Q4 2021 Marel hf Earnings Call
[music].
Ladies and gentlemen, and welcome to the marrow H F. Lepkowski for 2022 today I'm pleased to present CEO I think the adoption for the first part of this call all participants will be in a listen <unk>.
And afterwards, there will be a question and answer session speak up please begin.
[music].
Apologies for the ladies and gentlemen, and welcome to the marrow H F webcast before 2022 today I'm pleased to present CEO of.
So the first part of this call all participants will be in a listen only mode and afterwards, there will be a question and answer session B cap piece the game.
Yeah.
Yep.
Good morning.
In rest of saw onto all of our listening today to our cost of four on full year 2021 model, what I hope it will not be Osman, especially on the Q1 day part of it and kind of how we are looking cockpit view to how we see all three podcasts on 36 buckets, maybe you are not there.
Hidden valley was not with us yet in the beginning he will join us a little bit later, how ironic if hitachi wasn't logistic.
In the middle of the snow here in nicely, but she will join US here later in in in this webcast.
Let's go straight to the Masters may be the limelight the highlights of what we ought to see me you made the correct smoke in the mid class a pump they make to their sales service resources out in there each of oxo alcohols palette to focus on the consumer at the.
Market report them related to a specific business unit with focus on retail a full service solution and the faculty of processing.
We didn't get in the order intake we are seeing corporate pick up a run rate of one 6 billion on the backend of the year compared to where we were starting two years ago and $1 2 billion a year in order intake.
1 million of stock based acquisition crossed the 300 million, there's organic growth post tomorrow I'll need to get the caito shows the pipeline.
Very strong so we.
Truly believed you.
We will keep people on this high level and we are aiming cluster.
This is very important that we are taking market share in a market that is having pivoted yes.
Yes.
The top dose, yes will define the madness and lose shipped here in next three to four years.
If we look at our peers and we are in very very good contact with all of this we are seeing unprofitable. The postpartum hefei are nearly in order intake and talk to their seat.
The old stock are lacking the global rights on the infrastructure on the basket. So our customers are real.
Lying on a lifestyle sportswear 15, 30, yet believe that you will be that keep their pocketbooks Panther on we are very pleased to see indications how the pet of Palmas I'll I'll.
All of our customers is improving but all in all our current take 1.5 billion over the year on order intake won't put 6 billion run rate in fourth quarter.
What is driving this on the customer site via till we get the cost finished innovation very important constant innovation in good times in great times and not so good times. So we have constant new pioneering solution, but push the boundaries.
Yeah.
Then came the punt them got this cost until the light off.
The Biogen has been maximized sync the site last two months instead, a seamless flow.
We have seen three main factors buyout customer push for what.
I'm talking now investing and are planning to invest more it is the labor scarcity waits in place them on turnover rate of employees.
In recent two years, we have seen and Gil crawfish like U S. The base salaries in the factories, increasing protracted 5% we.
We have seen in some cases, the turnover rate of employees going protest at 240%.
Moreover, with the market channels are changing we are seeking U S U K.
E Commerce with food increasing in recent two years by Hunter Purser.
OCR enough by Portends, a peso avia seeing shine not exploding in e-commerce , and even pet comic lockstep, but in the U S market, comparing with five years ago, but they're back vast markets out there as.
Well the Pos kept farming this east changed he got speed.
Then the third pillar.
At least one is sustainability.
It is becoming more punk the mascot tuck in that this issue.
So resources less energy less water.
Eric can all mixt insight to us about the blocks. So you can have equal access to Genesis.
You can hot as well have more social distance safety of the people food safety at lesser resources.
We started towards the 17th two month cutoff wall, our innovation prototypical to sustainability Chop and then we have our digital solutions. So all overall, we are very well positioned to tackle the market. We are in pole position to talk about what is happening and this is very valuable.
South Korea.
I've been crystallizing Onvia foreseeing.
Let's then go to our Russia, allowing for steep at long way or not long equate to 16% EBIT.
We have to bear in mind, our muscle memory East 14, 15% EBIT.
Hi.
We are calling their back on track we are sacrificing.
<unk> Param Palmas for a transformational project this year I want to explain how our customers are completely changing the airflow. We us rather we are pouring stopped investing in the N. Two N spare parts in sourcing bed housing distribution channels are optical.
Yet I haven't correct Costar pedantic in spare parts into transport costs that aren't in service level agreements I'm, Tim software on the instant attack you plan, a and in the second they're proceeding we need more scalability, we need more speed.
This generation thought this walking toward our customers they want honest when know when their spare parts or the service will arrive they don't meet it necessarily tomorrow, but they need to know it.
With the snap of their being one.
Isn't it directs our industry is not there yet we are calling cliffs.
But let's Peel the onion.
For both of them Oh.
Our innovation like I say it continues on strategic level six person say March 'twenty three targets.
Our SG&A Hunter 5200 points from our previous level by pulse pulse to so go I had tougher growth curve. If you look at SG&A in comparison the authentic it's below 80% we are definitely concrete state present 33.
Then in in the gross profit level, we will discuss this year will be reached 38, 39, 40 or 41% next year Bracketry I'm talking about compared to the 36 37 level that we had in fourth quarter and the full year.
We are full.
Focusing car on those market. It is the mix that is improving there is more option pricing. We raised prices in October we raised prices in January onto.
To explain our business mortgage all our okta kept sort of a shorter runs through and that's true with the artist prices in six weeks' time.
Our short cycle <unk> runs through.
In like three to six months onto our approach at lunch.
Long ago through.
This is good and this is Bob.
We are not that quick.
Some off the shelf cycles in fourth quarter in the pit, but we didn't go down in the Bud light towards the type b navigate the battle throughout out the system.
Like I say transformational protests are on a high scale.
One indication is the operational cash flow you see here that the free cash flow after extensive investment talks about.
Our off but at the Kestrel is at a level of 55%.
<unk> to <unk> 11 per steep it.
However, if we exclude that in metrics safety built up our off but at the cost flow is up 17%.
So all in all we will discuss this first we have a clear clear path of recovery and let's jump straight into the inter cities.
The portrait inter three is clear.
Clearly back on track their memory is 18 to 21 person deep now we are improving the mix in the order intake the after kip businesses coming even more prominent and you're seeing that to be a touch sync their 15% level. We article wing stack by stack by stack up over 80%.
We might be a little bit under this level in first quarter, but then we see karate I'll pick up from second quarter.
If you move all with two of their meat sector that miata haven't got nine plus deep it over the course of the year, we are having quite many nonrecurring costs and forecasted we are.
Changing how we do the appropriate excuse not to what basically the customer, though so much. It's internal flows taking a hit on similar level. So I'll ask there possibly.
To say it honestly.
We are below all plants and out of breath aggressive doswell.
And last year.
We'll see it in our annual accounts as well the of bonuses to the access with the team that we are clearly delayed compared to the overall restaurants here I'm not blaming it all or meat, while the transformational ratios sought out a very clear aren't all of our our operational platform us pocket 22.
33 are clear so we are basically more delaying it I say, but meat is now changing the mix in the order intake we are seeing fabulous sales and Mark you referenced the IP.
They etcetera wherever we are mixing of the grants we are getting good their beans in oceana, China laptop.
Then we are strengthening their position in the U S.
It's just in line with targets and it's amazing to see that after our acquisition with Bhaskar yesterday announced full acquisition of Kyoto and let's look at Q2, a little bit we decided to acquire 50% there the punk that wanted to stay and not take it overnight. So we said, let's take porteous.
Before we fully integrate.
And then it's the cooperation and partnership is going so well in recent two yes. We have started to cross sell synchronized how can we go to the market amount to get more synergies. We go fully together Bhaskar mod modern judo with partnerships.
Uh huh.
This is exciting times, there will be some integration cost as well 32, but a clear path and the market. There's a lot of thought to be a now rethink Apple 200 million in revenues with high organic growth at least looking at the order intake in the fourth quarter.
It was a little bit I had talked to you I would be shocked them precisely pick any glitter I'm, a little bit longer because I got so excited that over to you Linda.
Okay.
Yes.
Cause here today.
Give you the highlights so far both Q4 and our full year FY 2021 and starting on the order intake. We are seeing very positive trends there like both in the quarter and for the full year the cost or the level of 400 million. If I look at four quarters, we have been delivering order intake.
Every all four 360 to 400 million, let's turn slide 12 full year to a level of five 1500 million with this 22% growth to 10 years with this of course that excellent trends in and that's happening on the backer backer.
Further investments in the cover it with is also paying off and of course, there is clear need in the market for further automation and for our solution. So a lot of activity here and lots of excitement and I think the team is doing great.
Great things on the order intake from so at something to celebrate and if we then look at are based off of mix. Like we are also seeing positive chance there like more sales of some of the equipment. We are seeing spare parts that are record quarters now two quarters in a row and aftermarket is around the level of 40%.
If you look at that at the present itself revenues.
Looking at the order book at healthy levels of 569 million with this around 42% of trailing 12 months revenues, which of course gives us a very strong foundation and and that underpins our positive outlook, we do see stuffed up and revenues now and of course, there are we at a level.
367 million.
And that translates well year to 10% revenue growth. If you then I think a bit about the order intake growth of 22% and the revenue growth of 10% and that on the pin side quite clearly that we are firmly targeting higher revenues in 2022 compared to 2021.
And we continue to see supply chain talent says that's impacting the prices set to us. Unlike other delivery time, so definitely impacting our gross profit levels. We are taking mitigating actions like we are increasing.
Prices off our own equipment. So that's already happening and of course, something we need to stay very much on top of because I would say like in general cost inflation and labor inflation is that the escalated levels.
And at the same time, we feel quite confident on the S. DNA like there we have stopped that.
We also feel we are reaping benefits from it already we really think that was the right decision to do that with more volume with the strong pipeline and the strong order book, we see a we feel confident that we will see better cost of coverage with increased volume, helping us getting to the park itself, 18% and 2023.
And profitability for the year at the level of 11, 3% clearly below our targets are and of course has our highest attention. In addition to what's happening in the gross profit area.
And cash flow strong.
Very strong cash flow like that especially if you take into account that we have been building up inventory levels throughout the year using our foundation of strong balance sheet and it's at the level of <unk> one.
But to run a bit through the slides are good quality of earnings. So I hear you here, we highlight that the entity is really the geography is placed in and also the business mix and looking at the industries. You can see here that the poultry is at a level of 47% compared to 51% that last year, we did stuff the.
Here a bit slowly on the pool side like in larger projects are with us and really picked up in the last three.
Three cost there so the industry mix has been improving a black with higher percent, that's coming from poultry throughout the year and you see that now we are getting closer to that historical levels, which of course is important to mention because it links directly with our profitability and looking at.
The geographies places like that you can see here that the San Jose now moving from 10% to 213%.
Here, we had been securing important though especially on the meat side and also like looking at America, Sam moving from 33% that to a 36%. So the this is balancing a bet.
Looking at the business makes up 40% coming from aftermarket.
So overall, yeah, good good balance and good movement on on this front.
Looking at the operational.
Four months, it's clear on the gross profit side that we are at the level of 36.6%. It is impacted by the supply chain imbalances and that is having a directly effect here and we are also working on a number of improvement projects like to improve to increase speed and scale.
So that's impacting the gross profit as well.
But that's as I mentioned in the beginning like we are taking mitigation actions to partly offset that increase their cost.
On the Opex there we are like a very comfort that we feel SG&A, even though it's higher than our midterm targets at the moment like we feel we've taken the right stops there.
With more volume, we will have better coverage on the G&A side, we are focusing on like also our efficiency by Sears and and and that taking taking important steps. There for example, like with US here at service.
R&D at strategic levels are there. It's all about just continuing what we're doing like coming out with our innovative solutions are solving the issue is do we see in the market with our customers so and so pretty straightforward picture on on the Opex lines and so in my mind that's all.
The gross profit and that then directly influencing the bottom line profitability.
And how is the order book 569 million close to 42% of trailing 12 months revenues you can see we started the year at the level of four four and then 16 and of course as we've highlighted before the order book consists of a financially secured the protests, but like grab it.
He is a very healthy level at the moment with enables us to adapt our balance and an unplanned on schedule.
And earnings per share.
Here like we have the first target of growing earnings per share faster than revenues you can see looking at the full year 'twenty like we are at a.
11 of 21, I say at the level of $12 85, compared to <unk> 62, but like nothing has changed in our our target like this is that this has our focus.
I'm looking at the dividend to mention it here like with it they'll pay 40% dividend for the year 2021 .
And that was around the 41 million we the proposals towards the ATM is a 440% dividend for for this for 2021 as well. So that's a that that will be then address them and the ATM.
Yeah.
And looking at the income statement that I'll I'll go relatively quickly for this because we are showing both the poster and the full year and you can see here our revenues are growing by 7% in Q4 and it was very important to like the gas to staff up to a level of 367, because we've been seeing.
High levels of order intake now for the full year and you can see here like that.
As an M cost as a yeah quite somewhat higher than it was before in line with what was that like we are stepping up their hand, and that's has been a very good decision and this is something that and returning us to 11, 2% deep it in the quarter compared to a fairly strong quarter off by Q4 'twenty at the level of 5000.
Pinpoint that 2% and you can see here like what this moving the needle as that's in them and that of course like the gross profit trends with I mentioned on the supply chain side, but not yourself, a 28.5 compared to 29.1 and in Q4 2020.
And looking at the full year here, you can see our revenues growing by around 10% and quite a lot driven by what we saw in Q4.
Around four 4% is coming from organic growth and 5.5 from our acquired growth and it's the same flavors here you can see that that's in them is increasing between years and that there is a pressure on the on the gross profit.
And NAFTA yourself for the year at the level of $96, two compared to 102.6 and 'twenty 'twenty.
EBIT at 11, 3% compared to 13.5.
And then combining list of best like looking at the midterm targets like here you see the cross profit at the level of $36 six its clear that that we need to move their San Juan here, we are focusing on a number of a number of fronts. It's a it's about volume it's about mix, it's about like value based pricing. It's also about that.
Our our customer journeys simplifying that also streamlining our better or the back end of it and so that's where our.
Focuses on this front at the moment and then we have a CNA at the level of 19.4% above our mid term targets, but we see a clear clear path there with more volume and dollar improvement protest that to get to the 18% level.
And they've done combined of course with the aim to returned 16% deep it in 'twenty 'twenty three so like working on a number of fronts to get there, but like you see a high order intake good pipeline, which it really translate.
Translate them into higher volume and with the right focus on the gross profit we believe that the past this is clear.
Okay.
And then on the asset side.
The balance sheet that not many things to mention here, but since the beginning of the pandemic. We have staffed up in inventories and you can see that that reflect the tier it's quite a sizable amount.
Around the 74 million euros, including our inventory so that the comment with the acquired companies.
I think it was very important to use the balance sheet for this and and I think we it really has made operational matters that more manageable.
And it's it's a complicated enough so like really having the inventories and the parts availability as the maximum level. We can monitor her spend not unimportant desktop you can also see here like property plant and equipment, that's going up increased by around 30 million like we are investing in the business.
We have set our we are like opening up centers. We also like working on the Antoine spare bus journey, taking steps there to prepare for them.
<unk> improved the Bakken and in that area and in addition to like that yeah, improving our facilities.
Across the business so.
Good Stuff's made here and as we've said before like we will stay on a higher capex levels for the coming four years.
And between 4% to 5% of revenues.
And then returned back to a more normal ASP levels left after that.
Then on the liability side here you can see the committed facilities, we have a 600 and close to 670 million that we have in committed liquidity. It just underpins like our.
Our our financial strength to take on and next steps when the opportunities arise.
It's at a level of one <unk> compared to our target of between two to three.
And then.
On the working capital side like overall are the main I mean, the main items to mention there is the inventory that would have been building up but you can see here as well that contract liabilities are increasing by around 70 million because of down payments. We are getting on that new orders are thinking about the the <unk>.
Johnson and the order book.
Yeah.
Robust cash flow, we are delivering very strong cash flow as I mentioned like a 212 million from operating activities. Despite the step up in inventories that we have explained.
And you can see here that the free cash flow is at the level of hunton and $16 million and we are paying taxes of around 30 million investing activities of 67 with a maturity now is it's like on the PP&E, but do you see like around 65% coming from from that.
And then that interest paid there around 7 million, we are investing in our associates and subsidiaries like that's the acquisitions that have been happening throughout the year that we mentioned the P. M D.
<unk> like final payments must drive etcetera. So so that's explained here in the 54 million and then we paid dividends of 41 million. So are these are these are the highlights off off the cash flow.
And then on the Kpis I mean this is like what are you focusing on.
All the time, it's about the earnings per share like a if you look at the revenue growth and in the period 2017 until now it's around 7% we are targeting 12%. So it's clear that we need to staff up in the coming period. We are also seeing different trends in the market. So we are expecting market growth to be.
At the higher levels.
And in the next in the coming years. So are they in the area of 6% to 8% then model of course is coming out with innovative solutions. So we see it really being in the top end of that and so that's what the that's that is what will move the needle here are in addition to of course, our continued focus on disciplined capital allocation.
And on the free cash flow just to highlight again I mean 116 in a year that we have a pinched up inventory levels are is is very good and very strong cash flow and.
Operating cash flow as a percentage of revenues is around 15, 5%.
And if you think about that in relation to the EBITDA you can see it is very strong and not that the EBITDA.
A level of one so that's clearly underpins our financial capacity to take further steps.
On our acquisition journey of course, it's always about finding the right opportunities or create them.
And then just a final one.
Yeah, we had the capital markets day, many serious and that we did have five events I. If you haven't watched it I encourage you to watch it that I think it can get very good insights into our holistic.
Equity story, focusing on growth of the global rights to the talent sustainability and we have like just I'm very sure with you submit a better like the highlights there, but really encourage you to watch it and then I'll give the word back to often they won the with you as it were so thank you.
Thanks Linda.
Sure.
I'm here at park going through it, but we had a long discussion on shoot with talk about strong caught up the book or should we talk about past the order book.
Our conclusion was healthy order book B are finally after quite a lot of headwinds in the market first the trade constraints then the pandemic.
Eight are both Cedar 0.4 times annual revenues in the order book, we feel more we said previously we want them to be M. Cedar point for Cedar 0.6.
It's slightly lower now because the mix is changing to path.
Not not so heavy in the big lots Proteus, it's more balanced towards stump attack you have meant that this coming into the revenue game, we see the mix such volatility more a moral were record order intake in the after care market. Because we are the main payments partner of choice. So.
So we feel very good that this level in the order book, even though I was a little bit hard to all people off of the operating profits. Then of course, we were sacrificing short term profit for transformational project for us as well last year and in recent two years that that is pretty clear.
And to explain a little bit better we are not delivering goods through U P S or fed ex that the customer can't just take in many cases, we have to sign them up this.
Through the all digital tools, we did that instead of being able to visit their customary and kits themselves. There are Furthermore, we have to have protein execution on we need to install so we have been rock finger on learning and development in China in Asia in Latam and this will.
Distinguish us from the rest of the industry to make it absolutely.
Then the Atlanta Tradeshow activities are picking great to see again, all the France, Unfortunately, I could not be there.
At this time, but.
To highlight this of course.
For instance, we were opening the appellant damage and Scott Tom family, It's so great to see our partnership.
Bearing those roots you have been on the forefront and sustainability safety, even the first one with organic chicken in the U S and you're at the young pilot.
Pioneer even though you are the oldest prompted chicken in the U S market.
Due to your reuse of water and energy you get the first green financing.
You know us well ask me that we need to collect and elected data. So we can report it to the financial World and this is actually happening our customers are on net zero journey as we are and note. The banner model here all the K base in the loan agreement, our Green loan Festival automation.
Our agility is just an ability driving the factor.
Tenuous infor.
Innovation throughout I speak a little bit better because I believe we will get a lot of laughter question. We are wrapping up the front turn in sales and services, especially outside Europe U S. We have implemented a regional structure, having a fully local team it's not a globalization it's rob.
The localization around the globe.
When you're doing that you have to play a little bit in two system in the Bakken now, we will see and judge the baton Ultimate the Bakken just like our customers are doing this is what this amaze.
Amazing to see that in two years' time pizza.
Things are happening that we thought.
It would happen in next 10 years. However, many things were late the 20th tested and you thought would happen to us.
The year tourist I put my Microsoft teams or something else would be towards the 10, but this is how things works now we are accelerating and it will distinguish betting right to win right to play what completely lose the game.
And just the ability matters I challenge you to go to our capital markets day, where we called poorly through with it is not only a master on itself.
I bet it in everything we do we embedded in our strategy our operating model thinking the local teams how we distribute the spare parts, how we're close to the source in Slovakia, China, Brazil, and so on and then we set targets and may be the most interest.
The path is the what countries the unions top management and capital are I agree income what matters and then we need to get the whole organization to run in the same direction.
Yeah.
Great example of how acquisition.
Driving organic growth in PMT and <unk>.
On us here in model in and the market, even though it sounds small the acquisition. We have provide think first year after coming together the first full line in a dark market.
Just to remember the metric tons in the market are twice as the athletic Solomont, especially in China, and we have ample opportunities in next 10 years to private there.
Thrive and meet cross selling Upselling face again, we are creating here a champion that can be with our customers and take the full land concept and the fifth sector Solomont Whitefish pumped white fish and then we can explore new avenues like the strip business in India.
In Vietnam onshore. This is how we see this is how we grow and are utilizing our global reach throughout.
Now we are ready organizational wise financier levis long term financed with less than one times.
Average in EBITDA.
To take on large Sis acquisitions.
We firmly state our 'twenty three targets on 36 targets.
Instead, the explaining 'twenty three targets in detail, let's go to Q&A, because I'm without toughed expecting some questions in that arena.
Right and thank God, nobody Townsend and not only happening on a macro level all of a sudden a micro level here with minus 10 degree with nice in today and with US and just as a reminder, he would like to ask a question. Please do so via the conference call or you can also email.
<unk> Dot com and we found so I'd like to hand over to the conference call moderator.
Thank you just as a reminder, two basis. That's the real question is he likes went up either one on your telephone keypad unnamed.
And mainly for the first question.
Thank you. Our first question comes from Akash Gupta from Jpmorgan. Please go ahead. Your line is open.
Yes, hi, good morning, everybody I have two questions. Please and I'll ask when did the first one I have is for Linda let's say if I look at 'twenty 'twenty. One gross margins, we are at 35, 9% which is.
Putting in 10 basis points below yard.
For 2023, having said that you have some one offs in 12 of the supply chain impact that May go away in next year. So the question I have for you is that can you give us a flavor in terms of the impact that you have which could be like temporary transitory when it comes to.
Supply chain nutrition inefficiencies, maybe something to Colgate that is embedded in 35, 9% to get some sense of what sort of underlying margin improvement you will need to get to 40% target.
Yeah.
So like I'm looking at the at the gross profit like for the full year, it's around 36.6%. So like clearly below the 40% target that as you mentioned.
And supply chain talent says that like has been ongoing and what we have sat there is that we would quantify it somewhere around 200 basis points to as a contribution to like where we are now with the gross profit.
And the timing of like when this will be relieved Tessa is S. It's tricky to say, but like a lot to comment on as well on the Q1 and Q2 and in 2022 like we are expecting and cost prices and the pressure to like that to continue.
For the first half of 2022, so like we are more looking towards the second half of the year to like stuff does.
King.
Improvement.
This level.
And then in addition to like a supply can tell us. There. So we are of course are working on a number of improvement projects, a 30 ton stuff.
Kicking in and improving our gross profit so in terms of our plans like we are more focusing on the second half of 2022, and then very clearly focusing on reaching the 40% target in 'twenty three.
And am I allowed us well to Ottawa, even though the question was the challenge in outside water start coursing, it's much more interesting instead of having the excuses of thought what are we doing.
And in an unlikely intercept we had to incur a lot of transformation projects, but what are we really doing good my spare parts that this issue of running high we are separating the spare parts handling and the mono factoring about this planning can skirt delink in manufacturing much faster tick tock and the spare parts and you have to answer.
On the spot one will thrive and to even go into proactive maintenance. So all of the business cost and their IP costs related to adopt except from the investments we take it through the books, that's why I say that the operator cash flow or Peapod inventory buildup is 70%.
Against the 11% we need to do this just like our customers.
Streamlining.
And then in the past 10th of the sales offices, we didn't dare to consolidate it and them. When we were built they got two system ultimately reach on onto business unit now we go for synchronization of it.
And pricing and then more dynamic pricing.
Thank you and my second question is also on 'twenty two 'twenty three targets. So you have a target for gross margin and operating margin but.
What we don't have is the revenues and the question I have is that can you give us some flavor on what kind of top line growth you will need in the next couple of years to get to these levels given it's free.
If we don't get there then there may be some shortfall on on margins and then maybe adding up on that.
Would there be any downside risk to these 2023 delegates from M&A, maybe I don't know if the companies you are looking to acquire also come with 40% gross margin or.
Maybe if you can comment on that.
So a good question so make it absolutely clear. This is exclude think acquisition all of our target of 60% we are not going to fix it with our acquisition and of course, if you would take ex acquisition in 'twenty three that could call Laurie.
So so our assumption you'll see a rupture we made the correct smooth Mpeg encoder year two rock scalar ahead of the growth we are expecting same activities level or higher active at this level, we said very explicitly and beginning of last year, but we believe that the.
Longton Crofton and market this 4% to 6%. We believe next five years from start of year 'twenty, one would be 6% to 8% growth in a market I said previously in this show or discussion as well we are seeing some empty aren't all they're doing very well like model and we are seeing order intake.
Growing much faster than beginning of that and then we will on top of that if you talk about 26 target take now lots of scale acquisition, but they keep at target is clear we will not fix it with acquisition.
We will though continue on our path to an acquisition, it's not for the shake of the graft is to get back their delivery to our customers become a one stop shop, we simply believe 2026 30 or beyond we need to have that scale and scope to service.
Our largest customer on a global scale as a one stop shop.
And perhaps you already mentioned it but I mean, and then we have of course, the 3 billion target out there for 2026 unlike at the.
The midterm targets as you would be then a good step in that direction like I would also think about it like that.
Thank you.
Thank you. Our next question comes from Eric Wilmer from ABN, Although Keith your line is anything.
Good morning, everyone and thanks for taking my questions.
I'll also ask them one by one but a few.
It seems like both your receivables and inventory position sell through at our cash outflows during Q4.
So I guess looking into Q1 and Q2 this year.
Where supply chain constraints are expected to remain would you expect cash outflows before things normalize in H. Two this is my first question.
Yeah I mean, we're really are following this very carefully I mean, I do think like what we've done now on the inventory side that creates like a good.
Good balance for us to work from and I would say like if we need more we will do more but I would expect it to start balancing up without looking.
Looking at that at the trends, but that but I think we really feel like we are using our balance sheet while taking.
Taking those decisions on the inventory front, so like if if we need to continue doing that that that is what we will take action.
But maybe talk towards pinard, Pierre logistic problem in the middle of the way.
Here in Iceland, we believe this pinkish comic.
May be it will only be in the cycle top or 2023 compared to two the way they're in and the logistic problems.
We decided to take more safety and I'm seeing many companies thought a publishing now taking down their inventories in first quarter.
I would not want to be really a customer of companies thought they're squeezing clean master is down sharply.
Sharper change challenges will be quite quite a lot in first and second quarter. This year and I will be very carefully us uninvested Roswell in those companies that are squeezing thing with the result impact end of last year just to be honest about it read their side there to stay on the safe side.
Understood very clear thing thanks for very much for that.
I also had a question on your after market sales, which equaled 40% again in 2021 in line with 2020.
You mentioned that spare parts. So another record level. After a very strong Q3 also for spare parts.
Does this mean that your service revenues.
We're actually somewhat lowered this year do you still arrive at its 40% total.
Yes, that's correct lower in recent two years.
Their service run on the <unk> mobility challenges now we are seeing the mobility comic in our service people wish it to their customers and the good thing about visiting the customer you. She is well off the tune this where we can advance the plants together, we don't see more than our customers put together become <unk>.
See the opportunities because we know our portfolio. However, the nice thing cost well in and shackled top of last year, we see service level agreements picking up again because of course, it's like a priority passing at this level or something like that when you have a service level agreement. It is we are seeing that.
Then you are I think we are we are proactively analyzing it de levering securing it in advance.
So on shop, so it's a <unk>.
Nice to see that again, but it's correct.
But talking about the gross profit I know it was a graft question, but we are.
Completely changed the system did settle I think ultimately the system and spare part Huntley.
Part of the gross profit is we Didnt did not only need in some places to walk on top will shift we needed to work on triple shifts to be able to hand to deliver to their spare parts you can imagine the cost and the crush there.
Compared to our tomato compared to have they are economic shots.
Can't have all Gen. This walking there aren't in a nice untried seamless flow so just like.
Like at this required today.
On the satcom to you'll have two answers.
Inside the company on towards the customers.
On our suite things and then two very short questions one on the rising cases.
Bird flu.
Across the European continent.
Is this in any way impacting your customers' decision.
Two to invest in the equipment.
Yeah. So so we will have African swine flu, we will harbored, Florida. This XR actually why we are impulse can meet the fish that's actually why we have the geographical spread and that's actually why we are in all of the approaches steps, but actually as well why we will expand further on.
Playing field into off Thailand, this vegetable someday, etc. In cost of the time and thoughts how we play the risk metrics are however, overall Nokia coffee by gear crawfish the indication is.
Intercept by industry on thin, especially allowed industry is robotics automation seamless flow will be higher than we have ever seen at least what our customers are demanding all the industries are planning no wonder and the labor scarcity and turnover we are seeing.
Okay, and then lastly, you.
You mentioned that.
Nonrecurring integration costs.
Where do you fish decision.
That they're going to likely going to impact the H one.
Profitability for this division is really related to a curio.
I was wondering and to what extent or what would be the order of magnitude 40 schools. Thank you.
It is cuda and Bhaskar.
Basically the vodka portfolio on modern portfolio.
It is more similar although the nice thing to give you insight it looks like the same but.
In some steps in the processing the customer decides to go in a flow or a different way of handling. It. So we have we standardized the portfolio on behalf of E. M. B options of this remake lunch together. So we go through it systematically we have taken quite significant or steps in.
And in the integration, we are seeing the orders coming back in ruska.
<unk> totally after we sang sign that they are having very good solutions and we are indicating some integration cost, but not a bad order intake was a high year of unusually so that's positive and then counterbalancing 'twenty two will be integration costs and then we are looking.
'twenty three and beyond where we are we can push the operational restaurants in fish Apple, 10% when I'm, okay with a 6% five 6% level last year in fish.
But just maybe as a follow up.
I mean.
The order book was indeed strong and.
But the EBIT basis, it's your smallest division should we look at a near zero percent EBIT margins in H, one or fish.
We you know that we don't give guidance.
For the year of sorts so.
Right.
Just one comment on it very high level I would say like that would not be the magnitude. So I that would not be my expectation for FIS.
But we wanted to highlight that there we can see some costs connected to our integration.
And but they're not of this magnitude dimension.
Thirdly, there, having said that having said that if we need to.
We believe that we can integrate faster untoward faster be basically don't care of Costa for costa compared to underlying the customer delivery and where will where are we rethink their run rate right. So so pleased with me anything that happened in the fish here and it's not an easy one.
To take on those acquisitions, even though they sound in Grand scheme of model small they are.
Quite interesting.
For fish and cure model is giving a promise where we can head in this direction, we have some wins in Latam and in tilapia last year quite many.
New avenues, we will have and then later on industry business in the ACR onshore and reshaped again again, one year ago. When you. When you asked that all this rightfully about the Opex coverage, we said, we're not going to slow down the Opex, we will call a call.
Over it with volume.
Now we are taking from hunter of $50 million to $200 million and revenue Shrimpfish next step will be 250, and then we get more and more car.
Coverage of our innovation cost and we need to innovate because we have some building blocks that means a lot for our customers. So.
The outlook is pretty good.
I'm getting some signals or at least it's just an answer because we have some questions panting, so let's let's let's continue.
Thank you just as a reminder to register for a question Keith.
Followed by the one and you can keep that kind of limit your questions to a maximum of two.
Thank you and next question comes from Andre Mulder from Kepler. Please go ahead. Your line is open.
Yeah good morning.
Indeed, two questions first question.
Linda you mentioned that 200 bps food pressure from.
Supply chain and logistics.
Impact.
Is there any way that you can split that between the price increases you're facing on the on the on the materials and on the other hand, the extra course that was related to later later equity or more and more difficult to delivery there that will be my first question second.
Second question.
Can you give us a feel of how the order intake has been developing and reach in China, especially for example in the U S and especially to meet the meat part and if you can give some insight to that would be appreciated.
Yeah.
On the supply chain part that I think I can't really help you there like that I think are giving the magnitude of 200 point this like a giving quite some insights already like it is a mix of factors that are impacting our gross profit. So I think I need to leave it at that in and dialed in or do you want to comment on the order intake yeah. So we are seeing.
Like usually the U S is quite quick to to respond on the especially the posture is quite to respond.
So so to recap overall the industry.
Fourth quarter first quarter fourth quarter, the year before in poultry quite soft in Wooster strong now onto pipeline. We started with plus then meet the first quarter last year quite a lot of softness in third quarter and then good order intake again in fourth quarter sure. So Gail traffic early in China strong can pick any.
Last year, we can at recent to cross. This this is how it has been in recent Thirtyish fluctuating and U S is the first step, but we are seeing Europe possible surprisingly strong at the moment in Latam and then China, China planning quite a lot.
North further details though.
Thank you.
Thank you there appear to be no further questions I'll return the conference back in speaking.
Okay.
Excellent. Thank you and we also received a few questions by email and the first one is fine and can Casper as bayberry capital and given inflation and supply chain pressures should we expect the margin profile to get worst in Q1, 'twenty, two and Q2 'twenty two versus the Q4 'twenty one.
And before it gets better.
Yeah.
Yeah, perhaps I stopped them.
I mean I thought is a highlight that the backlog there is definitely a lot of cost inflation and like labor inflation and an escalated level sign in the global market. So.
This is something that has a high attention of course, we are doing everything we can to try to limit that.
Another potential downside, but I would say like that in Q1, and Q1 and Q2 like we are expecting to see continued pressure.
On the supply chain side there. So that's why we highlight more like our target towards the second half of 2022, one and 2023.
Could the Tappan, yes are we trying to do everything we can do to limit it absolutely. So that has our highest focus there and the pension at the moment.
And maybe talk towards the big picture of where we are adding a second pop up next year and following we have seen 25% labor is by our customers and turnover rates escalating need for seamless flow, 25% increase plus turnover.
At the same time, we see our peers on model might be increasing prices by 12%. We are economies, taking our pioneering solutions that we have in our hands and the need on the call from the consumers how to change that we have pricing power to artistic we're not short cycle company.
Gosh pass through in and in the spare part Scotia little bit slow slower than spare part, but fast relatively fast compared to other companies in our Stanford acumen and then our protests take nine to 18 months. So this is how it filters through but do we have pricing power to compensate that yes, we have.
Yeah.
Thank you and his second question reads, what percentage of the elevators inflation impact is addressed by the 46% price increase and explain your value added pricing strategy and perhaps an idea of timing and magnitude of this pricing strategy.
Value based pricing is especially when you announce a new equipment solutions to the market. Then you go not only what the what value creating for the customers if you're a pioneer.
However, you look beyond well how likely it is that all level in a way to show you you don't mitigate in the beginning but you don't huge cost plus you go where the value is so you can penetrate the market.
Even more interesting in spare parts you go through with category by category by category. How will you do with in some categories in where our peers were third parties can come in where you are not unique you have to lower it and then all the country.
Need to go higher you need to lower it to because our customers will want the one stop shop, but you have to be fair in the pricing overall, you then increase it.
Lower it to get more market share and you increase it but overall it was from average 4% to 6% increase in October and again around two 3% in beginning of the year, then you'll have to be disciplined in the big project as well.
In the pricing structure, and et cetera, and when you have a healthy order book it matters of law. It gives you more discipline in in that discount Sunday, etc.
In there and this is ever evolving the arvada nurses of course much higher now we cannot give exactly how much. It cover we have been coloring it very much but it could be a downward pressure in Boston first and second quarter, the volume onto VIX mix will be the fourth project.
Yeah.
Thank you and I understand we also have a question and Phil Creek, Our bank earned via the conference call.
Please register for F N b.
<unk> bypassing zero pull up either one.
And I will open up your line.
We did not have any audio questions. Thank you.
Okay, very good and well I think we've reached the end of our session. Today. Thank you all very much for your time and attention and I Hope. This session was informative and insightful and indeed as I've noted mentioned spring is just around the corner and we hope to see some of you and a great shareholders at the AGM on the 16th of March. Thank you very much.
Okay.
[music].