Q1 2022 Marel hf Earnings Call
That should take so long longer than an hour, including Q&A.
And we have a great team for you here today and C E O.
So all of a sudden on C. O O lithium will go over the financial results and some key business highlights Chief strategy Officer openness to Sun will then give you a quick teaser on the agreement to acquire <unk> manufacturing at the names yesterday, and we encourage you all to tuning into our additional investor meeting on that exciting.
[noise] topic. They today at four P. M C E T.
We will then conclude with a Q&A.
If you'd like to ask a question. Please do so via the conference call and the dial in details can be found on our website and in the stock exchange announcement.
And you can also email your questions to IR at Norad that come and we would revise your name your question on your company.
With us I'd like to hand over to C O.
One of them.
Yes, welcome to our first cross that are tucked it to.
It has helped me think basically software last thing I'll say, it's a.
Announcement of new strategy pillar and modest where my friend Thunders here some will tie back into Ghostbusters. After Linda will go poorly through the financial I will touch on the highlights.
This was definitely a busy cockpit for Costa Verde, all the team shows and gates my posture on unity <unk>.
The more real real partnership with all the customer Sunpower Shotglass.
Chocolate chip constraints on a very high level, one micron on a high level and beginning of the year onto recast lockdown another loss, where do we have one third of our workforce wassa.
Wassa until posted so January however.
However, we saw the cost the throttle you're moving in right direction. After starting slowly in January February .
We're seeing a black and white the operational restaurants, the author and pick up their revenues and in March we saw that's a pick and a coffee yet.
I was asked to check if the clicker, we'll talk let's see.
And that's what's working.
Yeah.
So.
The clock that cotton, we can characterize the next circuit to somebody a rack or thought that and pick a new record in order to support 50 million compared to 400, it's a strong cash flow be costing you on a strong cash conversion.
Great here and the cost.
On behalf of the soft operation ratio, we should not shy away from them, but we are not taking no shortcuts via off.
Reshaping, how we take off Collectability the flow a bed set that out in the company, we will see a gradual pickup in revenues as we go through.
We made three times price adjustment in.
And the cost that the pipeline continues to increase no wonder our pioneering solutions are.
Right, Don he think challenges and opportunities of all our customers.
Moreover, it's not enough to have a seamless flow robotics automation picks it up we have to stay with their customers.
All of their sites if decision or Iraq.
The growth there.
<unk> network.
He's kidding.
Talk to you.
You can see it twofold.
And you can't see it in a sense the marketing costs, but this op hold normalized level.
This is a good cost Mauro.
Moreover, and push quarter on second quarter, we are having tradeshows. After all so think of them for two years until the COVID-19 situation.
We will do more business through digital through next year.
Our customers are feed cubic.
Our team is now staying with them at their sites and there is a good gathering to compare to the books with P. S. Some customers in the trade shows. So we are saying, we will cease forest that sensor market the cost higher in first or second quarter, and then you will see it crop going down compared to that.
Revenues for TOEFL revenues are extraordinarily high Simpson bucket the cost in the first two quarters.
Revenue was $372 million in the cockpit, it's below our targets, it's called a lot by the output in January February when we were on good level in mass.
Deep dive more into this in and when I go through the industry highlights.
Received I've touched on down EBIT marks an eight 4% at 11% the loss costs that we believe that we will see improvement in Sacco cross that more in line with the fourth quarter. What we are talking about and then we will see cropped yearly improvement in.
Cost coverage with the revenue ramp up we will get closer to revenues compared to offer a thought that it would take over the last three or four o'clock. This up you see now the order intake for deep water and 3 million net loss or craft that <unk>.
That's 1.2 very important it was one and backend of the year has flow is good to be paid for curio, we pay it out David.
Our leverage ratio at 1.2, it's more important to look at the leverage ratio post the acquisition of Wagner's bought this a real move where we are utilizing our policy our trust out there in the market thrust from you investors.
First from a pocket partner stuff, we are having.
Yeah.
Poultry.
Very good taught their intake of cloth geographical mix. Good we were not seeing clocks Proteus and in this cross sector. Although the order intake is very strong.
We were seeing a lot of smaller to medium size, we are expecting a lot scale protests to come in either in second or third quarter. This year on top of the order flow of smaller and medium sized proteus.
We are a 12 person deep it here, we were up 40% in last quarter, but more important we are happening to the Irene off plus eight and passion, we will see gradual pickup real pick up in third and fourth quarter and going into next quarter as we upstate.
In the meat segment, we are having staple order intake between quarters.
We are seeing Europe , a little bit down in order intake, we are seeing a softness although we are having good wins in in China. While there is a real real runway in the Americas markets in the meat segment. So all in all we had a strong quarter last quarter and we're I'm stapled between the quarters.
I E.
Oh, a six 7%.
The meat segment was most call out of the of the cost inflation. It takes the longest time to fill that out there.
Hum Haas Hoss that most of that effect of the new west to Sop events in Russia, Okay, I will touch a little bit more on that.
If you look at the pet segment.
I don't know how to say it how much percentage increase it is an organic growth in order intake you remember may be not to be hot a rather weak order intake cros that in first quarter last year, we hopped us well weak order intake for three or four quarters in a row.
It becomes soft pair them about in the Covid situation.
People needed to get the accurate it outside of Scandinavia, with fish and restaurants to increase the consumption of high end restaurants, casual restaurants, something et cetera.
The order intake is hunter post hire them push across the last year.
We could say, it's at least 50% higher than normalized level in order intake there.
There are some vape with set pulse three.
Face whether the feed conversion rate is lucrative.
A N now invest methodically type, we expect that we will continue and meet on a stable situation.
This level, while we will see further increase in order intake in poultry.
In the PC segment.
The EBIT of minus 2% in in in phases, not showing the underlying credentials.
We are having one off costs non recurring cost in integrating the companies.
The biggest effect in in Pes was a high tech savvy country processing solution is Solomon with deliveries shifted and good cooperation with the customer spitting costless.
Those start out there to have met our bookings that we book the revenues only after living.
This is quite significant that.
Proportion of those revenues start this EBIT. So we expect to be back on track very soon and piss adult changed anything that he got the golf plan and medium terms or long term. So on the operational profitability of every single unit tier it in modern.
Touched a little bit on Russia.
Onto crane situation.
We paused all new artis into those markets into Russia, especially reports all the we call them the innovation.
It was historically, 4% of our revenue stream.
The assistant.
In addition to the pillow and remember we have a balanced portfolio geographical portfolio and I'd say, it's having an effect on the park intake in Europe .
It seems to be escalating pushed the investment appetite and poultry.
In out in order to kill graphical areas I'm definitely is escalating on top of the health conscious way.
And the sustainability debate that the months in the pitch segment.
I'm not going to have it now over to you Linda just to recap.
The strategic pillar fully in line with our vision.
Hum sustainability at portability.
And let's a little bit not steal everything from my friend Dan. This is Shawn that will go through with but I will take care of the overall picture walked the RV tool.
And to recap we were a company that was pumped it in the middle of the processing steps in the peer sector.
One of our biggest part of it has been humming clear vision, then garage purely expand our playing field starting in secondary processing fees.
Expanding the playing field.
Val.
Feyerick scan back to strengthen our position in a fish a quiet start to get the primary a processing position in in the upholstery segment and then the MTS acquisition.
Yeah.
Here, we are acquiring and joining forces with Vanguard thought this office secondary processing point in in in that plant based proteins in the pet food and coffee.
We know exactly how to pick up my first full line provider in those exciting market.
That I expect it to continue to grow on a truck right.
And just look at it nutrition matters of law.
Proteins will be this at the point of the plates and now we are I think plant based protein and not this soon with you on your based proteins.
To give you a little bit insight into the first that's how we will go to the full line, we have buying short tank inspection and trucked off their secondary processing, then we hop hop rebel formats, we have coating country have old ones.
Yeah.
Rights and so on and it will go better in this post the link that goes into the finance shelf, but to say the least.
Sure Breck site that same costume and those companies same posture.
We will leverage graft in those sectors are meet the consummate the months for a hefty Palestine and heightened attrition.
Yeah.
So good morning, everyone and thank you all.
Like first to comment on the 10 says we've made and the executive team and Maritza with Stacy Cox took over as CFO . We are like in the transition period at the moment that with as expected is going extremely well. So you will soon see a more of Stacy Adams the Tuesday.
I will go over the Q1 trustee type D to resolve that.
I guess to explain as well.
My new role like I've been CFO for eight years and now in my role as Chief operating Officer, I'm I'm responsible for our three pillars.
The supply chain with is really at the core of our operations, where we have like 2007 hundred people globally working on the supply chain within modest.
And my focus there like are in the immediate the beginning will be on supporting the revenue growth like there is high demand for our products, we need to grow our revenues. We are also focusing on digitization optimization within the supply chain area. And then addition, there like number of transformation investments happening in this area for business.
We'll be following a carefully.
The second pillar within my responsibility. It is some of the human resources with its driven by a solid set up some and then the third focus area is on the operational efficiency like driving our improvement.
Improvements across the organization towards our midterm targets with our of course, a very important stuff for what's coming in 2026 and in our long term targets.
But two shortly.
Record revenue record order intake again, so like a clearly high demand for our product and we do see our revenues at the level of five 327 million with this like below where we wanted it to be like we need focus there too.
On the revenue front, but we are seeing quite that.
Quite some complexity in the quarter like the peak of the Panther make with absenteeism at the highest level since January February evening out in in March and we also see like inflation pressure cost prices are going up and that they seem.
To like the complexity, we saw before like on the supply chain side with I'm missing Pos so quite them environmental people are dealing with the everyday but we are navigating through this like a width and gates our team across the organization and our focus is really unlike following carefully the cost France.
This more often into our own product than we did before and then with our focus on scaling up revenues gradually throughout the years also to improve our profitability and you see that like we did step up on the opex levels a bit ahead of the curve and and that's who tend to cover it also with the.
Higher volume.
Operational performance in the cluster soft levels, eight 4% and that's where we will be focusing on scaling up on the revenue front.
It's one point too, but strong cash flow in the quarter there.
But to dive a bit further into this.
Now my slots are not working.
Sure.
Okay.
Okay. Thanks.
So good quality of earnings you can see here like the emphasis placed the geographical split in the business mix and putting out the level of 551% in the quarter, calling off from my last year, you can see a bit of a trend now in the order and taken this this quarter, we have a fifth record order intake we have like.
A very strong order intake and meet a similar level as last quarter. So like slightly different mix coming up then revenues by geographies, where we can see that the Americas are going off a cockpit balancing the trends, we see in ACI and Oceania and like the comments.
We have made on also developments in China.
Revenues by business mix now like the aftermarket is around 40% debt levels with the spare parts that are good levels in the quarter as they have been also like in and recent two quarters and then it'll be interesting of course to see like other impact from the acquisition of language on this this picture, but this is very.
Important for us to have the good quality of earnings not being reliant only on one pillar.
And soft operational performance I mean, its tough in the gross profit level with this is the level of 36% in the cluster. There like we are clearly impacted by a number of factors and the focus to its unlike a pricing that through like we have number of improvement initiatives.
Two I guess the gross profit.
And then on the Opex asking them at the level of 13, 8% and that this are on the higher end, but if you look at the order intake that they thought the level of 12, 2% and you can say that like our investments in this area like really staffing up ahead of the growth curve on the France plant has been paying off.
And and stronger orders taken in recent quarters. So.
So it will be interesting to see how this levels out then when we get the volume to a higher level R&D at the lab level of flower our midterm targets in 2023, and so like the main focus here is on the gross profit and improvements they're scaling up on on the revenue front.
Our strong order book are you see that like a it is a if you look at that.
The book to Bill is 113, 44% of trailing 12 months the revenues and the order book at the level of 16 to 19 at the end of the quarter. So good from phase two to work on a higher volume and and throw a gradually throughout the year.
Earnings per share.
Here you can see like that that if you look at the earnings per share like in the quarter. It's around two points 87 compared to $2 82.
Same period last year, and if you look at the trailing 12 months as you can see here into the picture you can see like we are whole thing quite a good pace here like despite the challenging environment also positively impacted by strategic moves.
Dividends paid and in Q1 is around $38 million.
So the focus here continues to be like growing earnings per share faster than revenues. If I look at the revenue growth from our 2017. The coker is around seven points, 2%. So that means that we clearly need to stop that and growth in in the late part of this that target.
We have.
And looking at that very briefly I think some states match. The gross profit 36, 1% you can see that revenues are growing from the same quarter last year by a lost the 11%, even though we say that if he wants to scale further looking at the Opex lines. It's very clear like what are the 10 says it is.
On the sales and marketing.
And after yourself and a similar absolute levels as last year.
And this is like very critical for US I mean, you started the midterm targets, where you can see there is still a gap on the gross profit and that's like a where we have a main focus that's like where we have initiatives ongoing where we are focusing on improvement and then you say, there's a gap on the SG&A side, but we think.
That's more like we are improving waste of working but like we see that covered more with our increased volume.
Then on the balance sheet are two comments here like on the asset side. We are we continue to a step up in strategic inventory in the quarter around 37 million.
And like otherwise theres not much to mention here on on the asset side.
And then on the liability side, just to and it depends like I love. It at the level of five one points to the pro forma leverage after the acquisition of a banker are will be around the three and but we will tell you more about that.
Later in the meeting.
And strong cash conversion operating cash flow at the level of 33 million.
You can see we continue investing and investing in the business our free cash flow at the level of close to 15 million.
We have said that capex will be around 45% without RMT of revenues and in the coming four years.
And that also relates to my comments on the supply chain, where we liked how transformational investments are ongoing.
And then in the quarter you can see investments in subsidiaries this actuarial impact.
We bought a 50%.
Oh stuff in the quarter. So now we own 100% and then you can see the dividends paid.
The level of 38 seven.
Yeah.
I'm just to underpin asked we have done before like these are the parameters. We are focusing on constantly at this earnings per share. It is the free cash flow and the last that the EBITDA leverage.
And but over to you out let's say listen.
Yes, Thank you Linda.
Hmm.
What I want to do is to share with you more insights into our two most recently announced acquisitions, it's Lakers and vendor.
If we start with the stickers, it's a it's a very nice bolt on acquisition that we closed last week.
And it's a Dutch company founded by Hoops, Legers and 19 ninety-three that focuses on basically inter leaving a loading solutions and slicing solutions.
It's a it's a business with revenue around 5 million euros and the employees of 27.
And they are basically based very close to our Boxmeer operations. So can I haven't been in.
It's very nice that we have kind of a an additional location kind of close to where we have such a such a heart in the in the poultry business, then and also closed store operations and enlist the water.
And we do actually share the same passion.
Which is innovation and so it is a very good cultural fit where we have a complementary portfolio.
And to give you a little bit of a more sense around the portfolio. It's a very natural next step into kind of strengthening our position in the in the case ready and prepared foods segments. So kind of to give you a little bit of a sense I mean, the loading solutions, that's kind of the application that is happening between or cutting portfolio.
And packaging, so kind of getting the raw material or are the end product into a tray and then to the packaging machine and then labeling and so on.
And the interleaving also to give you a little bit of a flavor what that really is that's the that's the paper that is often between the hamburgers or you're.
You're a plant based protein are kind of just to make sure that the the presentation of the material is in a good way and preserved for a for consumers to be able to cook it and they also basically recently launched a very nice placing solution and it fits quite well into our portfolio. So we're very excited around.
End of <unk>.
Taking this very nice bolt on utilizing our global reach and digital platform to a to be able to cross sell it and put it into our projects. So it's a very nice fit.
From that standpoint.
If we look at.
The other acquisition the vendor then.
I am extremely.
Excited and really truly honored.
That the Wagner family chose us to be the stewards of the vendor business.
It's a highly strategic platform acquisition for us to enter into new markets of the pet food Aqua feeds and plant based protein.
They are basically a global leader in processing solutions.
In those markets and have a very extensive offering that is mainly around could've extrusion technology dryers and power heaters, which is really kind of two two armies slight earlier, it's really the anchor point and the core step in the secondary processing that really controls.
The texture and quality of the end product. So it's it is really kind of the core pillar that you want to build around and Vanguards really strong in that market.
They have a very long and impressive history.
It's a company that was founded by two brothers and 1935 focused on cattle feed.
It was a breakthrough technology and they've continued on that journey ever since they were first mover into pet food, which represents around two thirds of their revenue. There were also a first mover into aqua feed and they are a very attractive and strong portfolio in the in the plant based market.
Yeah.
They have over 500 employees dedicated employees there are mainly based in <unk> and in Kansas in the U S. Latinos in Brazil, and clothing in Denmark, which interests.
An interesting fact is like all of these locations are quite close to.
Two our can am morale locations in those are in those areas.
They have a kind of long history of strong growth and healthy profitability, we're expecting revenues to around $190 million and are in the 'twenty 'twenty EBITDA in the range of 32 to 35, which is.
Around kind of 14% to 15% EBIT and this will represent around 10% of Meirelles pro forma revenue and 12% around 12% of morals pro forma EBITDA.
It is also important to highlight that they have high quality of earnings over 40% of the revenue is in aftermarket and they do have a very high return on invested capital.
So <unk> is a great business.
And we will continuously belief based on experience that good companies tend to be better than you think and bad companies tend to be averse. So we're really excited around kind of having vendor as a part of morale for the future.
But not only that there's a very good strategic fit between the businesses.
There is a strong strategic and cultural fit a we've had a chance to kind of engage with both the senior management and the second layer of finger and it is kind of they have a great culture and they share a lot of the same characteristics tomorrow, such as strong focus on <unk>.
Customers and growth.
They are committed to high quality solutions and innovation.
And they focus on developing their employees.
It's also kind of the fourth pillar focused on those new attractive end markets, which results in a more balanced business model for morale going forward, making the morale business more resilient and stronger for the future and that's we're really excited around this pillar and there were.
Our April to kind of build that further.
It might surprise some of you, but we do actually have a complementary product offering that will allow us to strengthen the value proposition towards our customers.
We are selling into pet food today, even though we don't talk a lot about it and we have we did establish a business development division last year and so we do have like Arnie said, I mean, our mixing grinding equipment forming.
All events, so on and so forth. These are actually pieces of equipment that will fit very very attractively with our with the vendor portfolio and we're very excited around kind of building more line concept to be able to offer a towards so kind of a combined customer base.
As we're also seeing some of our customers in poultry meat and fish moving into pet food to utilize the raw material and the byproducts, even better to increase sustainability.
Then our global reach and digital platform, our X factors, they will come in and in good hands now as well because it will make sure that we can reach faraway markets better and also help us to accelerate the journey to become more proactive on the aftermarket.
If we go through the some of the transaction highlights.
Then we have agreed to acquire a bangor for a total consideration of $540 million.
$530 million of that are our payment for the business on a cash and debt free basis.
And $10 million is a combination of morale shares for putting their employees as well as a contribution to a not for profit private foundation focused on continuing the vanguards legacy and commitment to the local community in tobacco.
The transaction reps represents could have a a 14 times enterprise value kind of against EBITDA and that's adjusted for a tax asset.
Of $60 million to $70 million that is the result of goodwill that kind of is kind of a kinase created as a result of the acquisition, but that good bill we can amortize and deduct for tax purposes. So there is a real value there and this is kind of a discounted are to kind of bring it to a net.
Kind of current value. So we do adjust for that to give you a fair representation of of the multiple that we're paying.
The acquisition is fully financed through our strong balance sheet and existing credit facilities.
In a kind of pro forma leverage will be close to a two to three times sorry, it will be close to a three times, our net debt EBITDA compared to our targeted capital structure of two to three times net debt EBITDA.
It is worth to highlight that we are in discussions with the selling shareholders to receive a partial consideration in morale shares and we expect that that will be finalized before we close the transaction and we do expect closing to happen by end of <unk>.
Q2, and the transaction and that's due to kind of customary closing conditions, such as antitrust approval and shareholder approval of the vendor family, but we do not expect any any any roadblocks.
To achieve that.
So that's that's it we'll be going through the acquisition in more detail later today. So I encourage you to to join US for that session. If you want to learn more but arnie I hand, it over to you now.
Yeah. Thank you Anna.
So.
The excitement personal exciseman thumped insight model pumped insight Vangorder E S.
It's very high on this one behalf.
Sell through them in in a process or on get to know each other so well on all layers in the company.
We have of course known Radnet out in the field, we have been working for some of the same customers to be up and following them, but this year it'll be a met them three times and in chip I thought comps us or talk to.
All people in all functions both from model side, the Vanguards that aren't always become more apparent go off but you only pay a head of us.
Like I say it is very important is smart about.
This has always been non loyal right that here and modest stuff that isn't the face we moved into possibly removed it took place.
And to meet them.
Three months after we close the acquisition of MTS about this equal in size and scope on the revenue side ask us ranked our second largest acquisition.
After start.
In H M two of 16.
We introduced our vision two in partnership with our customers we are transforming the way they put this process.
Before we hop.
Intension to pick on that globally that are impulse could meet them face, where we are and be up and less opportunity to grow within the segment and become a great partner to our growing customers.
Give our employees therefore graft opportunities.
Remember as well some of the blockbuster simple three bear in method at the Memphis I'm. The vice versa. We are doing the same here, we are using the economical scale to.
To halve the poker continuous focus we will run the company on four pills and not fishing with poultry meat and fish. This is the fourth pillar like I'm going to say it we will go more in detail in this today and in the meeting.
This fits perfectly there off costs in the primary proceeds go animal proteins goes into into the pet food industry.
Our customer.
Customers are using the same distribution network to deal with after the protest or plant based proteins are at the animal feed protest, so onshore and the touch points.
You could say removed slot towards the 16th introduced new vision on 22 closely guard Chris issue.
We work to Graz yearly expand powerplay increase you have to have the best core technology.
Built on the even though it will be more slow we have a.
Cracker of height toppled it should growth per annum. Since 92, we have lowered throw some fisher stand to 12 person, but we definitely will deliver with 50% in sales service and software.
Back to our business here on sales some marketing costs tie a lot of trade shows going on.
Let's let's see the trade shows we are ahead of us.
We are having their seafood processing in Barcelona.
That's a personal firsthand.
Our new car car maker, if further meet show about this every three years I've always these audit that's going down for six months before ive.
Skyrocketing. After that then stunt that that gives me and then we obviously would be part of the show, but then step of I'm, having it get longer on free up space for Q&A, let's dive into group. It pays out just for a while in Barcelona and see the MOSFET.
Fortunately there are customers I would have loved to be with you, but we have all the tasks here, we divide the forces, but let's hear from Cooper Kayla.
Now it's time for questions and just to repeat if you'd like to ask a question. Please.
Do so via the conference call or email IR at Miranda Com and let's start with the online audience and with that I'd like to hand over to the conference call in March.
Thank you ladies and gentlemen.
If you wish to ask a question. Please press zero and one on your telephone keypad.
The first question. We've received is from Akash Gupta J P. Morgan. Your line is now open Pease go ahead.
Okay.
Yes, hi, good morning, everybody and thanks for your time.
Three if I may.
The first one is on China, maybe if you can talk about supply chain exposure to China, both directly and indirectly from your supplier base and how do you see and the current situation in China might be back to your reserves in rest of the year as well as a impact on your the accretion from orders that you've won.
The second question I have is.
More if you can elaborate.
Early on when reshaping accountability I mean, what was what was the team which was not working before and when you say when you plan to reshape accountability.
Features that you are talking about and the third and final one is on vendor.
I didn't see any number for synergies maybe if you can quantify it but it will be any synergies with the rest of the.
Business in any any revenue or cost synergies and.
So that's the that's the question I have thank you.
Can you walk us or suggest that Ah I stopped by taking China reshuffle changes and maybe then get color from Linda on how excited he is our onto chances are they're nominal start on their bang there may be a pocket.
So China expulsion eh too, but let let's stop overall deepwater Conqueror chocolate base ciao.
China is a growth market and will be a growth market for the.
The next 20 years at least like it has been in recent thirtyish be hop in investing in China and that they're more sensitive we are fine pick the wrong there aren't opportunities in the middle of the violent tend to sort of the E. Commerce about this lots about <unk> and you were something of Lockdown situations E. Commerce is even more important.
Before so we are on the right spots doing the right things Rick I think our exposure in China, it's much less than most of our capital goods companies in sourcing.
May be b shoot popcorn deeper into the bulk was next in line. After Slovakia, plus then we have process platform on China part.
This may be the biggest exposure for meat that not sourcing, but we hop hot a business model to make what's inside the primary process.
In China, she hit to lift the water and then I can see if it may be to China or other places.
We assess inviolate business model going for what they anyhow.
Sustainability cost et cetera, while the logistic.
<unk> have been five to 10 fold to shop.
We're all.
Very small exposure to China in sourcing a monopod sprint compared to all the capital goods companies most important geographical spread on the business side without you wish this overwhelming that the China downturn.
There will be downturn for three more quarters, and Apis and through last three quarters, it's the long downturn and downturn in China is lower growth.
And that we have seen in Turkey, yes, and it will continue to grow it will continue to establish so there are opportunities there.
What we mean by increased stock comparability.
Flow on speed.
You know what happens in the pump them you know the logistic challenges.
Every single customer.
Modern peer so model and all that are changing the flow in the business. That's why we said one year ago, we will take our capital investment to four to five person.
I ask Lynn to jump over in and see your position to align those cros.
Punctual activity some of those investments I don't trust anyone faster having been in this year for position and we have the luxury of Stacy got Scott could move varied.
We are reshaping us about when the floor with changed it's more consumer at the appropriate reserve as a primary production on it.
Et cetera, et cetera, when you changed and remember we are a growing company, we've got Huntsville, 30 million going to $600 million going to want to build on some of you thought we were stuck to lump there now we're going to be two 2 billion and our target is 3 billion with three S says, 50% we have changed.
Sink their way and of course, you have to reshape the company and when you are reshaping is very important to stop doing what you used to do if you have a new way. That's why we mean by clear accountability, most likely then or not most likely.
Our lean admit to monitor Smith going forward I'm sure. The communication links that's what we mean, we're confident but we are moving in right direction. We are awesome well comfort that our best in class customers are moving in right direction with solution for a moderate but we need to invest like they need to invest but how is it Linda.
To be in the new Euro, though it's a it's a great I mean, I I really like the core off the operations. So for me. This is like a great opportunity I think also like when you go through such a period, we're going through now like where external complexity is high you need to turn every stone on the internal side like grew removed.
Wing all bottlenecks as soon as they pop pop off so I do think like we both have opportunities to work bathroom internally within our own matrix. We also have opportunities to work better with our external parties like our suppliers are like a lot of things that we are focusing on in addition to of course investing in our supply chain and.
And with our plants. There. So like are very excited about the tyranny of hat I mean, it's it's clear what needs to happen and I think also in gates Mastec with NK Smith and excitement that within a marathon and not guarantee there. So I'm looking forward to the next taps I would say.
Yes may be if we if it if I touch on the on the vendor. A question then we see Bangor is a very well run business. So our main opportunities is really around first of all we need to kind of work together to expand capacity because their demand.
It kind of demand for their products has been very high and they have a very strong backlog. So we see an opportunity if we expand the capacity we can continue to drive that strong organic growth.
We're not going to go after after a kind of a it's not a cost synergy acquisition. We do more C are the by far the biggest opportunity around kind of first of all more proactive service. So even though they are at a very healthy rate on aftermarket they have been more.
<unk> reactive on the service side, so we see an opportunity to move more towards a kind of a proactive reaching more proactively towards the customer and they have a very good could have data and customer insights for us to kind of develop that plan.
And we've already kind of started those discussions then also on the complementary portfolio I think that's really where we see the opportunity and that will then help us with operating leverage on the vanguards side to kind of improve our improve profitability just to give you a little bit of an example, I mean.
Last year alone we had a handful of individuals are focused on the pet food market and we were selling above $10 million a into the pet food market, which can have a very I would say just very touching the surface of the opportunity that we believe is there. So we see there can have the big.
Is the opportunity and we're really focused on the customer side, how can we service the customer better and we see that opportunity on the product portfolio side. Then if you do a good job with your customer then that kind of good things follow and so those are kind of really the things that we're focused on on could have value creation leavers.
In this acquisition.
Thank you.
So lung cancers, but to give you a global reach and model is now European global resource restaurant in the Aqua feed business or Wenger.
All of the customers at our booth and precious where there were a group of peer was talking.
Matson as well plant based protein. If you are a smaller company than model, but are great company onto you think youre penetrating into the plant based protein isn't it better to have the global Samsung.
Service network Colo Cullinane, theoretically say my plus two China pluck and poor people then you have to have the legal infrastructure, the pioneers and foster a to the I T system on compliance system, we have it.
Plug it in test.
This test the water.
Started to buy or not to you.
You can't grow it increase the courage to get closer to the customer, but Ragnar is a good company about this close to the customer.
Did not.
Yeah.
Yes, and then and.
The next question is from an analyst on the conference call as well.
Yeah.
It is from Clos.
Your line is now open. Please go ahead.
Thank you hi on the dark side. So the first one is on the the price hikes.
Can you please remind us again about the the rough magnitude across services project and equipment and the lag from when you hide prices until it hits the P&L I'm trying to model the likely effects from pricing towards the end of the year. We've seen several companies were longer lead time seeing this lag.
Curious how this can at all for you towards the end of the year on year I'll start there.
So so first of all the utmost it lost theatres ought to be but too late to increase prices. We took a prius special price increase in third quarter are usually with within beginning the year, we should have done it earlier.
Then we this year, we did the annual price increase in January than we did in February than we did that again in Bakken to from us.
How with filters out they start all we have a great business model off the kit business is 40% so enough ticket business. It takes like eight weeks to fully fix it all.
And stomped that they are cute, but when we are selling to stunt that there can be like sensor into existing factories, or the high tech and and and and and in this element out there said that I would take three to six months to pick it up and then the protein business. It takes nine to 12 months to pittsboro.
Little bit longer in meat done abandon possibly on face, but the average nine to 12 months.
It's good to Amp up it takes a long time to filter out maybe you remember some of the short cycle High Cross smarts and companies that are not time and quality of earnings with after Kipp on North Park, the Proteus Deva nearly belyea in in 2020.
We didn't we navigated it takes then as well a little bit longer time to two two fished out the price increase.
The good thing geese downstream.
Downstream the supermarkets, our customer Sunday et cetera have been.
April two at just their prices on their financial health is good. So there is some access to us and we have a pricing power due to our innovative portfolio. So that's the most important.
Our aim is not to get above the price we are going to get on the fair price law and then we're working on operational efficiency and we are more confident now that we will reach their 16% EBIT target from three months ago.
Strange such that sounds when we reported eight push the pit visa versa 11 were more grip on it we are getting faster on the price line and we are going to ramp up in revenues to cover the operating cost.
No. Thank you I I totally get how the business model works I'm, just more curious about the rough level.
And across the different three vertical so we can sort of bridge are they affecting to yearend.
Is it a mid single digit hike that we are going to be expecting sort of coming through towards the year end.
Yeah. So so let's think about it at the 11th is the bit rate to thought we were at.
In fourth quarter, but the journey to 60 per steep it is around 50 50 pricing.
Part availability on the other anther onto operation.
And we believe that we are a new <unk> now on Cora Priceline on a fair price line that takes this time to predict dropped so so.
Theyre stomped out there with the after care you know the after care is post the pressure we are not foolishly, there's tamper coupons on the big projects are we.
We have said, though that the proportion of this amp up their coupons. This increasing but then we say well lots of approaches to accommodating on they are coming in then on new prices. So this is the time like it takes to filter out.
Then operation is not only in F. S years here, it's us Val higher revenues against the variable cost.
Last August the valuable rope, a fixed to variable costs and fixed costs and that will have a private as well and then improve talk of cobalt lithium floor. So this is the time it takes to picked up.
Yeah, no I totally get how long it takes.
My second question, it's actually there's probably going to be.
Alright Priceline no.
So I'm not really important.
My My my second one is referring to your last comment there on the on the on the margin from 11% to 16% Rolling 12 months.
Just want to sort of Oh, it's Linda here I can say 200 bips from increased operating leverage as your invoicing to backlog.
And unless you eat some of the investments into the front end in the second half that's under your control that we have 300 bps lift that's the price increases launched under your control that they say one and then the installs being off because of Covid et cetera, creating under absorption can we try and break that down in my right you know two and a bit of leverage in that 300 bps coming.
Sort of points connection less.
Covid impact and so forth.
Yeah, I mean, I think it's Oh, we can detail. It out then like we can't go into detail there, but I think it's like a it sounds like a fair assumption I mean, it will be driven by a number of factors, but like are the main pieces are south known to covert like prices.
One for sure coming back from the 10th Amex is definitely another big one that will have an impact. So I think that's that sounds like a fair assumption plus okay.
Third and very final one is on linger.
It obviously seems like a solid fit so well.
Well done and I just want to come back to your comment that it will be accretive dream, Audi and it will be accretive today, but it will not be accretive to your 16% margin ambition. They are at 14 and 15% today do you imply that zynga can always improve the margin going forward I know that they are doing is trying to your presentation said it wasn't of course case, but if there's some operating leverage.
That you can capture thanks.
So class, it's a great great question, but.
72, eight the best the EBITA level and Ranga is 14 to 15 per steep and that Sox surely our historic rate didn't eat it in in to 17 or 18 model is going to more quality of earnings to <unk> 23 of them to 17 18, more aftercare revenue summary country.
Weak first more profitability, because we have invested as well in all of our infrastructure.
Vanguard is up close to 50 per steep at us well. So we are dealing with the same right.
In the east, but they're not.
Don't look at model about eight to 11 now it is posting 50 best the EBITA, we know what.
Magneti says well posting 15 on top and doing a great result, and the recent cross there something year, yes.
Yes, we can drive the profitability with their global reach with a complementary portfolio.
It's very interesting for us that in a plant based industry, it's entering chapter two.
Sure. This four three cross this we see a boom in the market again and beginning of this year I'm just to recap the beyond meat for Istar marathon market towards the 19 initial price 25 closing price 67 first day than two one trillion.
Now our own 30 40. This is how all knew that children and industry automate overnight success at 11 years.
It's east very interesting time with it into the.
Not taut companion animal business is a small interest in Colorado.
Wenger is their own dispute that globally. So yes, we believe that become thrive with poor what similar ways.
Perfect. Thank you.
The next question is from trade Dublin.
Your line is now open. Please go ahead.
Hi, everyone and thanks for the presentation Fraser Hill from burn back too.
Two questions. So just on dengue kind of following on the last question, but can we know what it is.
A normalized margin of that business are they running at quite high levels because of the like trends through the pandemic. It sounded like that not taking any pressure on that margin at the moment and the way you in some kind of a pet. So can you kind of just comes back.
Kind of a fair assumption to make but that's the first question.
Yeah, I mean, I think that's a very fair question to two no fair assumption to make.
Wagner has been.
Exceptional in running their businesses have shown very steady and solid profitability. So this is not kind of a I think we're very comfortable with that number. So I think that's a very fair assumption yes.
Okay. Thank you.
And then the second question is kind of like a.
Playing Devil's advocate question, but if I look at the history of Murdo you know like there was a number of acquisitions you know 15 years ago and the idea was that you needed to restructure because there was a lot of duplication of costs too many sites in the same place. So it's not a risk with trying some things with it that kind of becomes the case again.
Indeed could you say that that could be cost synergies with vanguard because it sounds like you do have a big overlap in terms of footprint.
Proximity.
I'd just be interested in your thoughts.
Nah adult don't talk Comping in direct cost synergies in this acquisition, it's a great company, where but you get in direct cost synergies. When you utilize the global network of model. So we are intend to gas well to go for capital investments in Wagner to make lots you.
In line with what we have to Lincoln modern shopping the lead time, Barry We Iowa would hypothesis of discretionary stuff there is even more of the month.
Their revenue and their anger.
Solutions. So we will Packer this platform and we will move forward on speed elaborate sync the X factors on investing in in the flow and the vanguard because the month is high.
Yeah.
You can read it in the new stuff that people are as well if you talk about the plant based centerpoint off the plate. These proteins people will be flexitarian.
Either you have the upholstery face or mistakes or the plant based on the new up sell up on their side.
Less grain less sugar so so.
We need some capital expenditure the magnitude this may be $20 million.
And Pik income then we will drive the growth.
Not cost synergies.
Okay.
Plus as well.
Got it.
Yeah.
The next question is from Andrew Moulder Kepler. Your line is now open. Please go ahead.
Yeah. Good morning first question on the existing business.
The actual price increases do you aim to have also some cost savings for in order to improve the margin sort of going forward or this is just a function of folks home pulled the SG&A falling because of a higher a higher topline a development.
And actually that's where we have some questions from the winger, possibly you will answer most of them in the presentation, but I still will have a go for it one of those being the growth of that company can you mentioned Andy.
Segment split of their road shows or even on a geographical basis those would be my questions.
Yes.
On the cost question like that.
Like for example, like within a engender off like we will also focus on the cost base looking for opportunities there like on the assay itself like their maturity should be like covered that by higher volume because like we really took good stuff and I think to the front of the plan that we feel very comfortable with Oh.
Overall, just like coming out of the Pan Panic, we will be focusing on like making sure. We follow the new ways of working lastly, like don't travel to months, we keep to the and in turn are less travel less address or like that.
Overall cost focus our answer to surplus or a midterm targets, but the but more maturity on last name site will just come from a better cost to cover it.
I may be to give you insight and duplication of cost now we'd be it you know we have made a promise that we will have the platform. The spare parts distribution. It will be in a split those second in three to five years. So that we can get the answer on the delivered a timeshare on their spare parts, we are investing in global hub and ninth or regional.
Perhaps around the globe.
Continuously we are having a rack orthopteran pick up deliveries in this paper. This means thought we are walking into system. This is a shape that takes three to four to five years to reshape same with our backend sales in there its shown up in the business area Digitalisation rational Northern Trust, we can automate.
Here as.
Well look throughout the volatile there is two floatation of work by our suppliers want us bye bye parking it for spare part we serve as some monophosphate income third ship. So there are structural savings.
Quite significant but will be sustainable savings not a quick fix.
What like many many other companies announced cost savings take it down the people there are structural savings opportunities, but we will crystallize it.
By stacking them.
Yeah and on the <unk> question, then basically what we are what we are disclosing is is that the historical organic growth. Since 2000, and then 17 has been a 5% and I think that's kind of a very fair number we could.
Have changed at one year and showed you a a higher number but that I felt like that would gave a like a very fair representation. How you should think about the business kind of what it's been doing historically Ah, it's sometimes it's a little bit lumpy based on the based on the projects that they're selling but I think that's a very good.
<unk> got to keep in mind are on on the segment split.
The pet foods is a is the largest segment with around two thirds of the business and that really represents their strong market position in that segment as they were a a first mover and so on.
Aqua feed is around could have yeah.
It fluctuates a bit but I would say around 10% is a is a fair number and then at the area of plant based protein either through a texture vegetable proteins are high high moisture.
Analogs, then that's I would say around 10% to just give you some idea on the mix and on the geographic split than vendor is a kind of a relatively U S.
V on on the revenue side, obviously big market. There are the U S market and a very important market. So are the north American market, a surround kind of $45, 50% are off of the revenue with Europe kind of around 20% and then.
Other markets kind of the remainder.
So you can do see that it's kind of U S. Europe is kind of flipped compared to morale and then and then opportunities also in in in the more kind of emerging market soaking up the global reach that R&D has been talking about it kind of speaks quite well to that that are they do have a strong foothold in the U S but with.
The rights and the ability and the infrastructure to build up a better service network and be come a stronger maintenance partner, we see a clear opportunity there.
But again to look at model people recourse at four pillars now are the new pillars. The sacrifice profitability was 14, 15%, even though we were reporting 12, plus the pulse creates used to be a 10 person. So just to remind to four pillars. Now there are some new pillar with a sacrifice.
Profitability, we need to dream drive all of them for what a full line offering increased value for customers some shareholders.
Thank you.
Indeed, many interesting questions raised today and how long they will have to conclude here I sincerely. Thank you for your time intention and continues to put some morale and we hope to see some of you back here online at two P. M. T. N T. That's four P. M C E T for more color on this new and exciting a fourth pillar in our business model.
And the strategic rationale and growth opportunities until then on behalf of the team. Thank you and goodbye.
Yeah.
Okay.
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