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Welcome to the conference call of Krones AG. At our customer's request, this conference will be recorded. May I now hand you over to Mr. Christoph Klenk, CEO.
Good morning, ladies and gentlemen on behalf of Krones. Today, we present our 2020 outlook as well as our Q3 results. We will concentrate today on the financials of Q3 and the financial outlook for 2020 since we present a broader view strategy and measures on the Capital Market Day next week on Thursday, 12. We have -- we are concentrating today on financials. However, I want to jump to the first slide. Olaf, maybe you can help me in pushing that forward. You see on the first slide, we have summarized whatever is related within Krones and COVID-19. And first of all, I would like to say that before we jump to -- very briefly to COVID-19, that we have been able to adapt our structures over the last 6 months quite heavily and the flexibility of our structure, Norbert will talk a little bit more about that later on, helped a lot to get at least the profitability maintained on a decent level. Of course, not everything is done on the structure, and there is still things more to come, which we will explain next week. However, up to now, with this severe drop in sales, I would say it worked quite well. If you look to COVID-19 on the first page, of course, it's very challenging for Krones. Since we are in the HRB business, to a certain extent, HRB stands for hotel restaurants and bars with the products of our customers. And this sector, which is called it trade, the on-trade sector is quite severely impacted at least in Q2 by COVID-19. And of course, lockdowns do not help at all to improve that situation. However, markets and the travel growth has stabilized to a certain extent. And I would call it even a good extent in many markets, not in all, but have stabilized. Of course, they have not fully recovered to the old level. But at least volumes are reaching in Q3 close to what we have seen in recent years. However, of course, since the hotel, bar restaurant area is impacted still significantly, profitability of our customers is still harmed in that way. We will talk next week in deeps about the perception of our customers. There are situations in the individual continents and countries, and it's really surprising when you hear how different markets are reacting, just 1 short story. Yesterday, we talked to 1 of the very big breweries around the world, and they were saying and all the others saying the same, Brazil, which has had a total lockdown, is performing quite well on beer, and they do not know where they should get the capacity from. So that's really amazing developments which nobody has expected. More details will come next week since we have talked, me personally, to around 25 customers standing for around 50% of our order intake, and that helped a lot to get a view on it. You see then on the -- in the middle row, our long-term growth drivers, and we say they are fundamentally okay, which is, I think, an important message for you to say, okay. Based on that, the business model of Krones will run further and is sustainable. That's important. We have a slight impact on the middle class, where we will talk next week, of course, how this is impacted and how we see the development of the middle class worldwide, in particular, I would say, in Africa and in Asia. Again, we -- long-term, we see our markets with their growth drivers intact. And that's a very promising position that we can run the new normal, which you see on the lower level. I don't want to touch anything there. But I would say, we have used the crisis for changing a couple of things for getting forward -- let me say, in particular, on remote and digital. And our localized service structure has helped a lot that we could continue our business, I would say, on a decent level, not, of course, on the level we are used to, but at least that we are, I would say, looking very stabilized into what is coming up and hope that our service business is hopefully not too much impacted by the lockdowns we see right now and that we can travel. That is the broader view from my side, and I would hand over now to Norbert. Thank you. Thanks very much.
Thank you, Christoph, and good morning to everybody in the conference. I would like to go quickly through the financials to give you also room for questions afterwards. And as usually, I will start with the highlights. Order intake after 9 months, minus 22.2% compared to the same period last year, a significant decline. However, as you will see further on, Q3 already showed improvement. Sales, minus 15.3%. Here we have the usual time lag between order intake and sales. The good news is, I think, the EBITDA margin of 6.0% and that's the result of significant cost adjustments that Christoph Klenk already mentioned, we will also come to that later on. And free cash flow, even though still negative, but with a significant improvement of roughly EUR 230 million compared to the same period last year. When we look at order intake on the next slide, you can see that Q3 this year with EUR 844 million, is significantly above the very, very low Q2 that we experienced this year, 37% above. However, still 8% below last year. But as already mentioned in other talks with some of you, we consider order intake of Q2 as the lowest. There was certainly a kind of shock reaction when corona came up worldwide for the first time. We expect that the improvement will stabilize, however, on a lower level compared to before corona virus. The sales, EUR 750 million in the last quarter, exactly 25% compared to the period before. This, from our perspective, is and was the lowest quarter as a consequence of a very low order intake in Q2, and we expect increasing sales in Q4. However, still significantly below the very high Q4 of last year. When we look at the regional development, and I want to mention this is only a short-term view that compares 9-month sales this year versus the 9 months last year or the year before. And this is not what we expect long-term, and we will discuss the long-term impact on our Capital Market Day. But short term, this year, 9 months, we have a good development in North America with an increase of our relative sales in that region compared to our total sales also South America in the first 9 months. And Africa, Middle East, here, I would like to mention it's primarily Middle East that it develops quite good this year. Africa is rather on the weak side. And also -- and negative development, we see certainly in Europe. Also China in our business for the first 9 months compared to the strong 9 months last year. And that's for now, let's say, our regional short-term development. More important is how we deal and adjust our cost structure to, let's say, react and compensate the shortfall in sales. And you can see on the personnel costs, in the first 9 months, we were able to reduce our personnel costs by EUR 107 million or 11% compared to a sales reduction of 15%. And so, this is a significant reduction in personnel expenses. However, not good enough to match the reduction in sales and to keep or improve our ratio. We are using all tools like everybody else, short time -- short-time tools like timebank reduction, overtime reduction, short-time working furloughs as well as structural measures to reduce our head count in the group. So far, more than 560 full-time equivalents or 3.3%. On the material side, it's easier for us. As you can see, the material costs has been reduced compared to the same period last year, around 20.5%, so this is higher than the sales reduction. So about 15% of the material cost reduction is because of volume reduction, a 3% reduction is due to a favorable mix because the new machine business is hit harder than the service business and the new machine business has a higher material ratio and about 2.5 percentage points are cost savings in material. And this results in the EBITDA of EUR 147 million for 9 months or EUR 29 million for Q3. The EUR 147 million is obviously, in total amount, a little shorter than last year due to the sales reduction, but come as a ratio with 6.0%. It increased slightly to the 5.7% EBITDA margin last year. And on the EBT level, which includes also the already communicated one-off impact of the impairments in Q2 of EUR 14 million. We have an EBIT of EUR 26.7 million and an EBIT ratio of 1.1% year-to-date. When we look at our 2 segments, the core segment, product filling and decoration proves to be very stable and solid year-to-date despite almost EUR 350 million lower sales. The EBITDA margin increased to 8.3%. I think this is remarkable in those different economic -- in this different economic environment. On the other hand, the other segment, beverage production/process technology, as already mentioned and explained in Q1 and Q2, is our problem. Here we have 2 areas: one is process technology, which suffers heavily by lower volume, especially in the brew segment. The other part is the intralogistics, which had -- the major operation there is in Italy. And here, we suffered from a temporary shutdown in end of Q1, beginning of Q2. Q3 isolated for this segment was a loss of minus EUR 1 million versus a loss of EUR 25 million in the first 6 months. So it is an improvement compared to the first 6 months. But of course, it's not satisfying. And intralogistics had a small profit of EUR 0.5 million and process technology, a loss of EUR 1.5 million. On the working capital, the ratio increase compared to last year because the sales reduction was significantly faster than the reaction in receivable inventory and liabilities. At the beginning of the year and still continuing to a certain extent, we build up safety stock to make sure that the supply chain is working and not in jeopardy, and so far, it worked. So there are no issues, but that costs a little bit on the working capital side. And now we have growing concerns because our POC receivables are increasing, and that's a result of delayed project execution because we can, in certain cases, not execute and finish our projects as we do without COVID restrictions. Okay, and to make it complete, our ROCE at 2.1%, that's primarily the result of the low EBIT year-to-date. A short view on the free cash flow statement. Free cash flow from operating activities year-to-date plus EUR 10 million versus minus EUR 122 million same period last year. Here, there is a significant improvement. The majority is that the changes in working capital last year were rather high compared to this year. And then when we continue to the free cash flow, CapEx EUR 68 million. We cut CapEx basically in half compared to last year. M&A activities this year 0 compared to EUR 35 million last year. So overall, that means the free cash flow still negative with EUR 58 million, and we are working on it, but significantly improved compared to the minus EUR 295 million same period last year. And as you are aware of, we are financially very stable. In addition to the EUR 255 million used credit lines, we have a liquidity reserve of about EUR 1 billion, about EUR 800 million free credit lines and almost EUR 200 million in cash. And our equity ratio is still above 40%. So from that perspective, both sides still very solid. And I would like to conclude my comments on the financials with our outlook that we published yesterday evening. For 2020, we expect sales around EUR 3.3 billion and an EBITDA margin between 5.5% to 6.0%, hoping, of course, that corona in the last couple of months will not make changes in terms of lockdowns or temporary lockdowns or travel restrictions more than we expect anyhow. Thank you for or listening. We will now move to Q&A.
[Operator Instructions] Mr. Sven Weier from UBS.
The first 1 is around the order intake situation. In Q3, obviously, you showed some improvement. We expect that to stabilize around that level. And as you corrected [indiscernible]. Wondering, obviously, [indiscernible] these are really, so to speak, in terms of the lockdown situation, restaurant closures. What do you think -- in time how they react to it this time around? Are they taking much more of a look-through approach? Or would you expect a similar [ nature of correction? ] That's the first question, please.
Actually, I had, this week, 3 calls with customers to figure out and to double check. Do we judge the situation right in terms of -- is the order intake now heavily jeopardized again by the lockdowns we are going to see. And the answer, at least for today, and this has some uncertainty is no, it will not. Why is that the case? I would say, as we have, our customers have adapted their structures. I would say there has been a lot of work adapted from them to serve different sales channels in a better way. And to get the products more aligned to compensate the hotel, restaurant and bar channel. We might see a bit of a drop, but not as severe as we have seen in Q2 because the shock is not there anymore because our customers are dealing with it. And I would say, in the rest of the world, which is even more important for us, we don't see that because they have not applied, I would say, first severe measures compared to where they are today. So I would say, in totally, the markets will perform in the way we have seen. And at the moment, we do not expect that it will have an impact as on -- as we have seen in Q2. So we would see, from our point of view, still a stabilization and even in order intake, and we would carry that on from our perspective with the order activity we see at the moment and the negotiations, which are still taking place. Some of it have been postponed, but not many. I hope that answers that question.
Yes, absolutely. Was just wondering, I mean, normally, Q4 is seasonally a bit stronger than, let's say, the summer quarter, Q3. I mean, of course, it's going to be down year-on-year. You had a strong Q4 last year, of course. But do you, based on the pipeline, still see a bit of a sequential improvement against Q3 on what you see currently?
At the moment, we plan, I would say, more on a stable level as we have seen in Q3. And this has to do with that our customers reduce their order intensity, I would say, already maybe a week before Christmas. I would say that we have seen recently in the last couple of years. And I would say the strong months are September, October and November, and December is already a bit reduced. So that's the reason why we are saying we lose 3 weeks in the order intake activity. I would say we see quite a volume out there, and it's a question whether all the volume is coming or as we have seen over the last months, only, let me say, a proportion of it. And the proportion we see today is -- would give us, I would say, a similar level as in Q3. So we don't see a hockey stick at the end of the year.
Okay. And the second question is just on the EBITDA guidance. If I take the high end of the guidance, you come out at almost EUR 200 million, which would imply something around EUR 50 million for Q4, and you had EUR 29 million in Q3. So at the same time, EUR 200 million higher sales almost. But it seems like a relatively marginal sequential improvement on the EBITDA side. So could you give us some more color on the sequential EBITDA improvement here?
This is Norbert Broger, speaking. That's correct. So we expect, in the last quarter, EBITDA somewhere between EUR 35 million and EUR 50 million for that quarter. And -- I mean we are also considering additional costs that we have in connection with corona to be able to complete, let's say, jobs on site in the different countries on our customer premises.
Okay. And can you quantify these additional costs that you're seeing? It seems a fairly, yes, maybe like a high single-digit, low double-digit number or...
Yes. Around EUR 15 million.
Okay. Good. And then I was just -- my last question, obviously, on the topic of pricing, right, which I guess, obviously, in Q2 have been under a little bit of a pressure given the weak order intake. I mean do you now, in line with some sequential improvement in the order intake, also see a little bit less pressure there? Or is it exactly the same as in Q2?
Well, we don't see less pressure. I mean as long as I would say, capacities are not adapted in the industry, I would say we see pressure on pricing. And I would say our customers playing in that very nicely again. However, we have been extremely strict and clear what we are going to take onboard and what we do not take onboard, which has certainly bit on -- hit on, let me say, the volumes we could get. I mean that would have been more out in case we would have been more flexible. But for us, it's a steep roof on 1 side to get the volume and on the other side, not to smash pricing in the market. And we still continue on that path. I know that's sometimes harmful. And if you look to employment, it would be easier to go the way to open up pricing, but we don't see it as a reasonable measure because it will actually hit us the next year even harder than this year. And that's the reason why we continue to be tough on pricing, keep our strategy even if we are suffering to a certain extent on pricing as well. I hope that answers the question.
Ms. Felicitas von-Bismarck from Deutsche Bank.
I have a question, I missed that. How much of the personnel cost savings that you had like was -- you would consider temporary? And how much of that is actually structural?
I forgot to push my mute button. This is Norbert. It's about half and half so far, structural versus let's say, onetime temporary measures.
After 9 months?
Yes.
So when we take the number in 9 months and we take the number last year and there we take half, half, okay, super. And just a more general question, how do you think like this period of corona has changed the way you are looking at potential structural measures or more structural measures even? [indiscernible], for example.
Yes. Good question. Short term, we also work with some in-sourcing, yes? But long-term, we have to adjust structures, and that also includes that we will reduce, for example, our own added value in certain manufacturing areas in the future to lower our risks when capacity utilization is low. And on the other hand, also to reduce our capital in those areas in the future.
And may I add. I mean we have at the moment -- and we will talk about that next week in more deeps. We have a voluntary relief program at the moment in place. Of course, we want to do that on socially acceptable job cuts, of course, but we have even stated very clearly that we are terminating for operational reasons if we not do not succeed with the voluntary leave program. I mean -- and I would say the important message for you might be. I would say we have a good estimate on the market size, we are going to see in 2021 and 2022, and 2022 is more important for us. And we know exactly how much we have to adapt the structures of Krones that we will be in the range of our targets in 2022. This is actually the way we are going to proceed forward. And I would say that's 1 of the reasons why we will speak a lot next week in the Capital Market Day about the market size and how we see the future and what is the equivalent structure for Krones to deal with that market size and to be successful in this environment. And again, we have been crystal clear on that we need to reduce headcount. This is publicly communicated. All our people are informed we are not yet there with the final figures that will come, let's say, within the next couple of weeks. Why is that? Because, of course, we have a lot of things to organize that we're getting forward with that. So hopefully, that gives you a flavor on where we are with that.
And then I have -- sorry, in reading your guidance, do you expect further special effects or further impairments in this year?
Impairments, very little, but we expect onetime cost for restructuring, as Christoph Klenk just mentioned. And coming back to your first question, what of the personnel cost is structural and what is temporary and where I said about 50-50. We know that it's our responsibility and job to make the temporarily cost reduction, switch it into structural cost reduction for the future.
Okay. That's clear. And then I have 1 clarification question on your current trading or on your pipeline. Did you say that you would expect -- if everything goes as normal right now that you would expect the same level of Q3 in terms of order intake? Did I understand that correctly?
We expect Q4 similar as Q3 or Q1, for example.
Yes.
Okay. But on a year-on-year comparison, that means it's still quite dramatically down, right? So in terms of your revenue for 2021?
Yes, correct.
So what does that mean for your revenue and your capacity utilization next year?
That we will have a similar situation next year as this year. We will start with a lower order backlog compared to this year. On the other hand, we do not expect such a low order intake quarter as Q2 this year.
Mr. Daniel Gleim from MainFirst.
The first 1 is a follow-up on your commentary on the end market development, and I appreciate that we will discuss that in very much detail next week. But could you give us a sneak preview. How much you expect the market for beverage equipment, not so much volumes at your customer, but on your own market for equipment to structurally decline as a result of COVID? So a very rough ballpark number, so we get a better understanding on what to expect.
That's a very good question. I have to admit, Mr. Gleim. I would say that's really good to say how that may look like. And what I would point out first is that we don't see, let me say, this continuing on a stable line for the full year. That's an important message because we might see in 2021, in the second half, a good recovery on the new equipment line. And why is that? Because what we see is that once our customers are recovering, there's an offset period between they are recovering, and once they are going in further investment, so that's the important message. And since they expect, even with 2021 being impacted, I would say, on -- with COVID-19, but not as severe as in 2020, they see a recovery, and they are estimating on the northern hemisphere, a kind of a normalized summer. That's important. And that would give us, for the second half of the year, a better taste on order intake on new machine business. Saying that, I would say, difficult on the product mix. But we do see the first half of the year on a level like we have seen maybe Q3 and Q4. We don't see exploding the market in the first half of the year in terms of order intake. But we are calculating with the growth in the second half since we are looking into a severe -- on a good recovery in 2022. But the exact number is difficult to say because there are a lot of -- a couple of big turnkey projects out there. Usually, they are difficult to catch because pricing is critical. So let's see how things are going. And again, I have to say a bit that some of our customers have done, over the last 3 months, 3x new budgets for the next year. Why is that? Because their estimates have been, I would say -- I wouldn't say wrong, but overhauled by the market development all the time. And that's the reason why I'm not sure whether I can give a full ballpark figure on how much is the new machine business down by next year. But I would see it in the range as we see it in Q3 and Q4 for the first half of the year and in the second half of the year, significantly improving. I hope -- I know I didn't give you a detailed figure and a detailed number, but that opens -- it gives you a little smell where things are going.
Yes. And just to clarify, when you say that the capacity has not been adopted yet in the industry, you're referring to the first half of 2021 and not so much on the long-term vision for the industry?
When I say the capacity has been not adjusted, that's more on the supplier side. So I see that with all the suppliers in the industry like Krones, like our German competitor, like the French, Italian competitor. And like all the Italian competitors, they have not yet adjusted capacities what we see. I would say we are the first ones doing that in a larger scale as far as I know, and this gives a bit of a pressure on pricing. And of course, who is grabbing the market volume. I would say -- I would believe that the others are working on the same measures as we do to get capacities aligned. And I would say that would give us a bit of a better, let me say, balanced market approach than we see at the moment. I would call it this way. Our customers have not adjusted capacities at all in the sense of they have taken out capacity. They still maintain their capacity because, again, in volume, they are close to last year in Q3. However, the -- let me say, the premium products they have for the hotels, bars and restaurants are on a much lower level than last year, and the supermarkets are working better. So that's the reason why they're running in terms of volume and liters of beverage, more or less the same. And that -- what we believe is they do not take out capacity. Our customers, they have even more pressure on cost reduction, which will give us tailwind for us that they are going to invest in, let me say, cost reduction programs, which will give us momentum. And of course, they would diversify even for the supermarkets will give us momentum as well. Hope that clarifies.
Very clear for that -- on that. The second question relates a little bit again to the one-off expenses, maybe not to give away too much ahead of next week, but just a rough ballpark for us to work with. When we look at the old restructuring program, EUR 60 million to EUR 80 million, could you remind us, please, how much of that EUR 60 million to EUR 80 million is still to come? That is first part of the question. And then secondly, when you speak about new structural measures where you find the final numbers in the coming weeks, what is the rough ballpark of this new restructuring amount? Is it comparable to the 1 you announced last year? If you could provide a little bit of color on that front, please?
Okay. We will announce those figures end of November or beginning of December, we don't know yet because we have to wait how our voluntary program runs. How much we can reduce with our voluntary program, which will run until end of November. The ballpark from last year, in addition, is probably not completely out of the way wrong, but it's too early now to announce something.
No, that's perfectly fine. Thank you very much for that indication. And maybe 1 last question on the Q3 order intake, which you expect to be in the same magnitude in Q4 and potentially also in both quarters in H1 2021. Has the mix there meaningfully changed, i.e., are the machines, the services that the customers order materially different from the last year? And what could be the potential margin impact of, for example, higher service, if that is the case, if you expect that for the coming quarters?
I would say, of course, in the service area, when you look to that, we have, of course, seasonality. And I would say Q3 had still a bit of a impact on COVID-19 travel restrictions to execute that. However, it's -- I would say, the beginning of Q3 is low in services, and it's picking up by the end of Q3. Q4, we have factored in that services working much better. However, we still have some travel restrictions, and we cannot fully deal with whatever is out there, which we could serve. So that has an impact. And second, we have to catch up with a lot of on-site installations, Norbert Broger mentioned that earlier, with some critical cost impacts. So if we see on the 1 side that Q4 is usually the strongest in terms of service activities we have. But on the other side, that we have some impact from catching up with those installations which have been not brought forward in Q2 and Q3. We have some negative impact. We have factored that in. And the -- a bit, of course, cautious with the development we see. So I would say, you won't see any significant surprise in terms of profitability in Q4. I wouldn't expect that. In Q1, we have usually a good Q1 in terms of service activities. And there, we have really to see whether the situation is improving or decreasing. I can say -- I could talk 2 hours about the measures we have in place that we can travel. They are quite, let me say, out-of-the-box, what we have done that we get our service technicians to decide. On the other side, I have to mention once more that we are running -- more than 50% of our service technicians are locally based in the countries, which helps us a lot to maintain our service activities, the overhauls and the installations we have. But it's too early to say that this is picking up significantly and is bringing on the profitability side, significant positive upside.
Very clear. Maybe 1 last try from my side. Do you have numbers that you can share with us by how much you want to lower the breakeven point from a top line perspective with this new restructuring program? Or is this something you could share with us next week? So we get a sense on the magnitude. If you cannot discuss the absolute numbers on the restructuring side, which I appreciate, is depending on the means of letting people go?
That's a good try. Yes, of course, I could tell you how much we want to lower our breakeven point. But then you could easily calculate how much that would make in personnel expenses. So we are back to the first question. It's too early for us to announce anything, sorry.
Mr. Peter Rothenaicher from Baader Bank.
Considering your comments on pricing, et cetera, I would expect that you might have lost some market share in the third quarter and in the first 9 months. Can you confirm this? And who do you think was the strongest beneficiary of market share gains?
Yes. That's a good question, whether we lost market share on that because visibility on that particular point is difficult today, even as communication is lower in our market. But I wouldn't say that we have really lost market share. I don't believe that. We might have some impacts on the 1 or the other quarter since we have lost the 1 or the other big one. However, we maintained, I would say, very good standard business, which is from the price effect, not as difficult as you have a very big project. And you might see maybe with 1 competitor, a good result in Q3, but I do not believe that this has really fundamentally changed market shares at all. We believe with all the analysis we have that it's maybe in the range of 1% to 2%, which we might have lost, but definitely not more. And I would say with the perspectives out and the ways and the things we are doing, I'm pretty optimistic that we are becoming stronger in the crisis because don't forget, we look all the time to the big competitors, but we see that some of the other smaller folks have running into problems because they don't have the global network on sales. We have heard a lot of complaints from smaller ones that they can't do the deal because they are not locally and cannot deal with the customer direct, while we have a chance to deal with the customer direct in, let me say, in any country around the world. And that's, at the moment, the size and the structure we have, even on the sales side, is a very big advantage to get through that crisis and to maintain market share. So I hope that answers the question, Mr. Rothenaicher.
Okay. And then coming to order intake and your comments on process technology. So is it fair to assume that your order intake had a relatively low share of process technology business? And how was intralogistics performing in terms of order intake?
First of all, to processing. I mean, processing was -- had a very strong hit, down by 30%, I would say, in the crisis time. So actually starting from, let me say, March to July. And then we have to differentiate in 2 parts. I would say everything, which is related to soft drinks, juices and milk is doing quite well. And again, it's the brewery, no question because of hotels, bars, restaurants are down, the brewing business is hit the most. And this is 1 -- the 1 actually, we are facing significant problems. I have really to admit that straightforward and where you see the toughest adjustments in terms of the structure we have for processing. The rest of it, I would say, would be -- is good for the rest of the year in the sense of it will be profitable. But brewing as such is still an issue. And this is pretty much down. There are some orders out there. But again, heavily thought about that, and we have been -- we are careful that we get the right contribution margins with the order intake. So that's 1 proportion. And we are restructuring that area fast because there are a lot of smaller companies in our processing environment where we have good, let me say, measures to execute that we have structurally aligned. In terms of intralogistics, that went quite well. Of course, we had a lockdown in Q2 for the plant in Italy, which was hitting us quite severe. But they are profitable in the second half, so we are catching up, and the order intake was very good. So we are going, I would say, with 2/3 of the order backlog we need for the revenue for next year already by the end of the year. So that's good perspective. And we will have significant growth in intralogistics next year compared to 2021. Of course, we have a shift of EUR 20 million, EUR 30 million revenue from 2020 to 2021. But even beyond that, we have good growth for intralogistics.
Okay. Then you mentioned in your initial remarks the topic of remote services. So to what extent is it already working and running and helping you in this environment?
Yes. First of all, we had all the time, remote service capabilities that we -- our service technicians could actually jump on the computers of our machines and to help our customers. But what is new for us that we had around 150 service technicians being remote from home in the crisis, supporting colleagues outside and even more important that we had service colleagues from Krones, let me say, from China being in factory acceptance tests remotely in Germany, which helped them to learn the machine. And once we brought the machine out, they have been already adapted and could actually commission the machines and the lines by themselves with our German help. And that's really a big step forward. And we are going to maintain that concept. So this is quite difficult to maintain at the moment because service technicians tend to travel. And as soon as the doors are open, they want to fly out. But we have actually a strategy in place on a much larger extent to maintain remote services on exactly the way I just explained it because we believe that, that helps, number one, getting the installation times and the commissioning time down, and of course, it will reduce cost. And that's something we are going to outline next week a bit more that you get a deeper understanding where we are with that.
Okay. My last question is on the Hungary plant. How is the start of the factory running? And was it in the third quarter earnings, positive or negative?
Okay. I'm first talking about the -- how it is running and Norbert will then talk about the earnings. Of course, we are -- and we said that already, we have been heavily impacted with COVID-19 in Hungary. And at the moment, it's again coming up, the issue, travels are restricted. However, in In October, we have the first months where we have more production hours in Hungary than in Germany in our, let me say, conveyor segment. That's a big step forward. And we are having a good curve of increasing the production hours further till the end of the year. And we -- at Q1, we should be pretty much on, let me say, on the level that I can't say exactly whether it's 90% or 95%, but we should be in a range that we are really performing most of the hours for our conveying technology out of Hungary. There is still a lot of bumpy things in between. I can't deny that. And we have everyday task force going around that, but we are getting our steps forward and things are continuing.
Yes. And in addition, I mean, we are in a very critical ramp-up phase right now. And in Q3, we had a loss of about EUR 3 million for the Hungary plant.
Sven Weier from UBS.
Yes. Just 1 follow-up, please, if I may? And that is regarding the free cash flow. I was just wondering the 9 months improvement that you've shown. Are you also confident to have such an improvement then for the full year? Or what's your expectation for Q4 regarding free cash flow then?
I don't expect significant changes in Q4 compared to the first 3 quarters. So I assume we will maintain this improvement also at the end of Q4.
And should we also expect you to talk about your general thoughts on free cash flow generation midterm next week that's how you make sure you keep this improvement for the years to come?
I can take this point if that is interesting for you and then we can certainly build this in, yes.
Because I would guess that then ties in into your working midterm over every target anyhow?
Yes.
[Operator Instructions]
Yes, if there are no further questions, thank you very much for joining us today. It was a pleasure to answer your questions. And again, next week, on the 12, we have the Capital Market Day where we give you much more insight, in particular, in the market development. And let me say, the strategies we are going to apply as well, of course, the important one, the measures, how we get our profitability levels, which we envisioned. And we are looking forward then for intensive discussion. Thanks a lot. Have a good day, and all the best for you. Thank you. Bye-bye.
Bye-bye.
We want to thank all the participants of this conference. Thank you very much, and goodbye.