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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hi, everybody. Nice to have you on this call today as we released our Q4 Results and our Full Year Results, respectively. With me today, as usual, here in Düsseldorf, our CEO, Dietmar Siemssen; as well as our CFO, Dr. Bernd Metzner. We will start the call with a short video. And afterwards, we will, as usual, present a set of slides accompanying the management notes followed by the Q&A session. Please note, this call is being webcast live and will be filed on our website, too.
Before we start, I have to remind you that the presentations and discussions are subject to the disclaimer. We will not read the disclaimer, but propose taken it as read into the records for the purpose of this call.
And now it's my pleasure to start the video and then turn the call over to Dietmar.
[Audio/Video Presentation]
Yes. Welcome, everybody, also from my side. Thank you for joining us today. I hope you enjoyed the short video and it worked out for you. Bernd Metzner, our CFO, and I will now run you through the highlights of our fourth quarter and of course, the full year results for 2022. We'll then be happy to take your questions. Yes, to become a sustainable and profitable growth company. That was actually the goal when we launched our formula G strategy process in 2019.
In 2022, we have reached this milestone earlier than expected. Our 2022 results proved that Gerresheimer is today a sustainable, profitable growth company. At our targets in 2022, while hearing Gerresheimer successfully through a dynamic environment, the strategic investments we have made over recent years are paying off resulting in significantly higher growth rates and returns. Today, we will run you through the details of the solid performance we delivered in the fiscal year 2022, and a strong fourth quarter as well.
For 2022, we set three core priorities: accelerate, execute and innovate. And that is exactly what we did, executing our strategy and accelerating growth, resulting in double-digit growth in both revenues and adjusted EBITDA, leading to another record year for our Gerresheimer. Our growth was again driven by high-value solutions, various growth initiatives and our strong pricing power. Our order books are actually at record levels, and this strong order intake translates into sustainable profitable growth, but especially also a continuous product mix expansion of our portfolio.
We enhanced our integrated solutions and service offerings and increased our research and development activities further. Examples of innovative products, solutions and processes contributing to health and well-being are our own auto injectors, our ready-to-fill vials, our next generation micropump technology or the recently announced joint venture with Corning for innovative vial technology that combines our extensive glass converting expertise with Corning's Velocity vial technology.
So now let's dive into our sustainable value creation and our major achievements in 2022 in more detail. Generating sustainable value, we are already delivering double-digit revenue and adjusted EBITDA growth in 2022, clearly ahead of our guidance. This success was driven mainly by the following actions and achievements. We are continuously expanding our portfolio with high-value solutions while executing our Formula G strategy. We clearly put our customers at the center. We are the proof of solution and system provider of choice for pharma, biotech, health care and beauty companies globally. Our global footprint is a real asset as it puts us close to our customers.
We are further focusing on unique growth opportunities, investing in attractive markets. An example of this is how the strong order intakes in biologics is significantly accelerating our growth path. We are harvesting the benefits of the strategic investments made in recent years resulting in significantly higher growth rates and returns. And finally, our ambitious sustainability strategy that we are consistently executing is paying off resulting in new customers and new orders.
The next chart, in principle speaks for itself. As mentioned, we are now a profitable growth company. By continuing to execute our Formula G strategy process, we expect to unlock additional business opportunities and further accelerate our growth. As a global diversified company with a footprint of 36 plants in 15 countries, we are close to our customers and well positioned for the dynamic market environment. We face short-term challenges but do not allow them to distract us from our goals and our growth course. Gerresheimer will continue to deliver.
Let's take a closer look at our results for the full year 2022 that are based on the consistent execution of our strategy and the delivery on our financial targets. In 2022, revenues rose organically by 16.2%. Adjusted EBITDA grew organically by 2.2% and the adjusted earnings per share by 6.9%. This is a very good result, in particular for the adjusted EBITDA coming in clearly ahead of guidance, enabled by strong pricing power, and our product mix shift towards more and more high-value products. Strong order intake drives our capacity expansion and delivers the foundation for our continuous growth. The over proportion of growth in high-value solutions is driven, for example, also by new orders in biologics in key areas such as obesity care, the so-called GLP-1s.
Gerresheimer is setting new standards for organic growth, taking sustainable, profitable growth to the next level. Rational risk comes up, how did we achieve this? Perception of our customers has already changed significantly over the recent years. The strategic partner of choice for the global pharma and biotech solution industry, this is what Gerresheimer is today. We are combining services, technologies and products into tailored drug delivery solutions to improve patients' lives.
Our portfolio can be divided into three core segments. Containment solutions, this means we bring the drug to the patient. The drug delivery systems, this means we bring the drug into the patient and the third segment, which is the digital treatment support. This is what ensures a safe and optimized course of therapy, ideally in home care treatment. With our broad range of containment solutions, such as solutions for liquid or solid drugs in the glass business as well as the broad range of plastic solutions for liquids, solids, ophthalmic drugs and so on, we are bringing the drug safely, reliable and conveniently to the patient. With our drug delivery devices and solutions such as syringes, auto injectors, pens, pumps, inhalers or even droppers, we are bringing the drug safely, reliable and conveniently into the patient.
And finally, we are enhancing the digital therapy support for example, through connected and smart devices that are already entering everyday's life. Medical device connectivity can help providing health care professionals with complete accurate and current patient assessments on demand. They are bringing the potential to deliver better patient care, improving operational efficiency and medical treatment itself while at the same time, driving down health care costs in general.
So when we talk about expanding high-value solutions at Gerresheimer, we are talking about solutions that are generating higher value for our customers and for the patients, but they are also important for our product mix, improving the margins for Gerresheimer, not only through generating higher sales but through shifting our product mix into the better. To remove from growth driven only by volumes to growth driven by volumes and higher value, therefore, expanding the margin.
So now let's take a closer look at our markets. We serve attractive niche markets with our broad portfolio of products, and we are consequently into profitable growth segments, high-value solutions, biologics and injectables. Our expertise and strong track record are enabling us to accelerate sustainable profitable growth by consistently increasing the revenue share of biologics and injectables in particular. The share of revenue for biologics and injectables will reach 40% this year actually, and exceed 50% within the next five years.
On the next slide, we look at why biological solutions offer such attractive growth opportunities for Gerresheimer. The pharma industry itself is witnessing a strong increasing amount of solutions based on large molecules. While the market for small molecules will remain strong, we see significant growth potential for Gerresheimer in the Biologics segment.
We are bundling our comprehensive long-term expertise in core technologies. Gx Biological solutions are serving the biotech customers' needs, offering the best possible containment systems and injection devices made of glass and engineered polymers. Gx Biological Solutions, which is standardized and customer-specific product offering is a full service provider for small, mid and of course, also the large biotech companies.
Gerresheimer is a global go-to partner for containment and delivery systems such as high-value vials, cartridges and ready-to-fill syringes as well as devices and services. The devices include our own GX autoinjector, but others pens, wearable systems and smart devices. Services cover analytics, fill & finish and regulatory support. We expect the share of total sales in our Biologics segment to increase from 14% today to 25% and more within the next five years.
Ready-to-fill solutions in syringes, vials, cartridges are driving growth in high-value solutions. We are the global market leader for vials. With our solutions, we are actively advancing the market change over the coming years from the classic bulk vial through pre-sterilized, washed ready-to-fill vials. This will result in significant growth potential for high-quality vials and cartridges supported by our newly developed and already introduced industry standards, EZ-fill smart, we will -- we are confident that we will be able to write another success story.
As a global go-to partner for containment and delivery systems, Gerresheimer supports its customers along the entire drug development process even in very early stages as illustrated in the following slides. Gerresheimer Gx Biological solutions serve biotech companies with the right product solution from preclinical testing through clinical testing and the approval to launch and the management of the whole product life cycle.
Our support starts early in the development phase of the product, so we can support customers all the way through from the preliminary stages of drug development. We are offering a clinical trial kit tailored to support the development of new drugs, vaccines or -- and biologics in early phases. This is -- it is suitable for small batch manufacturing from first-line trials to validation and clinical batches. Sample stock is available for preclinical testing and clinical phases in the development of new drugs coming with full documentation and available in also small batches.
And finally, we are supporting our new and existing customer activity to find the best possible containment solution supporting them with our digital product selector called g guide.
To finish this deep dive into Gerresheimer Biological Solutions, let's look at one further example of the increasing demand in biologic solutions. GLP-1, a group of incretin-based drugs that have proven to be productive for the very important obesity treatment. Fighting obesity with GLP-1 is one example of the increasing demand in biological solutions and one clear accelerator of our growth. With the increasing incidence of chronic diseases like diabetes 2, the obesity treatment market is expected to grow strongly. More than 650 million people worldwide suffer from obesity, representing a total potential treatment market value that goes beyond $50 billion.
Gerresheimer is as key supplier to all major pharma companies with our solution for drug containment and delivery, and we will support the GLP-1 obesity treatment with solutions like autoinjectors, pens and also syringes. Recent contract wins with leading pharma companies reflect our strong position in both syringes and medical devices. We will serve the leading global pharma companies with the right solutions for their drugs and thus support millions of people in their obesity treatment. These from our so-called large Eagle contracts, will strongly contribute to our profitable organic growth. They have an attractive risk return profile with actually a limited downside risk.
Our syringe segment offers a broad range of innovative solutions like backed on siliconized syringes, silicon-free systems, dual chamber syringes or the Gx InnoSafe solutions. We are, therefore, the preferred partner for our customers, offering a broad range of products and services, together with optimal technical solutions. As we double our syringe capacity, by 2027 or until 2027, we expect to triple our revenues in this area within the next years.
We are well established in the markets for medical devices such as inhalers and pens. Our autoinjectors and pens offerings are growing significantly and sustainable new orders for autoinjectors will further boost our growth in this medical device segment. HorsovskyTyn, Skopje, Pfreimd, Peachtree, Wackersdorf or Indaiatuba are names of production sites spread across three continents, producing in the region for the region around the world allow us to be close to our customers and the market and to be familiar with international and local regulatory framework conditions. Our large number of production sites worldwide also ensures a secure and reliable supply for our customers.
Before I hand over to Bernd for the final details of 2022 and the fourth quarter, let me quickly recap the key takeaways from 2022. 2022 for Gerresheimer has been another proof point for the consistent execution of our strategy and the delivery of our financial targets. We are investing into the right markets. In 2022, we further executed our investment program to accelerate profitable growth across a range of initiatives with a particular focus on high value, solutions and medical devices as well as further growth initiatives.
Our growth investments from recent years are paying off, resulting in significantly higher growth rates and returns. We are steering the Gerresheimer very successful through a dynamic environment with our strategy being a solid foundation for stability and growth. We have a consistent and continuous focus on improving our competitiveness and resilience of the business. Our customers, our clients now perceive us as a high-value, high technology and high-quality supplier with a comprehensive global footprint and strong capabilities together with a broad and innovative product range, innovating for a better life. These are not just empty words for us. This is the basis for our success and constant new customer wins.
And with this, I now hand over to Bernd to lead us through the details of fourth quarter and full year 2022. Bernd, it's on you.
Thank you, Dietmar, and welcome, everybody, also from my side. Let's dive into the analysis of the key financials for the fourth quarter 2022. The outcome for the last quarter of 2022 was very strong. We again delivered double-digit organic growth in both revenues and earnings. Reported revenues increased from €436 million in Q4 2021 by 21.2% to €529 million in Q3 2022. We had an FX tailwind of around €28 million, mainly coming from a stronger U S dollar. The organic revenue increase amounted to 15.9%. This organic growth rate was driven significantly by volume growth as well as pricing adjustments.
Reported adjusted EBITDA increased from €95 million to €112 million in Q4 2022. FX support was around €6 million, resulting in organic adjusted EBITDA growth of 11.9%. The adjusted EPS increased from €1.31 by 13.7% to €1.49. Stripping out the FX tailwinds, organic adjusted EPS growth amounted to 10.7%.
Before we take a deep dive into the divisional performance, I would like to zoom into the revenue growth and decompose it into the various sources. In Q4 2022, organic revenue growth for the group was 15.9%. The strong revenue growth can be divided into volume and price effects. Until Q3, we had to consider effectively two components of the price effects. First, contractual pass-through mainly related to volatile resin prices; and second, renegotiated sustainable price increases that we implemented as a result of higher input costs.
In Q4 2022, there was basically no contribution from pass-through effects, mainly as a result of easing inflationary pressures. While this trend might continue in the early months of 2023, these effects are rather volatile and hard to predict.
Looking at the underlying revenue growth, we see that around 10% of the growth comes from volume mix and the remainder from sustainable price increases that demonstrates our strong pricing power. As you see, Q4 is in this regard, quite representative for the full year 2022.
Let's continue with a deep dive into the divisions. Plastics and Devices. Reported revenues in Q4 2022 grew from €241 million by 19.1% to €288 million. This was supported by a favorable FX development of around €14 million. Hence, so organic revenue increase was 13.8%. In Q4, we had strong contributions, in particular from the Medical Plastic Systems segment.
Two items to highlight. First, our syringes business showed a double-digit growth rate. The phasing effects from previous quarters have been caught up. Second, furthermore, medical devices demonstrated a double-digit growth rate in Q4 on the back of a record order book level. The adjusted EBITDA increased from €67 million in Q4 2021 by 20.9% to €81 million in Q4 2022. Even excluding FX effects, we delivered strong double-digit organic growth of 15.2%.
First highlighting as well is the increase in the adjusted EBITDA margin from 27.6% in Q4 2021 to 28.0% in Q4 2022. Our margin performance is gaining traction, showing progressive improvement and signals further margin expansion in full year 2023.
Primary Packaging Glass. The Primary Packaging Glass division showed another impressive quarter. Reported revenues increased significantly from €196 million by 23.4% to €242 million. Excluding FX effects, organic revenue growth was 18.1%. Both business units, molded and tubular glass showed double-digit revenue growth rates. The strong growth in the tubular glass business was once again fueled by the high demand in high-value solutions especially RTF Vials and Elite Glass. On an -- as-reported basis, adjusted EBITDA increased by 3.0% to €45 million in Q4 2022. Organically, adjusted EBITDA was flat. The reason for this are the phasing of inflationary effects in the P&L.
The capitalization of a significant part of the cost inflation in the inventory spared us to some extent from the negative P&L effects of the inflation in Q4 2021. In Q4 2022, however, with a certain delay, the inflation hit us finally, different from previous year via higher COGS in the P&L and we have not yet fully passed on the inflation to the customer. However, there is good news looking forward. Given our excellent pricing power, we are able to further increase prices and expect a strong Q1 2023. Double-digit revenue growth accompanied by, yes, even an EBITDA margin improvement year-on-year.
Advanced Technologies. Advanced Technologies is running on plan. Reported revenues stand at €4 million for Q4 2022. Adjusted EBITDA was minus €4 million, a slight improvement versus Q4 2021. Also in Q4, we had a sharp focus on R&D in this segment. For the full year 2022, we saw a slight increase in revenues to €13 million and a negative adjusted EBITDA of less than €12 million. As a reminder, at Advanced Technologies, we continue to strive to establish Gerresheimer as an innovative original equipment manufacturer for smart and connected devices in the health care industry.
We expect our partner SQ Innovation to complete the FDA filing for approval of our patch pump in the context of a heart failure treatment in the next couple of weeks. This is a proof point that Advanced Technology is becoming increasingly relevant and will contribute to our growth and margin acceleration. And now we will have a closer look at the cash flow. The final quarter of the year is our harvest time for free cash flow.
During our Q3 '22, analyst call, we indicated that we expected free cash flow at the same level as in previous year. And the fourth quarter did indeed show a strong free cash flow outcome, and we were even €60 million better than previous year. We achieved a cash inflow from operating activities of €142 million, supported by a positive net working capital development considering also factoring. In Q4, our net CapEx stood at €63 million. For the full year 2022, we invested net cash of €238 million or 13.1% of our revenues. We continue to invest in global injectable capacities and are further ramping up contract manufacturing projects. Finally, I would like to highlight the positive development of our financial leverage, which improved by 0.2x to 3.0x EBITDA. This results in additional financial headroom and provides us with further flexibility. For the purpose of completeness, this slide shows the underlying performance for the financial year 2022.
As a brief reminder, with our Q1 results, we increased our initial revenue guidance for full year 2022, aiming for organic revenue growth of more than 10%. And we are now reporting a remarkable outcome of 16.2%. Even excluding pass-through effects of around 1 percentage point, we still showed a strong acceleration of revenue growth by utilizing our strong pricing power and volume and mix growth in our business.
The delivery on our financial targets is the result of the consistent execution of our strategy. Organic adjusted EBITDA for the group amounted to €338 million and with an organic growth rate of 10.2% is slightly above our guidance. Worth repeating, this is a great success and demonstrate as well our strong pricing power based on our excellent market positions.
Let me briefly comment on our EBITDA adjustments of €19 million. A significant part is driven by a onetime inflationary compensation payment for our German employees. Furthermore, we recorded one-off costs after the implementation of restructuring measures within PPG as automation and digitalization initiatives lead to further process optimization. Please keep in mind, these are exceptional effects, which are not part of the ordinary course of business and will not repeat. We are committed to reduce the exceptionals going forward, and we expect these to be below €10 million in full year 2023.
Now over to the next line item, the financial result. Around 50% to 60% of our debt is locked in at fixed interest rates. However, the share and the floating has been impacted by the steep increase in interest rates by the ECB as already highlighted during our Q3 earnings call. Let's have a look at our tax performance. In the financial year 2022, the adjusted tax rate stood at 24.8%. We expect a figure of around 25% to prevail for the coming years as well.
Finally, the organic adjusted EPS amounted to €4.47, up 6.9% compared to prior year, in line with our guidance. With that, I hand back to Dietmar.
We have a technical problem with the microphone. Just give us one second, please.
Hello? Much better. So we go back to one microphone for both Bernd and myself, that's flexible. Yes, thank you, Bernd. These were really nice figures. And we are fixing the technical challenges here. Yes. Let's come back to the presentation. Double-digit organic revenue growth in 2023. That's the goal and we are confident that the successful implementation of our strategy will continue to deliver sustainable profitable growth.
Gerresheimer is setting new standards for organic growth while consistently delivering on its targets. Attractive growth projects, including the strong order intake in both high-value solutions and medical devices on underlining our transformation into a system and solution provider and our position as a strategic partner of choice for the global pharma as well as biotech industries.
Looking at the strategic progress we have made in 2022, we are expecting another strong financial year in 2023. 2022, Gerresheimer has proven that it is a profitable growth company. Our strategic investments from recent years are paying off, resulting in significantly higher growth rates and returns across all businesses. We will go on to leverage business opportunities and will continue our profitable growth path. This will result in another record year with revenues and adjusted EBITDA growth of at least 10% on the back of increasing interest rates. We expect lower single-digit organic growth in adjusted earnings per share in fiscal year '23. But this will recover and catch up from '24 onwards.
We are even more optimistic about our midterm prospects as the benefits of our investments flow through leading to organic revenue growth of at least 10% and adjusted EBITDA margins of 23% to 25%, resulting in organic growth and adjusted earnings per share of at least 10% annually.
So we have made a strong and solid start to our 2023 financial year and are on course for further profitable double-digit organic revenue and adjusted EBITDA growth. The adjusted EBITDA margin is expected to improve year-on-year in Q1. We are on track to deliver on our targets consistently quarter by quarter.
With this, thank you for your time. We are now happy to take your questions. Thank you.
All right. So the first question comes from Oli Reinberg from Kepler Cheuvreux.
Can you hear me?
I can at least hear you. The others not, but I will try to answer your questions. And they are trying to fixing that at the moment, yes.
So a quick question from my side, if I may. The first one would be on the supply and demand situation in bulk buyers. Obviously, we've seen at the beginning of the year a significant drop of demand for COVID in general. And I guess, also overall, the industry is ramping up capacities. The offset here is obviously a strong underlying market growth and the trend towards localization here. But can you just talk about the dynamic in the vial space please, and also in terms of pricing, what you see here?
Second question on CapEx. Obviously, CapEx will ramp up quite significantly, probably exceeding €300 million. Given this kind of trend, it would probably be generally helpful to get more color on the breakdown. So can you just probably break this kind of amount into the kind of main projects and ideally also provide any kind of color where we expect the negative free cash flow to come in this year?
And then last question, just some kind of clarity on the guidance, please. Thanks for the color for Q1. Can you just confirm the margin -- the ambition to expand margins? Does it also apply for the full year? And any idea of the magnitude. And secondly, on this kind of guidance, what is the assumption for inflation effects in your top line goals?
Yes. I will take the questions. The first one, if I forget anything, just jump in. I think Bernd is able to hear the questions now as well. Perfect. That's very nice. But I can, in between start with the topic of the bulk vials. I think it's important to understand that we always try to express that our dependency on the COVID itself for the whilst is not the key dependence. And the downturn of the vial demand for COVID actually went down not in '22, but actually, we saw the first downturns in '21. You never saw this because it was actually compensated by other demands, and this is the same effect in '22.
So actually, we don't see this much. It's clearly overcompensated by high-value vials, and this is -- in the strategy, the technology, the capacity that we actually added was always prepared to do high-value vials, whether it's Elite, whether it's ready-to-use, and that's what you see at the moment. That's why you see this strong development in, for example, the tubular glass segment, and there's no reason to expect that this will lower in the next quarters. So I hope this answers the first question.
The next one is CapEx. The breakdown of the CapEx, you want to do this, Bernd. I can also start with the key chunks. I think we elaborated a lot on the CapEx in the last Capital Markets Day, and there is no change to this elaboration or explanations. What we have here that are the key blocks that are within the syringes, it's for the key devices for GLP-1 and the furnace repair that is expected to take place in Lohr, and that's the key area. And with this, because he gets increasingly nervous next to me here, Bernd, I will hand over to him, who is eager to answer more details -- these things.
Oliver, just to exactly what Dietmar said, we're investing into a high-value solution capacity increases, especially in Q4, if you really go through, you see this very precisely for -- this is better for Q4, but also for the full year 2022. Regarding your question, free cash flow 2023, given our CapEx program. We said in the Capital Markets Day, and it's still valid, let me say, it will be moderately negative. And this is also our actual judgment because it depends very much about our -- the execution about our CapEx program and I want to give you an update on this topic in April when we release our Q1 numbers.
Then your third question was regarding the -- regarding your margin. In the end, we are guiding short term always on the EBITDA growth. Why? Because of the experience now with the inflation and then it's always difficult really to pinpoint precisely the margin what we will achieve. But what is fair to say that, obviously, and we guide for 23% to 25% EBITDA margin, midterm guidance. And this year, we had -- 2022, we had an EBITDA margin of 19.5% that we really see that year-by-year, we will improve now our EBITDA margin. And one of the good touch points for this will be Q1. We said that we will grow our revenues by more than 10% and also our EBITDA double digit with a slight margin improvement. This is what we see also in Q1.
And what would be the impact from inflation on top line growth, please?
Oliver, can you repeat, please? Sorry.
Sorry. I hope you can hear me.
I got the question. The impact of the inflation he's asking for this year, we don't expect much inflation in '23. Honestly spoken anymore, and yes, Bernd, is showing 5% that what he's expecting for '23, but it's not actually included in the guidance so far.
So the guidance includes the assumption of no inflation, but you see a potential of up to 5%. Is that correct?
Yes, Bernd. Now you have to answer.
Sorry, Oliver, can you repeat your question because I'm technically was not able to follow your question. Sorry for this, Oliver.
Yes, no problem. I mean, the general question was in the assumption of double-digit top line growth, what is the assumption for the contribution from inflation. And I just understood from Mr. Siemssen that nothing is embedded in this kind of double-digit growth, but it could be up to 5%. Is that correct?
So in the end of the day, what is our official wording and we stick to this as part of in our guidance. And Dietmar also said in the Capital Markets Day includes also here to stay price increases, but not pass-through effects. Its basically how we see it. And this is also still valid today and as mentioned by Dietmar, because we don't guide for pricing adjustments for a year. This is not what we are doing.
Okay. So I take the point, the double-digit top line growth is possible even without any kind of inflation support, but there may be some.
Exactly. If the inflation is strong, we will raise the prices as we've shown in the last years. If the inflation is not so strong, we will not increase prices, but this is not what we have included in the guidance.
Understood.
What you clearly see is that in 2022, some of the price increases, as we always indicated, actually come with a certain delay. And that's something we benefit from in '23 because now we have actually the price increases in place, but the cost inflation is in principle not increasing further, and that's a clear advantage.
Perfect. That's helpful. And sorry, still coming back on this kind of CapEx for -- is there any potential to break this €300 million plus down into, let's say, the top five projects? Okay. Can you hear me you?
That's good because I just heard that you couldn't hear Bernd answering the question. So I can answer this. It's not so complicated. The investments you will see in 2023 are completely transparent in the Capital Markets Day, and they are following the clear strategy. You will see major investments in the rebuilding of Morganton the facility where we actually get the BARDA support, the tubular investments, you will see the syringe strategy executed in both Skopje, North Macedonia and Mexico, you will see the expansion of the facilities for the medical devices that are primarily driven by the GLP-1s. And that is actually what you primarily see as core big chunks in the CapEx.
Okay. Perfect. That's very helpful. And also for the color on the onetimers.
Okay. They can only hear me. This is a real busting today. So I think we can take the next question now from whom? Oliver Metzger, very good.
Do you hear me now?
Yes. I'm the only one on stage, but I can answer usually all questions.
Awesome. Okay. Great. The first one is on your product mix on the biologics on Slide 5. So if I do the math in five years, the biologics injected this should stand at 56% of sales from 39% now. Simultaneously, you also mentioned that the high value share at the group should move from 39% from 24% in the same time period. So this is around 60% increase while this move from the 39% in the biologics injectables to the 56% are roughly 44%. So if I do the math, and -- so is it fair to assume that the bulk of a high-value solution is linked to your increased traction with biologics? And the residual part is linked to the new GLP-1 project. Is this correct? And then I have some follow-up questions, please.
It's completely correct. And you have to see that the GLP-1 is a classic large molecule drug. So that's definitely boosting also the biologics up.
Okay. Great. Second question. So earlier this month, you sent out a news about your joint venture with Corning. Is it fair to answer, it's similar to the establishment of the same standards for RTF as likely as Stevanatos. Is this correct?
No, this assumption I would not agree to. What you have to see is the cooperation, the joint development, which led to a protected IP with Stevanatos actually a secondary packaging, the trays. And the secondary process, which is the washing and sterilization, that is protected. And that is one thing. It will definitely support us in switching the market from classic bulk into more and more ready-to-use formulas. The joint venture we have with Corning is actually outside surface treatment of the vials that is giving the vial better protection. You can run the lines faster and that's a different technology for a very important, but smaller niche market.
Okay. Great. And my last question is regarding...
One attachment to this. This does not mean that you can't deliver these velocity vials also as ready to use in -- which is, of course, the target, yes.
Yes. Okay. Okay. Last question is on your one-offs. So basically two sub questions. First one is on the restructuring charges. So we see again a similar size as we saw last year. And the question is when do these restructurings come to an end?
And the second part to the one-offs is regarding this inflation compensation payment you made. For me, it appears quite strange to see inflation compensation payment as a one-off because I would say, inflation has come, inflation most slightly stays. So I would most likely will see also some payments in future. So how should we think about it going forward?
I hope you can hear me, Oliver.
Yes.
Okay. Perfect. So just to start with, I mean, we are also annoyed about the exceptionals as such in Q4. But what we want to achieve is to give you a clear view on our underlying business, that's what we want to achieve. And if you look at inflation compensation thing, it was a very special scheme, what we have applied there, and we will not repeat this going forward. And therefore, we think, together with our auditors, that this is not the -- that this is something that you need to adjust for.
Regarding restructuring measures within PPG is automation and digitalization initiatives, this leads to further process optimization. This was including cost of nonquality ramp-up of the workforce training and so on. But I can tell you that this is now concluded and will not repeat also in 2023. Having this said, we think that our exceptionals for this year would be below €10 million, and we are quite safe on this.
We take the next question from Falko Friedrichs from Deutsche Bank.
Firstly, can you provide more color on the expected phasing of growth in 2023? It sounds like Q1 will be strong, in the past was always a slower quarter. So just interested in how you see growth is phased over the next quarter. And then secondly, on this GLP-1 and obesity projects, can you remind us when you expect them to become really noticeable in your financials?
I can start with the second question because actually, I didn't get the first one. There was interruption in the line here. So it's a GLP-1 sales. Actually, the GLP-1 sales, you will -- will be visible the first sales already in 2023 in the area. It's not a big chunk. It's maybe a mid-single million euro level, but we're also starting to deliver already this year, which is good, and then they will steadily ramp up over the loop of the next years. Actually, the ramp-up will be pretty steep, but they will ramp up over the loop of the next years. And maybe you can repeat the first portion of the first question.
Yes, of course. So what about [Technical Difficulty] Growth in 2023. So in the past, you want typically [Technical Difficulty] and then you have a very strong Q4 at the end. Now it sounds like you [Technical Difficulty].
Falko, your line is interrupted, we can't hear you. And I think this time, it's on your end. If you're still here, can you please repeat?
Can you hear me?
Bernd, try to interpret.
I think Falko, I can interpret you because you're talking about the phasing of the revenue growth over the year 2023 in light of our phasing of previous year 2022 and whether it's back-end loaded. As we think that this will be quite evenly spread our revenue growth throughout three years and that we expect as of today that we have each quarter, a very good growth rate and another quarter where we are falling behind our double-digit growth.
Okay. We take the next question from Anchal Verma from JPMorgan.
I have three, please. One on your revenue growth guidance. The double digit is underpinned by volume and pricing growth. For this year, you guys obviously had 6% pricing increases. Trying to understand how do you expect that number going forward for 2023? And how you -- how sustainable do you think these price increases are in the short term and the medium term?
Then the second question is just a bit more of a follow-up on the free cash flow situation. It's -- you've given guidance for negative for 2023. If we take the conservative end of your sales and profit guidance as well as the CapEx spend, do you still believe free cash flow can turn positive by 2024? And then just the last one, if you could please talk through your current capacity utilization across your plants and essentially trying to understand which businesses might be running a bit tight versus excess capacity.
Yes. This time, I tried to take the first one. It's about the price increases revenue growth. I think we answered this within this call, maybe it didn't come across in a proper way. The guidance does always include a certain price adjustment. That would be some 1%, 1.5%. That's normal in the guidance, but it's actually not include exceptional special price inflation topics. We did not do this in the past, and we also did not do this in the future. So the guidance for 2023 does not include more than the normal whatever price cost increase inflation of, whatever, 1.5%.
If it would come to further price increase, we would adjust the prices, but it's not included in the guidance. Honestly spoken, we have to see how the year works. I actually do not expect much cost inflation to occur anymore in this year. So that's the -- hopefully answer these questions.
The next is the cash flow in '24, do you still believe it can be positive? The answer is, yes. You can answer it longer, Bernd, but the answer is yes. There's unchanged to the things that we disclosed in the Capital Markets Day. And the capital utilization in our plans is pretty high. As a matter of fact, we are on principle fully loaded in most of the facilities. You will see not the fourth quarter but also in the first quarter that sales is accordingly because our facilities are fully loaded, which is very positive. And that's not a big difference. No further within the different business segments.
Just a bit of a follow-up on the first one, please. So that's on the pass-through pricing, but it would be helpful if you could give us a split for the sustainable pricing and how you -- the double-digit growth can split that, into volume and price, make us understand the sustainable pricing, understand the other cost and cost inflation and pass-through...
I understood this. Most of the price increases actually are sustainable. There might be some impact coming from resin material that goes down, that will definitely not impact EBITDA. There is clearly -- and that will further improve our margin. If it would come, I wouldn't expect much and it will also not have an impact on our lower total guidance.
Next question comes from Alex Galitsa from Hagen Aufhäuser. Happy to have you, Alex.
Yes, thank you. I hope you can hear me well.
Yes, we can.
I'm going to start with a question on high-value solutions. The cited growth of 19% year-on-year in 2022. First question, is this FX neutral? And then the second question is how much sales with high-value solutions you generated in 2022 in absolute terms, if you could give us a figure?
Thanks a lot, Alex. First of all, that you are back on our company. I have to say, we have seen your notes. So thanks to be back. Alex, high-value solutions, FX neutral when we are guiding for this revenue growth. And if you look now only in Q4, our high-value revenues were around €100 million and almost €400 million for the full year.
Okay. And that's including cosmetics?
That's including cosmetics, exactly.
Okay. And the second question related to that is when you look at the 19% high-value solution sales growth compared to what you delivered on the group level of 16%, why there is not a larger discrepancy between those two growth rates as of now? And would you expect this kind of gap to widen going forward, especially as the GLP-1 related revenue in high value solutions vertical kick in?
Basically, Alex, it's tough comps, as you might say, because we had not a very strong outcome from -- for high value solutions. But good news is that the acceleration of growth you will see in the upcoming years and here, you will have really a significant spread between high-value solution growth and product growth and the other products which we have in our company. So the CAGR is around 20% or something like this. For example, from 2022 to 2023.
Understood. And then a couple of follow-ups. You already addressed, exceptional items 2023 being below €10 million. Looking further out 2024, '25 really midterm, how much of these items do you really expect there to stay?
We don't -- Alex, we don't plan for exceptionals. And in our plan, what we have, we basically have zero exceptional planned for 2024 and 2025.
Understood. And then on the midterm EBITDA margin target. From today's standpoint, there is still quite some gap to cover even to the low end. So does this basically assume a steady sort of progression towards increasing share of high-value solutions? Or are there any single particular major sort of moving parts that you expect to add to the sales mix that would move the margin strongly. So basically, what I'm asking is it a steady progression? Or do you expect any particular year to give it a stronger boost?
Actually, what you will see is a steady progression. And as a matter of fact, if you look at the details of the fourth quarter last year and probably the first quarter '23, you actually will see this steady progression actually already taking place. There's two things we actually benefit from it. On the one side, it's, of course, the product mix that is steadily improving, and you see this now it's the increase of share of the high-value solutions and high-value products that we have. But as a matter of fact, also within the high-value solution, we actually improve steadily the product mix to better margin profiles.
Understood. And the last one is on the Advanced Technologies division. Do you expect or what is the next sort of the most advanced projects that you potentially expect to materialize and lead to revenues? Would it be the SQ innovation since it's in FDA submission or close to? Or is there any other potentially is a leader here?
Yes. In a smaller amount, you will actually see already this year or '23, an increase of the Parkinson's pump, the other pump in a small amount, you will see more sales here. The sales development in Advanced Technology will, of course, be impact positively by the SQ innovation and we are filing or they are filing now beginning of March. And then we are still expecting the first pumps to be delivered to the market within 2023, but we should not be naive. This will be at the end of '23.
But what we also see impacting in a certain way is, of course, reimbursements of engineering developments of new projects that will help us in a certain way. But we are meanwhile in the Advanced Technology very well on plan, which is very good after some tough years that we experienced in this group. But the real big bang, this makes a hell of a difference that is something that you will only start to see from '24 and then '25 on.
Understood. And I apologize. Just the last question I have here. With regards to the Midas corporation that gives you access to early-stage pipeline. Would you be able to kind of give a color when is the earliest potential product launch would be possible from here? Is it 2027 onwards? Or any color here?
There are actually several projects we are working with our partner, Midas. One of the most prominent project is actually the our own Gerresheimer autoinjector -- the cartridge-based auto injector. In the nature of these businesses that we actually are stepping in, in the very early phase of the development with the customers, the real sales results that will make an impact on the financial figures, I don't expect before '26 in the following years.
Now we have Sven Kuerten from DZ Bank.
First question on the GLP-1 again. I didn't understand that before. How much was the GLP-1 related revenue in 2023 in euro terms?
Got it. The pure product will be probably mid-single million level because it's really ramping up now, then you might see some of this in the toolings because we are starting to setting up the first lines, of course.
And you said you expect it to triple from there in which period of time?
The tripling actually was related to something else. The tripling statement I made was referring to the development in the syringes over the loop of the next years. And it shows it's, I think, a good proof of the margin mix difference, the high value impact -- what I try to say is that we are actually over the loop of the next years, we will double the capacity in syringes to more than 1 billion units, but we actually will triple the sales and also the margin in the segments, why is this? It's because we're actually moving into higher value, also biological syringes and that makes quite an impact.
Yes. So -- and what's the midterm potential for the GLP-1 then in your terms for Gerresheimer?
Actually, several hundred million, 100 million sales, definitely.
Okay. And then on the Advanced Technologies, when do you expect a sustainable profitability in that segment?
I think the breakeven is planned with the ramp-up of the hallmark SQ Innovation pump, which should be '25.
The next question comes from Chris Gretler from Crédit Suisse.
Just one question with respect to cost. Could you actually discuss what kind of wage inflation you are budgeting for '23. And also on the energy cost side, how that's developing on a year-over-year basis, given kind of the volatility we have on the spot market and the hedges you have in place, just to see now if that's becoming a headwind? Or what kind of headwind that is?
Thanks for this question. Maybe just the wage inflation, we have penciled in around 4 percentage points of wage inflation in our P&L for 2023, and we feel very comfortable to it. And also based on the negotiation which we have done with our employees, 4% is what we have.
And regarding the energy, actually, when we made our plan three, four months ago, we actually looked at the forecast and the -- let's say, these forwards and as you mentioned, they were relatively higher than the actual spot price. So this is what we see in, but we basically baked into -- for the part, which we have not hedged in our plans, we baked actually the forecast into it, which were around in October. So you can look at it. So it was higher than as of today, obviously. Today, it's around €50, I think, for gas, but it was higher at that point in time when we made our plan. So there could be some upside.
Now we are switching to the media side. [indiscernible] in the line.
Am I right that you said that breakeven for Advanced Technologies is planned for 2025? And I remember that the date before was '24. So could you comment on the delay, please.
Yes, it's not actually much of a delay, and that's also not rocket science. I think that the SQ Innovation project was delayed with around six months, and that is actually causing the effect.
Your next question comes from Oli Reinberg again from Kepler Cheuvreux.
Three quick ones, please. First on Advanced Technologies. So when SQ is going to file, does this have any kind of financial implications? And can you give us any kind of guide for the EBITDA loss for this year?
Secondly, on cosmetics, can you just comment on the demand trends. Is there any kind of softening or unchanged? And then thirdly, if you look at the quarterly progression of clean depreciation, they jumped from €29 million, €30 million in the first three quarters to €39 million. Is that a run rate? Or is there some kind of items included, which may not reoccur?
Just, Oliver, regarding -- taking your first question regarding Advanced Technology, the pencil is already in. So for 2023, there's nothing what is surprising us now. We expect that we have the same level of EBITDA like we have it in 2022. So no discount here. This is what we have planned. Regarding the depreciation in the end of the day, the certain -- yes, in the end, it's a little bit onetime effect you see also in our depreciation, normal depreciation because we had to catch up certain elements from previous year into Q4 this year, on the one side.
On the other side, you had -- we have seen that a lot of machinery and equipment were actually up and running, starting from Q4 this last year. And then we had to take -- we took basically for the full year, the depreciation. So therefore, you see a relatively high depreciation in Q4, if you look at it isolated. Hopes this helps, Oliver?
Not as. And so for the full year, the clean depreciation of €135 million to €140 million, is that reasonable? And then also the cosmetics question, please?
I think it's -- maybe it's reasonable as the depreciation of what you see in our P&L is reasonable. And you should expect that in the end, [conception] you grow 8%, 9% also there's a depreciation into the next year, this would at least be my expectation.
So you grow by 8% to 9%? Are you talking about percentage of sales?
No. It's a percentage of sales, so the depreciation line is increasing from the €135 million, something like this by 8% in 2023. And the question regarding cosmetic, can you repeat this again because I didn't got it, Oliver.
Yes, of course. No. I mean, obviously, there are discussions still on the macroeconomic environment. So is there any kind of softening trends that you see? Or is cosmetic demand still unchanged?
No, I would say it's the opposite. It's -- we are probably not on levels like we were pre-COVID, but things are ramping up and increasing and developing very nicely. What helps here is, of course, the switch also in product mix in the Cosmetics segment, where we are upgrading the products to higher margin, higher profitability that clearly supports us.
Are there any further questions?
As there are no further questions, we would like to thank you for joining us today. All the best. Take care. Goodbye.
Thank you so much.
Thanks. Bye-bye.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you very much for joining, and have a pleasant day. Goodbye.