Good afternoon, dear ladies and gentlemen, and a very warm welcome from Vienna. I apologize. It's my pleasure presenting to you the Semperit Group's Result for the First Nine Months today, together with my new CFO, Helmut Sorger, who has joined us on first of October. I am delighted to have such an experienced international finance expert at our executive board. Not only because we will have to weather economic headwinds going forward. Our COO, Kristian Brok, is also in the call today in case you have detailed question for industry, question in the Q&A. Let me first start with a brief overview of the operational highlights for the first nine months of 2022 at slide three. As the tale of two stories has essentially continued. While, and I'm particularly delighted about this, we have achieved top-line growth in all four industrial segments.
We faced, at the same time, a steep decline in the medical sector. Despite first signs of an economic slowdown, notable a weaker order intake and further cost inflation, the industrial sector achieved strong comparables during the third quarter. This, as it is, as it always already the case during the last quarters, was strongly driven by a proactive price management in the industrial sector. In turn, the medical sector faced not only a sharp decline in price, something which we had flagged in previous quarters already, but also excess in inventory further limited demand. Just as we have announced back in September, this change in market dynamic led to an impairment of EUR 52 million in this segment. Against this backdrop, we observe currently not only the availability, but also cost of material easing as previous supply chain disruptions appear to normalize.
We took our own proactive management measures. Similarly, the energy supply for the winter 2022/2023 period seems to be under control. Although we still face a very fragmented energy market in different regions and need to get prepared already now for the winter season next year. With this in mind, we continue to be very enthusiastic about our EUR 110 million organic growth investment at Semperflex in Czech Republic, which is designed to help strengthen our market and technological leadership. At the same time, now that the pandemic-related special cycle at Sempermed has clearly come to an end, we have resumed the implementation of the separation process.
The fact that the pandemic-related special cycle has flushed an additional EBITDA of EUR 452 million into our accounts in 2020 and 2021 confirms the wisdom of our decision to hold on to this asset over the past two years, and postponed the implementation of the fundamental strategic decision to focus on the industrial sector. Starting the analysis of our operational performance in the industrial sector at slide five. High demand and price increases at Semperflex were once again driving top line and profit growth. This combined with a late cycle upswing at Sempertrans, as higher demand for coal in the wake of the current energy crisis resulted in higher investments for our customers.
While we clearly see limits for further price increases as demand has slowed down and order books are weakening, overall cost inflation and continuous high energy prices have increased margin pressures during the first three quarters of 2022. Still, I also have to mention again that the pressure seems to ease somewhat, even though still at an overall high level. Also having this development and related to this, the sensible topic of price management in our mind. While so far, we largely managed to avoid order cancellation and/or postponement. On the back of some exceptional 12 months of pent-up demand in the industrial sector, we now not only observe a change in demand, but given still very high inventory levels, customers managing their own working capital more actively. Starting with the segmental analysis at page six. Semperflex has no doubt been our star performer again.
With sales up to 47% and EBITDA by 83%, as we managed not only to increase prices, but achieved also higher volumes and efficiency gains. With Semperflex gaining momentum in this market and technology, technological leadership, we enjoyed exceptionally high margin on the back of continuing strong demand and higher price levels. Having said that, we have clearly reached the peak level, as in Q3 2022, customers' higher inventory resulted in lower demand, while previous cost pressure started to ease. Turning to page. Our late cycle segment, Sempertrans, benefited from higher commodity prices during the last periods that supported top-line growth and the operating result. We also register tailwinds from the current energy crisis, notably in the mining industry. It is worth noting that the order book remains at its highest levels in more than three years.
As you can see from both charts on this slide, top-line growth and profitability have materially improved after two difficult years. I should also mention that margins have been supported by sales price increases. Over the page, Semperseal is facing the strongest signs of an economic slowdown given weak demand in the construction industry. In this case, peak levels in the order book were reached at half year 2022, with order intake having fallen afterwards and top-line growth being achieved at quarter three 2022, largely on the back of a proactive pricing policy. With lower volumes, margins are under pressure, which has been intensified by the discontinued Russian sales activities and excess inventory. In this context, we face now order patterns with shorter delivery lead times and focus more strongly on cost optimization.
I would like to give you a full picture and want to mention here a small impairment in this segment. These EUR 2 million are triggered by the current weakening market circumstances. On the positive side, however, we have started with our second line of production at the beginning of the third quarter in 2022 in the U.S., which is a clear expression of our geographic diversification and our stronger commitment to North America. This will be a basis for our further strategic growth explorations. Finally, for the industrial sector, Semperform on slide nine continued with its strong order intake, supported by the post-pandemic recovery and catch-up effect of the skiing industry. The portfolio of this segment remains diversified, with the business unit special application achieving outstanding results on the back of post-pandemic pent-up demand.
In turn, the business unit handrail and business unit engineered solution had rather mixed results, as, among other, demand for infrastructure projects and white goods has slowed down and the handrail business having been impacted by the Chinese lockdowns. In general, we managed to keep margin at Semperform largely stable as higher prices offset cost inflation and we see no sign of falling order intake so far. Coming back to the medical sector at slide 10. The chart on the top shows clearly the deep decline in EBITDA and margin. Against the backdrop of a sharp price decline in recent months, combined with excess inventory at our customer base and low utilization in the entire industry. With the pandemic-related special cycle having come to an end, sales volumes are in general in decline.
Even though in total we had comparable levels with last year's volume, as 2021 volume was affected by a COVID production stop in July 2021. At the same time, also margins are under pressure as we still face cost inflation and low utilizations. In this context, we recognized provisions for gas contracts and inventories as well as in view of the high market dynamics, which very rapidly generated negative effects on the medical business, an impairment loss of EUR 51.8 million. On the next additional slide for Sempermed, we have summarized the key building blocks for the sharp year-on-year EBITDA decline, which classically shows the steep fall in sales prices being aggravated by additional cost pressure and provisions at an amount of EUR 11 million. In turn, EBIT was highly impacted by the above-mentioned impairment.
This latest development at Sempermed led us to conclude in the summer that it was good and right to benefit from the pandemic-related special cycle over the last two years. However, the time has come to reactivate the implementation of the separation. You will certainly remember that this had been announced as part of the new industrial strategy in January 2020, only to be postponed for good reasons a few weeks later after the pandemic outbreak. Now, having set the next steps, the separation from the Sempermed segment should take place in a timely manner. As we have initiated talks with potential buyers, you probably understand that we are not allowed to go into confidential and issue compliance relevant details, which I would ask you to respect during today's Q&A session.
Be assured that we will inform you of all details in accordance with the requirements for capital market communications. With this, I would like to hand over to my colleague, Helmut, to take us through the financials.
Thank you, Karl, and good afternoon to all of you. Indeed, I'm very delighted to have joined the Semperit team and you might be interested what's my first impressions. These, over the last six weeks, are very promising. Even though we might enter a more challenging economic period, I'm really inspired by the strong team spirits, the agility, and also the sense of resilience of my new colleagues. Permit me to say a few words about my background. I've worked for most of my professional career at Wienerberger, which is one of the flagship companies in the ATX with a strong capital markets focus.
I started there in 2007, first in corporate controlling, and after a couple of months, in charge of financial reporting before moving to the U.S. in 2010 to become responsible for finance and IT at General Shale Brick. At that time, one of Wienerberger's legacy businesses. Looking back, this professional and also personal experience in the U.S. right after the financial and economic crisis left a strong mark with me and the way I look at modern and efficient financial management.
After Willy Van Riet called me back for two years in 2013, to Wienerberger's headquarters to head the corporate reporting department, I took over as CFO of the North America division in 2017, and, for the next seven years, tried to contribute to the organic and inorganic growth of the division. Just earlier this year, my family and I have returned to Europe. My daughter turned six years, and my wife was insistent that she joins the Austrian school system. To come to the core, which is the CFO agenda items. Let me start with that on slide 13. This obviously represents a first attempt to summarize the most important strategic topics for the future in Semperit's finance.
Going forward, I'll provide you with an update on a regular basis as we make strides to accomplish these goals. The first key message in there is that we need to get prepared for an economic slowdown as long as it might take, and have to pay special attention to the changing dynamics of supply and demands. As Karl has already mentioned, we will now face a period of lower capacity utilization, but still need to build or at least keep certain reserves, supplies, safety stocks, as supply chains have only started to get somewhat better. This leads me right into my second pillar, which is proactive working capital management at the time of continuing longer supply chains. In our case, diverting, from Russia to China, with working capital remaining at a structurally higher level in the near future.
In a time of a looming economic downturn, it should be no surprise that I will focus on cost control and disciplined capital management, leaving no stone unturned to further enhance operational and financial efficiency. In this context, please allow me some more time to review our financial framework and capital allocation policy before going into more detail here. This leads me into my fourth main agenda item, which is digitalization and future growth investment. We're in the process of implementing our industrial rubber strategy. One of my main tasks here in the finance department is to make the company fit for the future. For this, we need to make diligent investments into process optimization, digitalization, and further enhance efficiency. Of course, not to forget about the sustainable development of the company.
At today's conference call, though my job is to report historic numbers, and to be honest, I couldn't have hoped for better results when starting my new position at Semperit. Turning the page, we show an overall top-line decline over the first nine months of 2022, which is indeed, as Karl has already alluded to, the tale of two stories. I guess this will not surprise you as it was a similar situation in the last quarters. While each segment of the industrial sector managed to show double-digit growth, the steep decline of Sempermed resulted in an overall 10% lower revenue for the group.
Please note that the 36% revenue increase in the industrial sector is a combination of higher prices but also better volumes at the time of record high order books in the first half of 2022, which has only recently started to slow down. To the extent to which Sempermed has impacted the group's performance becomes graphically even more compelling over the page when we provide the same segmental bridge for reported EBITDA. Sempermed's year-on-year revenue decline of EUR 245 million is being translated into a more pronounced EUR 281 million fall in EBITDA. No doubt, this requires management attention, and hence our announcement to resume separation. As to the industrial sector, all except Semperseal have contributed to group EBITDA.
Although even Semperseal's 8.3% EBITDA margin is probably still formidable on the given economic circumstances, most notably the considerable slowdown in the construction industry. Expenses at corporate, to continue on that, are largely explained by IT upgrades, cybersecurity investments, and energy efficiency measures. When looking at the main building blocks of the year-on-year EBITDA decline on slide 16, it becomes clear that the main drag is from prices at Sempermed, which could not be fully offset by higher volumes. The next three components, inventories, cost of materials, and energy, all have a similar ballpark number, but going forward, assuming the lasting easing of price levels, we should be able to reduce these cost elements. Logistics costs are already at the lower level given the sharp drop in freight costs, while personnel expenses have proportionally increased since the corona pandemic.
One key element included in some of these buckets is the impact of the higher U.S. dollar, which is difficult to spit out in this particular format of a bridge. For the first three quarters, we saw a positive FX impact in the translation of currencies of about EUR 20 million on EBITDA. Moving on to slide 17. You're familiar with this table, as it distinguishes the two years of the pandemic-induced special cycle from a more normal pre- and post-corona periods. While there's clearly an improvement in EBITDA between 2019 and 2022, the earnings loss is pretty much the same range, but for somewhat different reasons. From my perspective, the focus clearly needs to be on free cash flow generation, as this has turned from a positive EUR 60 million to a negative EUR 19.6 million.
This will be especially relevant as we're facing an economic cool down and prepare at the same time for the financing of a growth strategy. In turn, the higher CapEx number is explained by more growth investment, and I will now spend some more time on both topics separately. Let me start with the free cash flow, first at slide 18, as this is largely correlated to the above-mentioned special cycle. Please note that this slide is for illustration purposes. As tax payments have significantly increased over the last two years given strong earnings, we have adjusted the operating cash flow to pre-tax basis, as was done already in previous quarters.
This helps to make like for like more comparable, and we have also moved an investment into a U.S. money market instrument out of the cash flow, same as in previous presentations. When looking at this free cash flow development from this perspective, the two key trends are clear. The pre-tax operating cash flow has been impacted by the ongoing inventory build-up over the last nine months, and our growing CapEx commitment resulted in higher investment needs. Taking everything together on this illustrative adjusted basis, the free cash flow has declined from EUR 233 million in the comparable period of last year to EUR 30 million this year. Turning to CapEx on slide 19. The aggregate CapEx of the first three quarters in the year 2022 was EUR 42 million and amounts to 87% of the full-year 2021 CapEx.
No doubt, we will exceed previous year levels by the end of this year. There are two separate developments explaining this upward trend. First, the industrial sector continues to receive more growth investment, most prominently Semperflex. Secondly, we continue with the necessary maintenance CapEx for Sempermed to safeguard the value of the assets, while at the same time preparing for separation. Just let me think out loud. Having our growth strategy in mind, when we start spending growth CapEx, we will also show you the corresponding numbers and carve out the relevant parts of growth CapEx as spending, or if you want, use of free cash flow rather than being part of it. Starting with the presentations next year, I want to prepare you for that. Over the page, working capital is still at an elevated level though moving into the right direction.
We peaked out in late August and the trend is going in the right direction, both in terms of lower inventories and lower trade receivables. We would expect this to come further down over the next few months, as we have still in excess about EUR 13 million compared to the first three quarters of 2021, and would then be again in a more comfortable position regarding our ceiling target of 22% in relation to the last twelve-month revenues. As I had outlined in the beginning, proactive working capital management will also be, from my perspective, one of the key strategic focus areas of our finance function, and I will update you on that regularly.
Finally, on slide 21, the strong balance sheet and solid cash position is probably the dream of every new CFO joining the company, particularly in times of an economic downturn. I can only be grateful to the entire team here at Semperit for this inheritance. Being in this great position, we not only have a financial buffer to weather economic headwinds, but also dry powder to keep M&A optionality when the time and the price is right. As I've mentioned before, we will review the financial framework and capital allocation policy under the current economic circumstances, but for the time being, I couldn't have hoped for a better start with a net cash position. With this, I've come to the end of my first presentation here and hand back to Karl for his final remarks.
Thank you, Helmut, and let me complete with our management agenda at slide 23. As you are familiar with the format of our final management agenda slide, let me just focus on those key building blocks where we sense a change in market dynamics. While there is certainly an element of normalization of supply chain constraints leading to surging costs for raw materials, freight, and energy in previous months. We see first sign of inventory drawdowns and a slowdown in the order book. In terms of cost inflation, prices remain entrenched at a higher level, with further wage pressure going into 2023.
As we had published our updated outlook for 2022 at an earlier stage in March, right after the start of the Russian military aggression in Ukraine, and we, as executive board, having reviewed the impact on terms of economic sanctions, energy and raw materials, we can still confirm this outlook today. Going into 2023, we see a slowdown of the order book in the industrial sector. Given the steep decline of the medical sector, we will pursue the separation process consistently and in a timely manner. Let me be absolutely clear, we have a strong balance sheet which not only allows to weather economic headwinds, but also to pursue our strategic M&A aspirations, which with more attractive strategic optionalities as valuations and price expectations have come down in recent months.
With this, we have come to the end of our presentation and we are now available for any question 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. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. We have the first question from Markus Remis from RBI. Your question please.
Good afternoon, gents. Thanks for taking the questions. A couple of things. Firstly, on the outlook, I mean, you're referring to a wording from March, which back then was basically well below the consensus range of EUR 100 million-EUR 120 million. I mean, can we maybe clarify that? So you're expecting full year EBITDA below EUR 100 million. Is that the essence of the outlook?
Thank you very much, Mr. Remis for this question. You know, we are nine months in the year and we have still three months to go, but the last quarter is for Semperit always the lowest quarter according to the December, let's say, maintenance outages. Therefore, I would say yes, we say it's below 100.
Okay. Very clear. Thank you. Can I then ask you on MED please? I mean, just to get my head around the dynamics, we now had EUR 73 million of revenues in the third quarter. If I look back to the before pandemic levels, this is roughly the average of the 2019 quarterly run rate. At that time, if I'm not mistaken, you had lower volume contribution here. If I now look ahead into the fourth quarter, I mean, given that prices or basically your realized prices should come down further, I mean, is this fair to assume that there will be a further revenue decline, say. Well, definitely in the fourth quarter, but also maybe going into the first or second quarter into 2023.
That would then amount to, I don't know, maybe rather EUR 50 million per quarter. At the same time, is there kind of a currency impact which is detrimental to the top line?
Thank you. Thank you, Mr. Remis, for this question. You analyzed it rightly, 2019 average around about the 70% like Q3. The MED business is in a hangover of the pandemic and all the supply chains of our customers, the end user, hospitals, distributors, having quite a high stock level, and therefore the demand is low and the capacity utilization is low in the entire industry, not only Semperit. Quarter four, we will face price pressure in the market according to the low demand. The demand will be, let's say, under pressure according to the supply chain as explained before, but I cannot confirm if it's EUR 50 or EUR 60 or EUR 65. I will not confirm a revenue number.
Just to add to it, 2019, of course, was more negative. We had FX effects in there too as we've alluded to. In 2022 we had some reserves for future contracts in the third quarter. Just to add to this.
Yeah, yeah.
To help you with this.
Yeah, that's but that's not on the revenue side, that's on the earnings side.
No, no.
Was there a negative FX effect in the third quarter? Translation effect as well?
The translation effect was a positive one in 2022.
A positive one. Okay. I mean, looking at the book value of the MED assets, they are now at EUR 46 million. I guess that's the PPE plus working capital of EUR 66 million. I mean, given that MED is now loss-making, even stripping out this provision for pending losses, maybe around EUR 10 million, presumably won't be less in the fourth quarter. It seems the overall earnings profile is weaker than before the pandemic. Back then, basically the assets have been written off to zero. Is there a risk for further write-downs?
I think this is a little bit one-sided, this, mindset. Our operational performance is better than, let's say, before the pandemic. Of course-
Yeah.
The market dynamic is completely different compared to 2019. Therefore, for the moment, we don't foresee a further potential for write-off.
Right. Okay. If I can ask, maybe on the industrial side. Thanks for the breakdown between prices and volumes. When I look at the bridge, first half and nine-month industrial volumes in the third quarter have been negative. Can you break that down a bit? Which segments have been most impacted? I guess maybe Semperflex at the forefront because you're prominently like this destocking. In connection with that, I'd be interested if you have any sense on where your clients, now asking specifically about Semperflex, where the stock levels are.
If that is an effect that will kind of fade out going into 2023, say in the first quarter, or is it something which is just amplifying then a prolonged weakness because of the economic downturn?
Thank you for this question. For the industrial, i f I compare to the different segments, actually they were hit in the same way, I would say. The dynamic in the different economic cycle is different. The lead time of our deliveries were different as well. We had a very long lead time in Flex, which is normalizing now. We had a very high order book in Flex, which we are working through now. The order intake slowed down, let's say from late summer towards now. Of course, different dynamic in our Sempertrans business because it's a project business and it's late in the cycle. Having the tailwind of this energy, let's say situation according to the Ukrainian situation.
From that point of view, we will face economic downturn in this segment. Overall, we feel not too negative from the final demand. Still, as you said as well, the stock in the supply chains are high as well, but of course in a different degree compared to the pandemic in mid.
Do you think the destocking Flex is an issue for, say, Q3, Q4, and then we will see kind of a normalization and then you will get a better sense of the underlying demand into the first quarter? Or will that be something that is kind of maybe lasting for three quarters?
No, just be very, very clear. This destocking effect will affect our business in Semperflex as example and Semperseal as well in quarter one and partially maybe towards quarter two next year.
All right. Okay. That's very clear. Thank you. Final question on the holding side. Costs were pretty low, at least compared to my expectations. Just a notch above EUR 2 million. Any help you can give us with the full year figures? Is it fair to assume that there will be a step up again, also because you're kind of reviving your divestment activities and M&A activities, so more costs to be booked then in Q4 again?
Operationally, I would say, it's a fair assumption that this, what you see through the first three quarters, I'm sorry, is operationally the picture for the corporate. Special projects always impact, but we will of course carve that out in a proper way.
All right. Okay. Thank you. I'll get back into line.
The next question comes from Christian Obst from Baader Bank. Your question, please.
Yes. Thank you. Good afternoon. One question is concerning personnel costs. You had as much as a 9% increase. Can you drill that a little bit down? How much of that is due to the increase in Malaysia, and how much is the overall personnel cost increase in your industrial segment? What do you expect for the next year here? Then coming to flex, a little bit to the competitive situation. There were some problems going also through the newspapers here, quality problems within ContiTech. Have you seen any kind of impact on your customers, higher demand, winning customers, whatsoever? These are the first two questions. Thank you.
On the salary increase side, it's basically a trend that's coming from, well, the inflationary pressure and the collective bargaining agreements. All in all, you see this in Europe, Austrian companies, in Malaysia. It's in the price component, not that pronounced, but also the labor was reduced to accommodate for capacities there. So most of it's coming from Europe on the labor side. What's our outlook for it? I mean, it's a general economic outlook. We are facing, in core market, double-digit inflation rates. For this year, we are in the collective bargaining process for next year. We have to react accordingly to stay competitive in our workforce, but also bearing in mind to stay competitive as an industry.
I would like to add one point. You mentioned it, the Malaysian minimum wage increase or minimum wage level was introduced from the government in Malaysia summer, and of course, this has affected our costs as well. Coming back, Mr. Obst, to the Conti question. We are not, let's say, how can I say? Misusing the situation on the market. This is not our separate way of working. We get, of course, requests if we can help here and there, we are helping. A general trend that we get now, much more requests, I cannot confirm. From time to time, we get requests, we fulfill the requests and we are not misusing the situation on the market.
Okay. Coming to CapEx. Of course, I understand that you have to invest in Malaysia still, but nevertheless, it's when it comes to regional investment, it's the major CapEx driver, the EUR 15 million approximately. At least, so long as you have those activities in your balance sheet, will you invest approximately EUR 5 million per quarter going forward? Do you have to invest that?
Thank you for the question. Kristian Brok here. We would, of course, maintain the investment. We will maintain the assets, but it's not at that level. It's at a lower level. That's a spillover of the capacity build that we established the two prior years.
Okay. Thank you, Mr. Brok. The last one, about, concerning the new CFO, Mr. Sorger. Of course, you have now, you are responsible for a company with a 60% equity ratio and approximately 90%, cash net cash position. Going forward, assuming something will normalize a little bit, what kind of a normal kind of debt ratio do you find appropriate for such a company? Thank you.
I mean, I'm new to it. But of course, with our growth in mind, bear in mind with a massive growth investment in Odry, in the flex segment, more than EUR 100 million, as you're aware of, a 2.5x EBITDA net debt ratio is doable. Don't forget, next year, as we read in the papers quite recently, the Financial Times had a very good article on it, the valuations are coming down significantly. They cited companies with some cash reserves being in a very good position at the moment. I can fully stress that, yeah. We're out looking targets.
Yeah, of course. Of course, you are in that kind of position. I hope you will use it wisely. Of course you will. Thank you very much for your answers.
We do our best, yeah.
We have a follow-up question from Mr. Remis. Please go ahead.
Question one, please, on the absolute CapEx amount. When you say above the prior year, I mean, is it something like EUR 65 million, EUR 70 million that you will spend in the current year? Maybe if you could give us some flavor already into next year, maybe just a up or down indication, that would already be very helpful.
Certainly. The outlook is that we will maintain the same or lower level of CapEx as well. Then we will maintain our reserves. As previously mentioned, we want to keep our powder dry. The CapEx as planned, they are at the same or lower levels.
In 2021. Because in the presentation, it says it should be up.
Yeah. In the
On the group level.
Going forward.
On the group level.
Going forward. Sorry, 20
Yes, for 2022.
Yeah. It'll be as stated. Yeah.
Stated means higher than in 2021.
Yes.
Can you quantify that as EUR 65 million-EUR 70 million, or is it just EUR 60 million?
Yeah, it'll be somewhat below 60.
All right. Okay. Okay. It's not higher than in the previous year, then it's rather flat.
True.
All right. Maybe also one question related to Sempertrans. I mean, not too long ago, you always flagged in the presentation there would be an extra management attention to it. I mean, apparently there's now a lot of tailwinds to that business with the kind of commodity price cycle to driving up demand. I mean, is there any sense you can give us what the kind of share of the management attention to the improved performance is and how much is basically market driven because of prices, because of pricing, utilization rate and yeah. If kind of what are your future plans to the business? I mean, should we see a downward trend on the commodities?
Again, I mean, prices have corrected partly. I mean, what kind of the midterm perspective for the business?
Mr. Remis, thank you for this question. Sempertrans has always a management intention since years. It would be too easy to say the market is giving us all this. You need to do this. There are very difficult projects in the global world, and if you are supplying from Europe, the competitiveness is tough because you're facing all these cost increases against market players from U.S. or Asia.
Mm-hmm. Yeah.
Therefore, the order book is in a very healthy level, and this is coming from all the efforts what the management team, the executive board gives to the business. Operational improvements, debottlenecking is ongoing, that we can supply all this. Therefore, we feel comfortable we continue this journey, what we have seen, let's say the last 18 months to go to the right, let's say, level of profitability.
Yeah. That's why I'm asking what has been kind of the main changes you've done to the business apart from this market support?
It was, of course, cost control. It was operational efficiency, debottlenecking, finding the right product mix at the market for our machines. We have sweet spots and all this happened the last quarters.
All right. Okay. Thank you.
We have a follow-up from Mr. Obst from Baader Bank. Your question please.
Yes, thank you. Another follow-up. It's concerning Sempermed and working capital management going forward. Given that you still have a situation of sluggish demand, inventories have to come down also going into the next year. How much can you reduce your inventories at Sempermed? And might that lead to a situation that you might be free cash flow neutral at the end of the year? Is that possible?
Very good question, Mr. Obst. Indeed, we're aiming this, and we see that we can most likely achieve this as well. Despite the lower order intake the last months, we achieved also working capital decrease. Therefore, this goes hand in hand, needs quite some attention, and we are aiming exactly as you have said.
Okay. Thank you very much. All the best.
The next question is from Roland Könen from Value-Holdings AG. Your question please.
Yes, good afternoon from my side. Thanks for taking my questions. First one would be an add-on question on the balance sheet and working capital question from Christian. Concerning the capital allocation, I know it's a bit early in the year, could you elaborate a bit on your thoughts about dividend? You will report a negative earnings, but have a very solid balance sheet with net cash. What are your thoughts about paying a dividend for the year 2022 in the next year? Second question would be on your extraordinary gain in the first quarter of the sold real estate of EUR 4.7 million. Could you elaborate a bit more on this? Will there be more asset sales in the next quarters or months?
Third and fourth question would be a minor one on the energy costs. They doubled in the year to date comparison. What is your outlook there for the next year? The last one, an additional question on the energy cost question. You were very fast in increasing your prices for your products because of the rising raw materials, et cetera. Now we see some stabilization or in some cases decreasing costs for the raw materials. Will there be a kind of time lag before you have to decrease your prices for your product?
Maybe a short-term positive in effect on your margin, or is this eaten up by other increases in costs, for example, personnel costs, energy costs or something like that? Thanks a lot.
Okay. Thank you, Roland. Let me take the first one on capital allocation policy. Our capital allocation priorities are in first line organic and inorganic growth and then followed by our dividend policy.
Furthermore, their debt repayments as well as raising new and additional debt that's also dependent on the M&A strategy and the profile. In case we don't find suitable or affordable M&A targets in due course, we will apply our dividend policy in a way as to have all of our shareholders to directly participate in the success of the company. Otherwise, shareholders will benefit of the cash generation from Semperit's post-growth set up according to our dividend policy again. This strategic realignment will be in the best interest, as I said before, of all of our shareholders.
With regard to the dividend policy, in essence, as you might all know, and allow me to recall, the dividend policy of the Semperit Group basically aims at the distribution of around 50% of earnings after tax, assuming continued successful performance with no unusual circumstances. However, the group is currently undergoing a profound transformation to become an industrial rubber specialist, although it's somewhat delayed by the pandemic, as Karl has elaborated on. For this purpose, company acquisitions and organic growth projects are being planned for which the corresponding financial strength will be required. Deviations from payout ratio of around 50% are therefore possible for the duration of the strategic transformation of the group, with the aim of being financially robust enough for potential company acquisitions and organic growth. Hope this answers the question on the dividend.
With regard to your second question on the EUR 4.7 million one-off in France, that's in the events after the 9:30 closing. This is the sale of a property of a plant that was closed in 2018, and we now successfully sold. It's completely unrelated to the current situation. We have Christian on energy.
Yeah, maybe on the outlook for energy for 2023, I mean, any guess can be as good as another one. We have worked intensely to build flexibility when it comes to switching between gas and oil, so we can actually use the more competitive or the lower priced alternative. We of course are monitoring this very closely, but having a very stringent outlook on the energy prices is really difficult, as I'm sure you can appreciate. Of course, the outlook outside of Europe is significantly different. We don't see the same swings, but there's definitely inflation on the energy cost also in the areas where we're active outside of Europe.
The answer is yes, we are monitoring it, but we don't have a firm outlook on it.
Mr. Könen , I would like to finalize your fourth question, and I'm quite happy that you realized that we are fast to increase the prices, which indeed Semperit did. Of course, you said the raw materials are maybe going down a little bit, the outlook, but we hope as well. Then you ask how we see our sales prices. Are they under pressure to reduce the sales prices? Of course we are under pressure now already. We resist this pressure, and currently the demand drives the strategy. Because even if you would reduce the price now, you would not get more orders in our segments.
From that point of view, we need to consider at the right moment a price adjustment in a certain way that we have, let's say, picked up the right volume on the market as well. We are in a better position from a higher prices to maneuvering here.
Yeah. Perfect. Many thanks.
There are no further questions at this time, and I hand back to Mr. Haider for closing comments.
Thank you very much. I think it was a very nice rollercoaster of nine months. Petra Preining left us and we say thank you very much to her. Helmut came in very at a good time. We have things ahead of us, like MED separation, what we said. We feel comfortable to manage all this as an executive board. You as our analyst, you will be sitting in the first row to observe us from time to time. Thank you for listening. Thank you for recommending our company to your customers. I think we have a very solid future-based company. We will surprise and support your support of your customer with our Semperit shares. Thank you very much.