Ladies and gentlemen, welcome to the publication of Q3 2024 Results Conference Call. I am George, the Chorus 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. 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 Mr. Haider, CEO. Please go ahead.
Thank you very much, George, and good afternoon, ladies and gentlemen, and a warm welcome from Vienna to our Third Quarter 2024 Results Presentation. Thank you for joining us because we appreciate it very much, your time and interest in Semperit, because we are aware that today is a very busy reporting day, and thanks for joining Semperit. As usual, I am in the call with Helmut, our CFO, who will provide some financial details in some minutes. I will then finish with a brief outlook of the market from both divisions and our unchanged guidance for 2024. Afterwards, Helmut and I are available for Q&A. Starting with the highlights for the first nine months in 2024 on slide three, I would like to make three key observations.
First, we managed to increase profitability over the period, with EBITDA up by 11.9% to EUR 63.9 million, and the EBITDA margin improving by 1.6 percentage points to 12.6%. Equally, earnings after tax turned positive after the now divested medical business had cost losses at group level over the same period last year. Second, we continue with our strong focus on cash generation, with a free cash flow reaching EUR 22.4 million by end of September, which provides us with solid firepower for our growth investments. Helmut will evaluate on that in his section in greater detail later. Third, we have continued to drive forward our active working capital management and have clear signs of our structural measures having an impact.
As a result, we can confirm our 2024 outlook for EBITDA at EUR 80 million, consistent with what we had guided since the beginning of this year, and remain committed to our 2026 midterm targets as announced in August 2024. Turning to the operational update on slide five, both divisions, Industrial Applications and Engineering Applications , are complementary on a strong joint industrial base and provide us with a powerful business model. While you can see shifts in sales between the two divisions over the last 12 months, the share of EBITDA has remained stable. They correspond to the current cyclicality of the commodity-driven, highly standardized volume business of Industrial Applications and the innovation and technology-driven engineered applications business and reflect our cost measures.
Over the page, and starting with Industrial Applications , we continue to face a difficult market environment, but are performing well in it, and we are able to improve the EBITDA margin by almost 3 percentage points to 19% in the first three quarters. In hoses, we had a low order intake due to subdued customer demand, but continue to focus on more share of volume wins. In turn, in profiles, residential building permits, particularly Germany, Austria, remain an issue, and we continue with our cost efficiency efforts. For the division, revenues were down by 16% year-on-year, while EBITDA remained largely stable over the period on the back of our cost reduction effort. In the chart on the top of the slide, you can see the seasonality in quarterly EBITDA development, with a clear improvement over the first three quarters.
Moving now to Engineered Applications on slide seven, we managed top-line growth over the period, but margin remained under pressure. In Form, our specialty products like handrails continue to drive profitability, while at the same time, subdued demand in industry and construction remains. Investing, we faced some postponement of projects and overall a product shift to lighter belts and some price pressure from China. Generally, we had a high utilization rate in welding with regard to kilometers produced. For RICO, we reported year-to-date numbers with a sales contribution of EUR 71 million since the beginning of 2024 and an operating EBITDA of EUR 10.5 million. As some of you had joined our site visit a few days ago at RICO, I hope it convinced you what a strong asset we acquired and that it fits extremely well into our industrial strategy.
For the entire division, sales were up by 12%, and EBITDA remained almost stable over the first three quarters, despite subdued demand, shift in product mix, and pricing pressure. With this, I would like to hand over to Helmut to take us through the financials.
Thank you, Karl, and very good afternoon from me as well. Permit me to start with the financial highlights for the first three quarters on slide number nine. Let me put this into four messages from my perspective as the CFO of the company. First, we continue to have a strong focus on free cash flow generation, as you can certainly appreciate, with a cash balance of EUR 111 million end of September and a net debt EBITDA ratio of a mere 1.7 x. This provides us not only with the optionality for growth investments, but puts us also into a position to offer an attractive shareholder return. The strong balance sheet remains a key pillar for our financial framework and is supported by significant cash reserves and a strong free cash generation of EUR 22.4 million in the first three quarters of 2024.
Active working capital management, combined with efficiency enhancements, supports our effort for more operating leverage and a lean and efficient organization going forward. In this context, the cost reduction program we've talked about the last couple of quarters has now turned into daily business. Similarly, our strategic digitalization project, most notably our One ERP project that will bring the group together on a common framework, IT upgrades, the active use of AI, and multiple projects for further operational excellence have very much become part of our corporate DNA. And we also continue to focus on smaller projects with a payback of less than two years. Over the page, we summarize the key financials for the first three quarters of 2024 compared with the same period last year. Against the backdrop of slight top-line pressure, we managed to achieve higher profitability at EBITDA level, supported through cost efficiency and operational excellence.
In turn, the regular depreciation charge for RICO over the first three quarters resulted in a lower EBIT year-on-year. This, combined with higher taxes and higher financing costs for our growth investments, still led to a positive earnings after tax compared with the negative result last year when losses were incurred from the now divested medical operations business. I would like to draw particular attention to the increased free cash flow as we managed to offset higher maintenance capital through working capital measures. The total CapEx number of EUR 54.7 million includes growth projects for the DH5 plant in Odry in the Czech Republic, as well as RICO, and is in line with our industrial strategy.
The next slide shows that our effort for setting up an efficient cost base and achieving operating leverage provides evidence, while at the same time, top-line decline has been slowed down on a 12-month rolling basis. As before, we've inserted a dotted line to indicate where margins would have been if cost measures had not been initiated in Q1 2023. As many industrial companies appear to somehow be surprised by the continuing downturn, we've taken things we can control in our own hands at a very early stage, which include not only capacity adjustments and cost reduction, but also investments in new growth opportunities in a cost-efficient and streamlined way. This will hopefully provide us with the benefit of a strong and sizable recovery when markets turn eventually around.
As to the EBITDA average on a year-on-year comparison on slide 12, much of the negative price, product mix, and volume effects were offset by lower costs of materials, energy, and change in inventories, as well as lower expenses for personnel, consulting expenses, and warranties. On top of this, the changes in consolidation range contributed to the positive EBITDA deviation. This refers to the contribution from RICO for the first seven months from January to July this year, which were not included in the nine months for 2023. Our production efforts explain the remainder of the year-on-year EBITDA increase. This is a clear testament that our early and proactive cost and efficiency measures have put us in a strong position to benefit from a new future market upturn.
Turning the page, the chart on working capital shows an encouraging trend, with inventories and trade payables being consistently reduced while working capital seasonality over the summer, when we essentially produced in advance, led to higher trade receivables. With 18% of trade working capital as a proportion of last 12-month revenues, we feel comfortable below the 20% target. Please rest assured that active working capital management is one of the priority areas in our finance strategies, and we remain committed to strict cost discipline in the future. Moving to the net financial debt bridge, since end 2023, our free cash flow generated over the first three quarters largely covered the CapEx for growth projects, while at the same time, the proceeds from the investments helped to support the dividend. In terms of the main pillars of our capital allocation strategy shown on this slide, dividends remain an important part.
With the payout this year, we essentially wanted to signal the market management confidence in our business outlook. In terms of balance sheet structure and financial profile on slide 15, I will only highlight a 5% increase in financial liabilities due to the very attractive financing of the capacity expansion in DH5 in Odry, as well as the repayment of EUR 10 million of our debt in Q3 2024. This was essentially the bridge component for the acquisition of RICO. In addition, as an example of our continuing efforts to restructure financial debt, we also used a swap to convert variable into fixed interest rates during that period. Over the page, I finished the section of the presentation with our capital allocation policy and the priorities for usage of cash, something you're clearly familiar by now.
By distinguishing between maintenance investments and growth CapEx and digitalization, we want to update you regularly on our investment policy and to what extent strategic opportunities might change. Please note that maintenance CapEx also includes small growth projects that enhance our industrial base. In addition, we remain open for opportunistic bolt-on acquisitions, which provide a strategic fit and a compelling investment proposition. This is something that we keep in a rigorous screening process and pursue regional product and technology opportunities. Finally, our commitment to shareholder return in form of dividends. We had reiterated by paying a EUR 0.50 per share dividend at the end of April. I think with this, I've come to the end of the financial details and would like to hand back to you, Karl.
Thank you very much, Helmut, for giving us a good insight into our financials. I finish our presentation on slide 18 with the market outlook and the guidance for the current financial year, which I'm proud to say that we have consistently confirmed since the beginning of 2024. Our Industrial Applications continue to face a cyclical downturn, largely due to the weak demand in the construction yellow goods industries, here notably in construction and agriculture. In turn, Engineered Applications operates in diversified markets with different dynamics and its focus on technology and industrial solutions, whether medical applications, mobility, or healthcare, helps to be more resilient and stable despite some renewed price pressure. Overall, we continue to face a difficult economic environment for the rest of this year and into 2025, but have currently a good visibility for the next six months and a strong foundation.
With this, I can confirm again our EBITDA guidance for 2024 of around EUR 80 million and CapEx of around EUR 70 million. We hope that the consistency in our investor communication provides you also with more confidence in our midterm targets for 2026. Finally, before we finish the presentation, let me just recall our five investment propositions with a key focus on market leadership, innovation, our resilient business model, and cash generation capacity that are also underpinned by our recently presented 2026 targets. And now, Helmut and I are available for any questions you might have. Please, operator, start the Q&A procedure.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch or 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. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Our first question comes from Markus Remis with RBI. Please go ahead.
Hey, good afternoon, gents. Congrats to the results for upholding the guidance not given in the current framework. My first question relates to the industrial application segment, actually, the whole business. Can you maybe shed a bit more light on the order intake dynamics? It needs a bit of room for interpretation. Can we get a bit more tangible when it comes to year-on-year dynamics and also how the sequential development was? Anything that gives us a feeling where we stand in the cycle and what it also means for the next quarter? Of course, focus is increasingly onto 2025 already, so anything that would help us get our heads around the next quarters would be helpful.
Thank you very much, Marcus, for these questions. As you remember, the whole business, 2023 at the beginning, we were or 2023 was really the supply chain issue overstocking. And this overstocking, there was a spillover also in 2024. At the beginning of this year, the order intake was not the best one last year, end of the year as well. And now we have a stable order intake, which reflects our sales. This means the real demand what is in the market, we see now in our order book, in our sales. If I look forward, you know the hoses are used in agriculture machinery, in yellow goods machinery. Is it JCB? Is it Caterpillar? Is it Palfinger? Etc. This means they are linked quite to construction.
The construction, as we said, if you look to the, let's say, permits of private residential houses in Germany, it's still going down. The construction industry has somewhere bottomed in a certain way. Therefore, we see as well in our whole business, we have bottomed out in a certain way. We are not seeing a higher order intake in the moment. Our expectation is in 2025 that the first couple of months, maybe six months, is in the same light as we see, let's say, since April, May this year.
Okay, that was very helpful. So when you say stable, you mean basically quarter on quarter, so in absolute terms, it's not getting worse. And that's then also the basis for kind of the indication of a relatively stagnant development into the first half of 2025.
I would confirm this, Marcus. That's correct.
Okay, thank you. That's very helpful. Then on the cost savings, maybe that goes to Helmut. On the cost savings in the recent quarters, you've always kind of gave the numbers. Either I did not see it or you skipped it in the Q3 presentation. Can you update us on the run rate? Because to me, it looks as if there were still some progress in the third quarter. Is that more of a spillover of kind of the cost savings of the last quarters or were there incremental measures?
Marcus, as you remember, in Q2, we said we did this program for a year with a target of a 10 million run rate. We attained a 14 million run rate already in half year. And we said, it's only honest if we say this program is concluded now and we transfer basically all the ideas, the measures, the lessons learned into operating business. And therefore, we decided for Q3, we report on the cost savings year-on-year for the EBITDA bridge to be a bridge. But we don't put this program in focus because we want to show this is our ongoing business principle. It's discipline, it's consequence, it's execution. And of course, we have some effects. We had a phase one, a phase two, and a phase three. And we are constantly evaluating our overhead cost base further.
To give you some meat to the bone, we just had our budget discussions, and the board was very involved there too. And it's very new for a company when the board member or the entire executive board discusses a cost center budget at the cost element level, line item by line item. It took us a lot of time. It was necessary. But with how the wireless on the corridor works, the third meeting we had, they were already asking, shall we go into the presentation or straight to the Excel? And this is exactly what we wanted to achieve, that we go into EUR 10,000, EUR 15,000, EUR 20,000 euro items to show discipline and demand discipline from everybody.
Okay, I'm taken. Thank you. Coming back to the operating business on belting, I think, I mean, it was one of those areas that held up quite well, or at least in terms of earnings contribution. Now it seems, reading from your comments, that there is a deterioration not only in the pricing, but also in the underlying demand. Can you tell us a bit more about the end market momentum that you're seeing?
Thank you for this question, Marcus. Overall, the mining industry is quite strong and healthy behind. This means we see growth rates cater nicely in, is it, in copper, is it in different metals, etc. That's very good. But this year, we had a little bit of a different product mix. Normally, we are very strong on heavy steel cord belts. And this year, we had a little bit lighter belts. The average weight per meter was less. Therefore, we were busy. We did a lot of kilometers, but of course, the output per meter was less. This affected, of course, our profitability. Secondly, last year, you can remember, it was an extraordinary strong year in belting. And this was, of course, raw material timing, and we used the momentum quite nicely, I would say. This year was a standard year.
We had no momentum from this raw material to sales price projects, and so from that point of view, it's been a good year this year, but of course, it was not so good as last year.
The end market per se is still intact. The components that you're talking about, are you concerned that this might actually not materialize as an order, or is it just a temporary delay?
Mining, when they are investing in new, exploring new, let's say, pits, etc., these are big projects, and there can be always a delay. These projects are not lost. We know this project will happen. We are still in a good race. If you look to the, let's say, megatrends behind the mining, is it electrification? This is fully intact. We have investigated just recently many studies in mining, and we have not found one which gives negative signals or negative smell on this business. The business is in good shape, and therefore, we are very optimistic.
Just one thing to add. One thing is mining, and the other trend is belting. We've learned recently, and Karl wanted to elaborate, but he forgot, so I do it now. The biggest burden for mine operators in a truck and shovel operation is the big yellow trucks that we all know, the diesel, electric, mega trucks that go down the mine and go up the mine. So everybody who opens a mine right now wants to get rid of them because they're the single biggest cost factor. And belting, of course, is an alternative that works. So you do in-mine crushing, and you transport the ore, the rubble, the stones over kilometers, 20, 30 km until it's being processed. And this is definitely another trend that we see and another trend that will reshape the mining industry.
Okay. Thanks for the addition.
Last question before I get back into the mine relates to retail. Unfortunately, I have not been able to attend the site visit, so I'm left with the figures that you report here. There is a trend in terms of quarterly earnings contribution from a bit above EUR 2 million to about EUR 3 million, now a bit more than EUR 4 million every year. This comes against the backdrop of relatively stable sales. Can you maybe elaborate on the drivers here? Is it a mix? Is it all the cost savings related? And I mean, margin is now close to 18%. So what can we expect for the next quarters? And related to that, you're reporting operating EBITDA, so I was wondering what the stated EBITDA would be like.
So RICO, here we need to differentiate in two topics. One is the call-offs of the products, what RICO is producing for the different applications. Is it healthcare? Is it mobility? Is it sanitary? Is it household, etc.? And the call-offs are very strong this year, despite the economic situation. Of course, we have in some market segments a little bit, and I would say an impact as well. As an example, if we are producing showerheads, and if building goes down, construction goes down in private residential buildings, then, of course, less bathroom, less showerheads. And here we have a little bit affected. But overall, the call-off is quite good. Second picture of RICO, the tools that they are producing are high-end tools. These high-end tools cost from, I would say, a couple of hundred thousand and can go up with automation up to EUR 2 million or even higher.
This tool is a CapEx for our customers of RICO, which needs to go through the CapEx committee. Certain customers are postponing, not approving this CapEx. We have not lost one single that's a prospect, but they are coming later yet. From that point of view, the new tools, we have new tools, but we expect more to come when the recession comes a little bit out of the bottom of this, let's say, cycle in the industry.
To further, basically, we reported in Q1 that we had delays with call-offs under utilization in the tool shop. So we're now developing in a better run rate and are also very cost-conscious on it. But we all need to understand that cost for RICO means personnel cost because once you run, they run in night shifts without personnel. It's fully automated processes. So if we talk about personnel cost, we are talking about highly qualified engineers, workers who set up machineries, who work in tool making. And of course, if we want to have the business, we need to be very, very vigilant on this, how to develop this further. And cost cutting can go the wrong way very quickly with RICO because it cuts into our future potentials. To further this, you asked operating EBITDA. Why do we stress that?
Yeah, if we talk about EBITDA from businesses, we refer to operating EBITDA for RICO last year. You remember in the Q3 results, we had the PPA adjustments from the purchase price allocation where we had to do the step-up for inventories, put a part of the margin into inventory. And then if we sold, as we sold that product on inventory off, of course, the operating EBITDA is the relevant one and not the EBITDA that's shown after the higher inventory costs. This year, the factor is just we started, of course, to integrate RICO so they get the portion of service fees, charges, intercompany charges, and operating EBITDA would be the one which is on a standalone basis that's comparable to what we reported last year.
Yeah, and the deviation, would it be material? Or are we talking just about points?
Yeah, the deviation was material. I think it was last year, it was EUR 3 million, if I remember correctly, from the PPA adjustments. This year, it's EUR 1.5 million-EUR 1.7 million.
Okay, good. Thank you. I'll get back into the line.
Our next question comes from Christian Obst and Baader Bank. Please go ahead.
Thank you and good afternoon. Just two additional questions on that. First, the free cash flow. It was slightly negative in the third quarter. You mentioned some products you produced in advance, and you gave us some kind of guidance on how this will develop in the fourth quarter, and what is your projection for going into 2025? This is the first question.
Christian, thank you for your question. Of course, we have in summer, at the end of July and August, our summer shutdown with regard to manufacturing where we do plant maintenance at pretty much the major sites. So what we have to do in order to still furnish goods, stay ahead, produce ahead, and then, of course, work that inventory down. The major effect in the free cash flow, however, was, as I already announced in Q2, we used factoring as a tool in addition to our structural tools of working capital management, and we reduced factoring by EUR 10 million in the second quarter. So this is the main effect in accounts receivable that you see in there. The reason for this was, we are working on more than 500 initiatives in working capital optimization in the group.
And we wanted to send a sign to the company, to our managers, to our colleagues, what we can really do structurally. And then, of course, factoring will come back. But this is a clear sign in a very difficult month when it comes to working capital, August, September. We still showed we have it under control, and our focus is on free cash flow and working capital management. So Q4, as you can imagine, will show an improvement in free cash flow when we increase factoring towards year-end.
Okay.
Going forward for 2025, we're fully committed to these working capital measures. It starts in procurement. It starts in maintenance when we go through the plants and go through spare parts and say, "Do we really need to have two electric motors, 400 horsepower motors on the shelf, or is one enough, or is none enough?" We just accept that we have a downtime of one or two days. This is difficult because for an engineer, for a maintenance engineer, this is a nightmare if he has to do working capital management, but they're still committed.
Yeah. The difficulty is very granular, of course, and going into every detail.
Yeah. Understand. Okay. Thank you. Concerning corporate costs, they are close to -EUR 4 million approximately. Are we now coming to some kind of, I would say, normalization in that area?
Yes. Clear yes. We still have some stranded cost with regards to the sale of the medical business. We did the contract manufacturing for Harps, the buyer of the medical business. And of course, we were able to sell that business and move into a rental agreement mid-year. The plan was to do that for a longer time, the contract manufacturing, of course, with some sharing of cost. And this puts us into the position that we have stranded costs to deal with now. I think you've seen it in the EBITDA bridge and also in the development of the corporate expenses that they are fully part of our overhead cost initiatives, overhead cost programs. But I would say we are entering into a steady state. But I have to add there's also headwinds coming.
Everybody has to prepare in cybersecurity with systems to be vigilant, to have our IT systems protected against attacks. We're investing into our One ERP project, which is, of course, an SAP system for us, and with the new systems that are software as a service, it's not like the old licenses that you purchase and capitalize and then you're done. It's basically something that also has a component that goes into CapEx, but also a component that goes into OpEx, and so I would say it's a steady state now. We are working on reducing our stranded costs, but on the other hand, see some headwinds.
But does that mean going also in 2025, 2026, that the negative EBITDA contribution from the corporate side will be more in the area of EUR 20 million?
No, no, no, no.
No?
No, no, no. Not 20. You see, we have 11 now, so that's trending in the 15 million range.
Okay. Okay.
No, no.
That's fine. So then I can leave my estimates at 15. Yeah. Perfect. And maybe a last one. I asked this in some of the calls before concerning M&A. You say, "Okay, you are evaluating something going outside or what you might acquire going forward." You kind of talked about that, but some kind of an investment on the buy-side. So we are still in a very good situation there. Nevertheless, you also mentioned maybe some kind of rising competition coming from China. How is your position concerning that area? Because you can say, "Okay, it might not be some kind of a core business for us. We are in a very good situation currently, and we might think about a further investment to strengthen not only the balance sheet, but having even more headroom for acquisition and for our core business going forward.
No, thank you for this question. Overall, M&A, of course, we are looking into M&A if it's something available on the market. But I would say first, this recession, if I call this a recession, is a little bit longer, a little bit different than many in the past. Therefore, you need to be prudent what you're doing. And you see now the challenging quarter three, quarter two, quarter one this year that we as Semperit managed it quite reasonably, I would say, what the market showed us. And we are quite proud that we did not do wrong strategic steps, that we did the right one. What Helmut explained, is it in cost? Is it we prepared for this and not having too much debt, etc.? Very controlled, conservative, I would say, that we are planning.
Next year will give us also the six-month, let's say, copy-paste phase from the market. Therefore, let's continue with this course. And when the nice topics are coming around, then, of course, we have ideas, but they are not mature. And if I'm coming back to belting and you said pressure from China, I say always competition is just stimulating, inspiring, and motivating you that you work on your own USP and strengths. And this we are doing in belting. Therefore, we are having no concerns about our competition. We know them. We have our own USP. We have very good, let's say, products. We have a global approach. Therefore, there's no concern about this. And belting is a business which fits to Semperit in a very, very good way. If you look, these belts are heavy steel cord belts which need quite some reasonable amount of rubber.
We are backward integrated in our mixing units. Every kilogram or every ton that we are producing on rubber products, we are mixing by ourselves. Therefore, in the value chain, it fits nicely in. If you look the last two years, this year, last year, belt is quite a reasonable good business. Last year, we had an extraordinary, let's say, result. This year, we have a reasonable good result. As I explained before, the market is there. The market is there. Let's have a good competition on the market because this keeps us healthy.
Okay. Thank you very much. All the best.
Thanks.
Our next question comes from Jens Heider and Kepler Cheuvreux. Please go ahead.
Yes, hello. Thank you for taking my questions. I also have three. The first one is regarding the engineered application segment and the top-line growth of 12%. I don't fully understand what is driving this growth. Is it just the recall business, or are there other business units that also saw higher volumes or higher demand? And the second question would be regarding the financial debt. You stated on one slide that you swapped some debt into a fixed interest rate. And I was just wondering what the logic was behind that, right? Because right now, everyone is wondering when interest rates will go back down. So I don't think anyone is arguing that they should go further up. So just wondering what the logic is of securing an interest rate or a fixed rate right now. And the final question would be on the outlook for 2026.
I mean, I understand that you just published an outlook over the past months regarding 2026. But what we're also seeing over the past weeks now is a severely worsening auto market. So I was just wondering if this potentially, if it continues, could change your outlook to 2026. Thank you.
Then thank you for the three questions. I take the first one, and question two and three, Helmut will take. Engineered application, of course, RICO is nine months in with the revenue, and last year, it was not in. This is the comparison of the 12 months. But we have the belting business in this engineered application, and we have the form business. And even the form business has a different part of the business. And form performed this year quite good. Only two smaller stuff which irritated a little bit. It is a sealing for concrete pipes. It's linked to construction. We'll come back. Yeah. And filter membrane, big ones for some slurry treatments. The rest form was quite good in the business, and the 12% is coming from RICO.
To take your question on the 30 million we swapped, that's not only a small portion of our debt. It's, we say, a third of our syndicated loan facility. We did that in July. The plan was to do it very early on. We did it at 269 basis points, so below 270, which was our limit, which I think is a very good fixed interest rate. You say variable rates are coming down now. Yes, that's right. But we also see temporarily inflation coming down. We are just not fully convinced in the long term, and we are talking here swap for 2028, that interest rates will come down to levels that we've seen in periods of 10 years where they were close to zero.
We think 270 basis points, 2.7% is a very good fixed interest rate, particularly since we are committed to financing our industrial base in a long-term way. To add to this, you're certainly aware that we are going to repay our Schuldschein loan next year, private bond next year, next July, which is about EUR 32 million, which is fixed interest rate as well. In the mix, I just want to have a mix of fixed and variable in the group financing. This is the main reason behind it.
When you asked about automotive, out to 2026, automotive, our exposure is not high. We have a little bit of exposure with recall in mobility, but the call-offs exactly in this were quite good this year. We expect, of course, the automotive industry in Europe is on the way to be, let's say, declining. We cannot ignore this. The competition from Far East is high. Therefore, our exposure is very, very limited from that point of view. I would say everything under control, even I would say everything under very good control.
That was very clear. Thank you for your answers.
As a reminder, if you wish to register for a question, you may press star and one. Our next question is a follow-up from Markus Remis. Please go ahead.
Yeah, thank you. I would have one question related to the strike at Leeser. That was part of the media coverage. Can you outline if there was any tangible impact in the third quarter or if there's anything to burn the fourth quarter?
Yeah. Thank you, Marcus, for this question. You know the salary increase in Europe generally were horrible last year on the bracket because even the metal industry in Austria this year, 4.8%, which was negotiated last year, is too high. So therefore, we as Semperit are quite firm with our, let's say, bargainings in the different countries. The same we did in Germany at Leeser. And of course, we had some unhappy unions there, and they made their point. Everything went under control after, I would say, two, three weeks, and we had no damage. We had no really impact of the business, and everything is settled, and we are on the normal way forward. Yeah.
Okay. Okay. Very clear. Then another financial question related to factoring. I mean, you've got this EUR 75 million program. Did not use it in 2023. So in the first half, you were using EUR 22 million. Did I get it right that in Q2, this was actually down EUR 10 million, or was it meant to be?
In Q3.
In Q3, it was down EUR 10 million. Yeah, so we had 12.5 million end of Q3, but we certainly did this. This was basically just a measure. It's signaling to the organization, "We can do it without factoring." Of course, we utilize factoring. It would be unwise a year and not to do it, so we use all measures of working capital management that are available, and factoring is an integral part of this.
Yeah. Okay, so it should then go back to 22 million-25 million, whatever it then is at year-end 2024.
Yes. Our factor has quoted us, I think, with around EUR 30 million. So that's the potential at the moment for three companies where we use it, but we're certainly looking into expanding it because it works nice. And once you've set it up, it really works.
But that's just an item that's important for valuation because it essentially should be treated as debt as a source of financing. And the last question is on coming back to this midterm target. If you could just remind us regarding the CapEx needs that you've penciled in to arrive at this EUR 900 million sales figure, so beyond the EUR 70 million this year. Can you at least give us a direction for 2025, 2026 CapEx?
EUR 25.70 million is, I would say, a little bit on the higher end this year according to our organic growth investment that we made. The older example, recall. Next year, we are planning a little bit less than 70. The year after, it will be around this ballpark.
Okay. Thank you. That's very helpful.
Ladies and gentlemen, this was our last question. I hand back to Mr. Haider for end closing remarks.
Thank you very much, George, and thank you for listening to the Semperit third quarter or first nine months. It's a busy reporting time this week and especially today. Thank you for your interest, and I wish you a very nice day and fruitful questions for other companies. Thank you.
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