA was down 29% year-on-year, with the main drag coming from volumes and the change in inventories. Over the page, we present quarterly CapEx developments since the Q1 of 2022, 2021, I'm sorry. For year-on-year comparison, please bear in mind that last year's organic investments also included the EUR 15 million for the P7 Plus plant expansion in Kamunting, Malaysia, as we remained a responsible owner and stakeholder of Sempermed facilities right up to the closing of the sale of that business.
Since 2023, we are now showing growth projects and maintenance and small growth projects in different colors, which should then help to understand how we arrive at the free cash flow before strategic growth projects on the next slide. For your convenience, we also show the EUR 144.9 million, which so far paid for the RICO Group in the first nine months of 2023. For year-end projections, we've shifted some of the capacity expansion works for the DH5 Plant in Odry, Czech Republic, into 2024. Overall, our CapEx budget implies roughly 60% for maintenance and small growth projects and 40% for future growth.
Moving to slide 21, and following on from the CapEx split we have just explained, free cash flow for the first nine months of 2023 was supported by EUR 42 million of operating cash flow, mainly due to active working capital management, as well as the proceeds from the sale of Sempermed. After taking the proceeds from the sale of Sempermed, together with maintenance CapEx into account, we arrive at the free cash flow before strategic growth projects of EUR 111 million. For the latter, total proceeds were essentially used for strategic growth investments at the DH5 Plant in Odry, the expansion of the RICO plant in Thalheim, as well as the acquisition of RICO Group and the dividend payments.
Turning the page to chart on working capital developments show that we have now come to a more consistent run rate, with trade working capital as a percentage of last 12-month revenues going slightly up quarter-on-quarter, but being in line with the Q3 of 2022. The development of the working capital also reflects the initial consolidation of the RICO Group. Finally, on slide 23, we update you on the balance sheets and financial profile for the first nine months of 2023 compared with the year-end 2022. We continue to have a strong balance sheet and a good cash position, with cash and cash equivalents amounting to roughly EUR 160 million.
From the EUR 360 million financing arranged in March 2023, we have used so far EUR 150 million for the RICO acquisition in July, and another EUR 15 million for the DH5 expansion in Odry. Our net debt position at the end of September was EUR 95.8 million, after showing a net cash position at the year-end 2022. The equity ratio stood at 41.7% and shows a shift in balance between equity and debt in our capital structure, compared to an equity ratio of 61.5% at the end of 2022. With this, I've finished my part of the presentation and would like to hand back to Karl for some closing remarks.
Thank you, Helmut, and let me finish our presentation with the management agenda and outlook for the year-end 2023. As we are in the process of implementing our industrial strategy with a distinctive focus on two competitive business models, as outlined before, we keep our focus on profitable growth while managing the current economic downturn. The ongoing top-line pressure, we try to address through share of wallet gains and cost programs, as Helmut just highlighted. In this context, the key focus remains on simplification, lean management, and operational efficiency. Over the midterm, we aim to set up a new growth platform for technical solutions and cost leadership. Finally, on slide 26, let me confirm our EBITDA guidance for 2023 at EUR 70 million, which is at the lower end of the guidance range, as previously communicated already.
Due to phasing various CapEx programs into 2024, CapEx for this year is expected around EUR 20 million, EUR 70 million euro, excuse me. At this stage, especially due to the current low visibility, we do not provide any detailed outlook for 2024. With this, we've come to the end of our presentation, and Helmut and myself are now happy to answer any questions you might have.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star, followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star, then two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star, followed by one at this time. Our first question comes from Markus Remis with Raiffeisen Bank International. Please go ahead.
Good afternoon, gents. First question relates to the hose business. If you could maybe put the comment about lower order intake and backlog a bit into perspective and help us understand the magnitude of the decline. And maybe related to that, does it have any impact on the expansion phase at all? Are you kind of telling us it's a slowdown because the markets wouldn't be there for the additional capacities anyway, or it is irrespective of current trading conditions.
Thank you very much, Mr. Remis. Post business, you know, there's a link to the construction business, and everybody knows the construction business is suffering as we speak. And what intake we see since quite some months? And you need to realize, according to the COVID situation, according to the supply chain situations, our customers are overstocked already in 2022. And this overstocking affects our business this year, and we still believe the overstocking will not be finished by end of this year. A certain product, let's say, single products are still overstocked with our customers, and therefore we are suffering with low orders.
And delivery time is coming with the construction from that point of view, we see a similar trend what we're having now, let's say, over the winter. And then it would be a guess to say something about, let's say, March, April, May next year. But you know, construction is always doing better when the winter is over. Expansion ordering, of course, we check very carefully, and we have a little bit of different phasing now because we need to be clear about our cash as well. Therefore, we have still the plan to finalize order. It's a bit, it's the most modern, energy efficient facility what you can find in the world. We are not giving up on these ambitions.
We want to have this because we know the whole market, market is a typical market, and it will come back, and we need this facility. Therefore, we stick to the investment, but of course, we optimize our cash out as we speak.
Marcus, just to add from my side, you mentioned the order intake. Of course, an interesting observation is, we're basically right in forecast, which, what we've seen. I think we prepared you well on this. But at the moment, another interesting effect is customers have little incentive to place long-term orders because, of course, they count on some suppliers being able to furnish, as we've already seen in 2022.
Right. On the general demand picture, are there, do you have any plans in the drawer to take out capacities, or have you already taken out, I don't know, some shifts or certain capacities, in the wake of the cost savings program?
Good question.
On any business, on any business line, I mean.
Yeah.
Not necessarily on hose.
Yeah. Here we have, I think always the duality of the reality. As we have the industrial applications business is suffering more from the construction-related, let's say, customer base. We have also the engineered applications. And in industrial applications, we reacted early enough to downshift in different lines to optimize the cost base. We have done this, I would say, months ago. We have done this recently because it was necessary to adjust our capacity to the order book. And in other businesses, we are running flat out 21 shifts for the next couple of months. From that point of view, again, this duality in our business.
Right. Okay. And on the cost savings target, just to get that, it's EUR 10 million, right? I mean, first of all, is there more savings to come, so will the run rate be increased? And also to get a sense of the timing, I mean, up to when is that EUR 10 million to be fully P&L effective? So I understand EUR 2.7 million, it was in the first three quarters. How should we think about the timing of the remaining?
It's a very good question, and we say it's more than EUR 10 million run rates. But I think we've said it on previous calls. We want to overdeliver and not overpromise. So clearly, we have defined savings. They are already in implementation. You will certainly appreciate that there's a time lag with them due to notice periods that have to be observed. But we see very con-- we are very confident that we can deliver the EUR 10 million run rate in 2024, and more than EUR 10 million, I think is a feasible statement. I, I leave it, I leave it for interpretation now, how much is, is more than a EUR 10 million, but it's, it. You, you, you can see the 2.7 is already P&L effective in the first nine months. And this is over.
Right, and the bulk of it in Q3.
We are not measuring here in these EUR 2.7 million, the adjustment of shifts that Karl has previously mentioned, yeah. But it will be, of course, effective on EBITDA.
Okay. Can we expect any further warm-ups in the Q4 ?
No, I mean, we don't have big M&A transactions planned.
Coming back to the operational business, I think at least most industrial companies claim that the prices are still holding up reasonably well. How is it with Semperit business units? Maybe you can provide some granularity on the various businesses.
Coming back to this trilogy, as I said, in the building business, it is the cycle is still ongoing. Good investment of our customer base. From that point of view, we are very nicely loaded, have a very nice order book and a good outlook. In our form business, we have part which is a little bit related to construction. Here, we are having also lower order intake, but other parts, as I said before, we are running 21 shifts on our machines. RICO, I said as well, we have a smaller part, as example, shower head. When you're not buying, building a house, if you're not building a bathroom, then you don't need a shower head. And then there are certain things, less demand, which are primarily construction market.
But as I said before, healthcare, machine to our household, they are doing extraordinarily well, I would say. Mobility is a little bit different in Europe and in U.S. U.S., quite reasonably good, I would say. Europe, you know, mobility is a little bit different than U.S. Yeah.
All right. Thank you very much.
But global and hoses, I said before, this is construction mix.
We've talked about this business before. I mean, this is a commodity business, and we play by the rules of the commodity business. So what we are trying to do is prepare ourselves to gain share of wallet. I mean, we have to clearly state that, but market headwinds are market headwinds, and we're not the only ones facing this. But these times will go over, too, so I'm not in the long term pessimistic at all.
Yeah. Okay, thank you very much.
Our next question comes from Christian Obst with Baader Bank. Please go ahead.
Yes, good afternoon. So I try to get some kind of a sense how the normalized business will work going forward. So first of all, when it comes to corporate costs, we are now close to EUR 20 million, and we have one-time RICO cost. You mentioned that the EUR 6.6 million, which should not occur again, going forward.
Sorry to interject you. The RICO transaction cost was EUR 3 million plus EUR 1.1 million set up, not the full EUR 6.6 million. The EUR 6.6 million has some effects from personnel changes from not related to RICO.
Okay. But on the page seven, the one-time expenses of around EUR 6.6 million from the transaction cost for the acquisition of RICO.
Oh, okay. The three, a part of it is related to the acquisition and initial consolidation of RICO, but just a part of it, Christian.
Okay. So, the question is, what do you think give away any kind of sense what will be a normal quarterly corporate cost when it goes into the next business year?
At the moment, we are accomplishing two things. We are on this overhead cost reduction program. A part of it already is reflected in the corporate cost.
Mm-hmm.
But please bear in mind that we've just sold a huge part of our business, of our revenue base. So, what we are doing as well, is compensating for this with cost reductions. So you see flat over, corporate expenses, but, in effect, this is covered by savings to a large degree because they are not charged out to the medical business anymore. So we are actively combating this, this stranded cost situation. And, I mean, we are actively investigating measures, to further reduce corporate expenses, but, these have certain time lags and are connected to our digitalization efforts, too. You heard me mention our OneERP project, the ERP harmonization, which will, of course, have a significant impact on this.
But at the end, will give more real guidance for where this will come out in the next year?
Yes, yes. Over the course of the next year, I think this, you, you will see a picture then, yeah.
Okay. But then when it comes to the remaining surgical operations, which is -EUR 7.1 million after nine months, if I understood it right, going forward, the two, there should be some kind of a cost plus business. Can we expect there a break even from the Q4 and going forward?
So the EUR 7.1 million is, of course, combination of the losses of the last, the first eight months, and we are in a contract manufacturing and at costs. That means we forward the cost position, and so it would be cost-driven, will be neutral at the end. Yeah.
Okay.
You don't see this loss anymore.
No. Our ambition is to have this business cash neutral, which requires a slightly positive EBITDA.
Yeah. Okay, thank you. And, can you give us any kind of guidance how the operating cash flow and free cash flow might develop in the Q4? .. here, you mentioned that the free cash flow before strategic growth investment was approximately EUR 100 million, or was EUR 111 million. But does that really also include the financing activities?
No, this, the large share is of course, our operating cash flow, the EUR 42 million, plus the proceeds from the sale of the medical business.
Okay, but the underlying free cash flow, what do you think Semperit can deliver going forward? Any kind of guidance, or should we wait until the end, beginning of next year?
You know how it is with the Q4 , yeah. Everybody's optimizing working capital, and so are we.
Yeah.
So every guidance of a normal Q3 is probably not appropriate for the Q4 , yeah.
But will it be-
I really, I really don't want to give a guidance on this, yeah, but, I mean, it's, you can normalize it basically from our, from our EBITDA guidance pretty well.
Okay. Yeah. Well, all the best, and thank you very much.
Thank you. Thank you, Christian.
Our next question comes from Zürcher Kantonalbank. Please go ahead.
Hello, gentlemen, thank you. I have just three questions. I was wondering, since the construction industry is impacting both of the segments, could you just maybe quickly remind me the total group exposure to the construction industry?
It's a, it's a good question. I have a number which I would say in detail would be maybe not completely correct from that point of view. But of course, you know, our hoses goes into agriculture, is a little bit of different dynamics and goes to construction, the, say, yellow goods and cranes, et cetera. Profiles is there, and this is the main, the main exposure what we have in construction, in industry application. In engineering application, we have only some sealing business, which is more or less in concrete pipes, et cetera, but it is small amount.
Of course, in the profiles business, we have two effects. One, I mean the profiles, as when it's the ones going into window, the frame systems, as key element to the insulation. Of course, it's impacted by new build, and we've seen that effect already in Q4 2022. Our core market is of course, Germany, Austria, Central Europe, but we're trying to expand that market, yeah. But we were impacted relatively early in there. What if some kind of an upside is, if, you know, you have some installation of new windows and you want to replace it, so the renovation business, but of course, this will never compensate the new build activity.
Okay, thank you. Moving on to the next question. Now that Sempermed has been sold and RICO has been acquired and the strategic positioning is complete, and now you have a cost program introduced. I was just wondering, I mean, obviously you're not going to provide a figure now, but wondering if anytime soon, in the next couple of quarters, we can also expect maybe an update on some financial medium-term targets, given that the company is now completely different as it was a couple of quarters ago.
Good question. You realize we are quite happy that we have made these two moves, because our glove business was decided earlier to find a new home. RICO fits very well into this, and we have quite some growth plan for our business. But for the moment, it would be too early to give you an indication where we want to be. Yeah.
Okay, then-
Okay.
Okay, that's good. Good. Great. Then just two quick housekeeping questions. One was the higher tax that you mentioned. Is this a regulatory change that will lead to a higher tax rate going forward, or was this just in this quarter? And the second question would be the planned CapEx of EUR 70 million in 2023. Is this including the EUR 15 million that you also invested in the plant for Malaysia, or is this coming on top? That would be it. Thank you.
Say the last question again, please. The last part, the EUR 15 million-
You mentioned-
From the-
Yeah, you mentioned, you mentioned that you invested EUR 15 million also in a plant in Malaysia.
That was the previous year.
Ah, okay.
That was. I just gave the EUR 15 million to give you some better granularity and understanding on the total CapEx for last year, for 2022.
Ah, I understand.
Yeah, that's all.
Okay.
Hold on, yeah. And with regards to your question on the tax rate, yes, this is the interesting situation in Poland right now. Of course, it's legal changes. They changed the tax law, and of course, we are reissuing our tax statement back to 2017. And, of course, these are ongoing procedures, and we'll see how long that goes. So this is based on taxes for previous years as well, yeah? So, for the future, impacts will certainly be the effect of the initial consolidation of the RICO Group. That will have some impact. Just to bring back to mind, we have tax loss carry forwards in Austria, significant tax loss carry forwards.
With regard to the Polish situation, we're gonna have some upside potential there. I mean, we're gonna refile our tax statements for a reason, yeah. We want something back.
Perfect. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then one. Our next question is a follow-up from Markus Remis with Raiffeisen Bank International. Please go ahead.
Yeah. Hi, can you hear? Can I ask you on your average interest rate level at the moment, and the share of your fixed debt or vice versa, share of your variable debt load?
The fixed debt is basically our supply chain loan that is outside of the outstanding with the new financing. This is all variable. And give or take 4-4.5%, yeah.
At the moment, and this probably is going to go up a little bit. Or is that, is that kind of reflecting-
Yes.
Kind of also the phasing in of-
This is an average, if you look at the interest date in the cash flow statement, yeah. You can calculate backwards, but, I mean, for obvious reasons, we did this, we closed the financing on March 31st, where the margin situation was a more favorable one than nowadays.
Okay. And your general thoughts on the shareholder remuneration, can you provide us with an update there, anything? I mean, it was always, okay, we will decide on, I think it's like 60% payout ratio, but subject to-
No, no, no.
Some other conditions, but what's the current view? How do you want the market to treat your shareholder remuneration policy?
We have a dividend policy, which is still in place and which is still good. I think this is well known. We basically say we want to distribute, if we're in a profitable situation from the group, we want to have shareholders participate from this. This year it looks like we're gonna make a negative result. I mean, this is what it is.
Right. So you, you're taking all the one-offs also into the dividend base then? It's not on a, on an adjusted, net income figure.
No, the existing policy reflects on the profit after tax of the group, so there's no one-offs, or anything adjusted.
Right. Okay. And it is 50% payout ratio in general?
Yeah.
Or is that a little bit outdated?
In general, yes.
Mm-hmm. Yeah. Okay. Okay, thank you very much.
There are no further questions at this time, so that concludes our Q&A session. Now I hand back to Mr. Haider for closing comments. Please, sir, go ahead.
Thank you very much for listening to our Q3 and our first nine months results. I wish you the nice rest of the day and all the best. Thank you.
Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.