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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and thank you very much for joining us for Manz's conference call regarding the publication of the financial figures for the first half year of 2023. First, our CEO, Martin Drasch; and CFO, Manfred Hochleitner, will give you an overview on the operational and financial developments in the first half year of 2023. And afterwards, you will have the opportunity to ask your questions to ask a questions. [Operator Instructions] One last point before we start with the conference call, please note that this conference call is being recorded. I would now like to hand over to Martin Drasch and Manfred Hochleitner.
Thank you very much, Axel. Also a warm welcome and good morning from my side. We are happy to have you here today to discuss and to give you a deep dive into our half year figures, which we published as of today in the morning. And as you will see, we had a very busy and also quite stressful second quarter with good success at the end of the day but due to several impacts and, let's say, developments, which we will go in too deeper afterwards and give you some insights here, we had really some good outcome here.
Let's start with our KPI numbers, which you know from the last time we [ started ] with the order intake. As you can see, we achieved roughly EUR 48 million of order intake in the first half year compared to last year's half year number, this is a reduction by minus 57%. This is due to the overall situation and also the very good order intake we had in the second half of 2022 but also the reluctancy of our customers due to the topics of the economical situation and the reluctancy of investments of our customers and a lot of technical discussions we had with them. The decision-making process was in several orders delayed so we are actually in a -- had a lot of discussions with different customers in front of the summer shutdown to finalize this discussion and generate the necessary order intakes that we are looking here very optimistic into Q3 and Q4 to achieve then again, very good order intake with the also the good situation, which we actually face now is a good order backlog which helps us to overcome such influences and impacts out of the market. Second topic is the cash situation, as you can see, which is also in connection with our order intake as we normally achieve a huge amount of our cash with down payments from our order intake customers. So also this is in combination with some missing order intake we see actually, but Manfred will also take you here some further details in the next slides.
On the revenue side, we had really good development, as you can see, compared to last year's half numbers on EUR 142 million of revenues, which we generated in the first half year. As I mentioned, it was very busy in second quarter, and we had a really good outcome with several customers where we had 2 supports in the ramp-up of their lines and machines. We delivered to them as they are still not on the level that they are able to handle such lines alone so we've invested here and now got the feedback from the customer with further order intakes and payments in such relations. So this was very busy, but also very successful outcome in the first -- in second and first quarter. This is also already reflected in our EBIT numbers. As you can see, this negotiations and developments with higher revenues and closing of some of these orders really lead us then to the situation that we increased the EBIT, also the final negotiation and finalization of our Britishvolt order, which will give you some further insights afterwards had an effect on this topic. So this is the overall KPI figures, which you can see and which can see in the development. And I will now hand over to Manfred, which will give you some further insights into our financial figures.
Yes. Thank you, Martin. Also from my side, a warm welcome to our today's conference call. So after the -- you have seen the KPIs, let's make a deep dive into our income statement first. So we have achieved, as you have already seen, a significant and strong increase of revenues of 12% compared to the previous year. And this increase was driven by both divisions where [ MBS ] showed a stronger growth than Industry Solutions. As already shown in the previous report, the total operating performance reflects the progress of our IPCEI subsidy project in connection with developing new battery competence here in Europe. The main item under the operating income is the effect out of the shares from custom sales, which happened already in the first quarter. So this was a share swap from customers, stepping into Customcells Holding.
Aside from this, we recognized roughly EUR 1.6 million of exchange rate gains under this position. Very good development on the [ cyber ] material expenses in the first 6 months of this year. We reduced the material cost ratio by 9 percentage points compared to the first 6 months of the previous year. Main reasons are contributions of improvement of costs in running projects and an optimization of external service providers in connection with our ongoing execution of our customer projects. Personnel expenses are higher due to the usual salary increases and higher headcounts in Germany and Italy in connection with the IPCEI project so therefore, we have an increase in high-cost countries compared to a certain stable results and stable headcount in the low-cost or lower-cost countries. The other operating expenses are in the level of the previous year, which shows clearly that we have a strong focus and keep our costs successfully under control. In total, our EBITDA came out at EUR 16 million, which is EUR 16 million higher than last year. So overall, excellent development even without the impact of the share [ slot ]. The same is true for the EBIT, of course, this EBIT grew also very strong by EUR 16 million. And finally, our net result and it also up with a strong plus of EUR 7.6 million. Let's now look at our divisions. As already mentioned, the first half with the division [MBS] as already mentioned, the revenues grew by roughly EUR 9 million or 18% compared to last year, mainly due to a good progress of our projects. EBIT grew also very positively with more than EUR 14 million compared to last year as we could do several major contracts with additional cost coverage incurred already earlier.
In addition, the [ German ] now officially, Martin mentioned this already, 1 of the 2 owners from Britishvolt and you can see this also in a decrease of our order backlog in Mobility & Battery Solutions. And we see now and that's very important to mention that our operation of [ Dual Group Manz ] starts to come into real life as we have processed now the first RFQs together. So the European market now realize more and more that there is indeed a European alternative and European answer to the very aggressive competitors from China.
Regarding the market development in the past 6 months, we see that investments have been postponed due to many question marks now arising from the different subsidy projects in Europe and in the U.S. And as a consequence, the order intake is below our expectations. However, our sales [ further ] remains with a volume of more than EUR 500 million for better applications, very strong. And so we are expecting a much stronger order intake in the coming months.
Going forward now to the segment division Industry Solutions. Also, this division shows in total a very good development with a further growth compared to last year. So this growth is also reflected on the EBIT level with an EBIT of EUR 4.7 million. This is EUR 1.5 million higher than last year. The growth is mainly driven by the German business area, Industrial Automation, whereas you see a weaker market for display in Asia. Nevertheless, the growth perspective of our FOPLP business remains very stable and shows increased order intake, increasing order intake perspectives.
Just to remember, for those who are new in this call, FOPLP or Fan-Out Panel Packaging, in this application, the components are wired in [ filtering ] technology on the wiring layer with embedded components, asset components, such as resistors, capacitors and conductors are integrated, and this [ thin-rim ] technology allows the package [ needs ] to be reduced significantly compared to other packaging properties.
Now going forward to the balance sheet. The balance sheet total is now EUR 28 million lower than at the end of last year. On the noncurrent assets side, we have a slight growth by EUR 7 million, mainly due to the impact of the share swap which I already mentioned and which happened already in the first quarter. The current assets came down by almost EUR 26 million, mainly by a reduction of contract assets and lower cash and cash equivalents due to the missing down payments from new orders, as I already mentioned, I and Martin before.
On the liability side, the equity grew by EUR 6 million based on the positive results of the first 6 months and this leads now to a very healthy equity ratio of 34.3%. The non-current liabilities remain on a stable level, and the current liabilities are now EUR 33 million lower based on lower trade payables and contract liabilities. The delay order intake was compensated over a higher usage of our financing lines, which leads to an increase of our net debt position.
Regarding the cash flow, as already described, the negative cash flow from operating activities results mainly from a decrease in contract liabilities due to delayed order intakes. The cash flow from investing activities shows the current status of the financing of our IPCEI projects. Also there, we have seen a delay in getting the payments from the government. We received this only after the first 6 months 2023. So this has also a negative impact on this cash flow from investing activities. And finally, this negative cash flow from operating activities and from financing activities was financed partially over a higher assumption of our credit lines.
In total, we ended up at a cash level of EUR 7.6 million at the end of June 2023. So far, the deep dive in our numbers, and I hand back now to Martin for our strategic strategy and outlook and more details for that. Thank you.
Thank you, Manfred. So I will take you on the journey now further on our outlook. But first of all, short reminder on our strategic focus. So as you can see, based on our 2 division model we have, we want to become the top three supplier for EU and U.S. as integrator of production equipment for the battery industry. And for our Industry Solutions department, we want to be the clear target provider solution provider for our customers in case they have special topics. We can solve them and grow with them with their special demands. That's the second part of it. And as you can see the principles of our focus strategy is clearly to invest in such markets where we see opportunities to bring on our technologies and see a further growth.
And also what we see that we have then the potential in this early entrants in this market that we can realize them business potential in maturing markets or development of maturing markets. And clearly, also, as I mentioned, we want to pushing forward our innovative technologies and solutions in different businesses and want to be come here with our customers the first in the road to solve their issues. And at the end of the day, this then reflects as well in a further expanding service business, which we already recognized the last 2 years as more and more machines of Manz are in the field and need for sure our systems and service.
Having a look on the Industry Solutions potential, what we see actually is really increasing demand from the automotive market, especially for components and solutions for the electronic in the powertrain area. And for example, for the cell contacting system, but as well for inverters and battery management systems. There is a huge demand coming up for scaled solutions, which we can answer with our LightAssembly platform, which we made now fit off as well for the automotive industry, which was the development target of the last years to lean it up and really make it traceable and have also traceability in our lines in there that we can supply here at the necessary solutions for the automotive industry.
And as you have seen, also, we won here the first order the former Tier 1 supplier, which was beneficial for the solution of Manz, and we see here a huge potential, which I will show in the next slide in some figures and data for the upcoming years.
Also what we see is that there is a strong demand also for the nonautomotive market because more and more tools and equipment is also supplied with power electronics and also here in a smaller scale, we see the huge demand for solutions from Manz that we can assemble on a high quality and also on a high scale with our solutions and our technologies, such products.
Also in the digital printing technology, we see further demand after now our first projects are realized and in the finalization of the projects, that there is a huge interest from different industries coming up and with our solutions of fast supplying of the products under the printing had a high precision and the highest throughput so that the cost of the printing head gets reduced and that makes this technology interesting for other areas especially also in the automotive sector to get rid of the lamination technology in different applications. And also in our Asian market, we are actually developing here solution for functional printing, which is of high interest of several customers, which are developing with our here a solution, which can be scaled in the next quarters.
Also here, like Manfred mentioned, we see an excellent market position in the FOPLP technology and also in the IC substrates. We have here the last weeks a road show in the U.S. with high interest of several big customers, which are interested in the solution with our customer, [ST Micro]. And here, we are seeing a huge demand coming up also out of the aerospace industry, which has a huge demand for such technologies and such potential solutions also then build up in the U.S. market.
As announced, you can see now in this slide here, for example, for EV inverter assembly lines, our assumption, which we had in a basic scenario, in an extended scenario with a CAGR of the roughly 11% for the next 6 years. And as you can see, there's a huge demand in this market coming up from roughly EUR 500 million in 2024 of the basic scenario and going up to nearly EUR 800 million or EUR 900 million and if we go to the extended scenario, even EUR 1,600 million of overall investment in this market is achievable.
And coming back to what I mentioned before, there is really a need of highly automated solutions with a high precision traceability as this inverters and as well the necessary components need to be on eye accuracy to avoid failures in the systems and avoid burning of such components. And therefore, we see here a huge potential for our solutions that we already have proven with our customers, we have in place that Manz is able to handle here also lines in a scale of more than 160 process modules in a highly connected way in the automotive industry sector.
So this gives us here the good outlook for this business and a further development in this area as a given fact.
Coming to the growth potentials in the Mobility and Battery Solutions department. We still see a significant growth in the demand of lithium-ion batteries, but as well other technologies coming up, if it's natural [ ion ] battery source, lithium [ car ] batteries which are coming up.
This is really a huge demand and necessity for different customers to be here in the market and thinking about to develop their own technologies. And as you can see, we see that the forecast will reach roughly USD 9 billion by 2026, which is a CAGR of more than 20%. And we are in this business since several years, so we are good prepared with our IPCEI project and our anchor machines we have developed and we already sell and for sure, as Manfred already mentioned, with our partnership with [indiscernible], we are also very interesting for our customers coming out of the OEM sector, which see us really here as a beneficial part for them to have other technologies, more reliable products, higher OpEx and less scrap in the lines than they actually face with our Asian competitors. And this gives us also here a good opportunity for the future to healthier growth.
And also we see in the future and also the next quarters, a very, very good situation like Manfred mentioned, with more than EUR 500 million of projects we're actually processing in our sales department which we are actually discussing and further developed with the customers.
Also, we see a strong revival or coming back of the North American market, even faster than we have expected. This is due to the Inflation Reduction Act. So there are more players now in the game, taking opportunity and advantage out of this program, which is from our point of view, very interesting and very beneficial for such customers. And they are now actually in discussion with us and our Manz support and when we are able then to have the machines ready for their products. This is also something very interesting also for the big partners over there. We still hope and Manz solution is a very interesting thing for them too and reliable partner with scalability and also a very good footprint in the North American markets.
So therefore, we still have a strong focus on the development of technologies in this market, our [ FPD] department and developed already very good products. And I just would give you here a heads up, we will have our showroom showing on our site in [ Tupin ] in October, where we will give you here an insight, and we'll present some of our new machines and technologies. So Tech Day which we will closely have our customers with us and show them the advantages out of our developments. And this is also a clear focus for the future that we develop the technologies on a level and also with the necessary developments in the software and digitalization area to reduce scrap.
This is the biggest advantage the European suppliers can deliver. We are famous that we have machines already delivered years before, which are reliable, which have a capability and capability to process on 99% of availability and mean time to repair more than 5 -- or less than 5 minutes. So this is something which we are famous for. And our task is now to show this as well in the battery production which our competition is actually not able to show such numbers. And this is our clear focus where we need to step in and to prove our capabilities in the near future.
Therefore, also due to the fact that there is no standardization from a battery perspective visible, actually, we develop further our modernized anchor machine products. Means that our machines are flexible and are fast adaptable to the needs and dimensions and decisions our customers at the end make for the dimensions of their cells, and we have been capable with a lower and very fast mechanical engineering efforts to adopt these machines, but the processes are stable and known, and this gives them also us the opportunity to integrate and ramp machines earlier in lines, earlier than our competition.
And [indiscernible], with these topics, like mentioned also in our strategy, we see a huge chance to have here increasing out of [ Seri ] business in the future.
Just underlining that one with some facts and figures, so what we found out after several discussions also with some of our close partners and customers like Daimler Truck, we see the future here is coming in waste. It's not coming straight up and reliable, but it's different waves, which we are actually seeing. So the first wave of battery production equipment is actually ongoing. And as you can see, the main focus actually was here in the area of Asia, Europe and America where, let's say, on a lower number, but that's not we are focusing now, it's Wave #2, already a little bit delayed due to the fact that some of the subsidy programs and uncertainties, energy costs, actually we have a huge point of discussion for investments of our end customers.
But nevertheless, with the infield and look deeper [ not ] insight with our customers see that these investments will now come and you see now a different share in this way for 2024 to 2026 where Asia is lower and Europe and America come into the focus. And then for the next scaling effect, we see then, again, a clear focus for the Asian market, which we have done roughly number of 60 or 2/3 of the installation, but also Europe with part of 24% is still highly reflected. And overall, what you can see is the number of factories, which we see and in the second wave is 85 factories worldwide, which we see roughly 60 of them interesting for months is a huge number, and we are able to focus and as well target them with our corporations we have in place, but also with our concept of anchor machines and solution provider technologies, where we can solve some of special topics of our end customers.
So also here, the growth market of battery and cell production equipment is ongoing, and we see also here a huge, huge demand for technologies, which are really outstanding and delivering the capability to lower the cost in the sales production. So it means that the cost of kilowatt hours per -- or the cost per kilowatt hour will be reduced, and this is only possible if you can reduce scrap and have a higher capability and less energy consumption in the manufacturing of these cells.
For the opportunities for Manz, we have identified 4 clear opportunities. First window of opportunities for new cell producers, which have less capabilities and knowledge, they need to act reliable and as well experienced partners and machine builders, which can support them and help them to train their people to not make the failures or the others do. So this is our first window, which we see as target customers and opportunities, and they also see this in the capabilities of Manz.
And that's also the second topic that with this expertise, we are really a partner on eye-level, we are already supporting our customers in the development phase of the cells. It's the experience we have based on the alliance and the products we deliver to our customers since more than 30 years. And we also have here a clear line model, and that means that there are more than 50 processes in such a battery production line. But each process can lead to a failure and to scrap of the entire cell and the interconnection and the digitalization of such a line is of a huge effect, but that means at the end of the day, we can detect in the preprocesses, the failures, can do a rework in the after processing or even take the sellout that not even more waste is generated if the defect is too high. And this leads to really lowering of cost because the material ratio for battery cell is roughly 70% and if you produce a scrap on this cost are on the table, you cannot reuse them. But if you're [ wide ] scrap then you a huge effect on the overall cost structure of the output of your [indiscernible].
And the fourth window of the opportunities for Manz is that we are modular. So we have developed our processes even 3 actually [indiscernible] are ongoing for new processes that we are filing and we will show on our Tech Day in October, which are outstanding and really will deliver game-changing solutions in different areas for our end customer, and we are looking forwad here to integrate this in the first line. First of this equipment already is sold to [indiscernible] and will be used in their -- in [ Manheim ] for our first test on real production.
So all of this leads now to the order intake and backlog situation. So Mobility & Battery Solution you see for the order intake, we have roughly EUR 42 million achieved like we announced before. In Industry Solution, EUR 42 million. So you can see here, we have the biggest gap of the order intake compared to the 6 months figure of 2022, mainly due to a weak order intake in Asia, where we already faced huge topics in the investment behavior of our customer due to the difficulties over there in the industry of this [ day ], different looking field is then the area of the FOPLP and IC substrate technology. Here, we see a huge investment demand, but still some reluctancy for the development is very promising in this area that we will see a change here, which leads them to an overall intake of EUR 84 million like shown before.
Backlog in Mobility & Battery Solutions, still quite very good. We see the reduction of the Britishvolt [indiscernible], now EUR 118.6 million order backlog. In the Industry Solutions department, we have an order backlog of EUR 102 million. So still very healthy EUR 221 million of order backlog which we are actually reducing by very good development in the order processing with very good development also on the material side, but the clear target is for the next quarters to get the necessary order intake potentially in the market is there. We need to convince our customer to go with Manz. This is the strong task for the entire team of Manz in the next weeks and months.
Coming to the guidance. So we see still that our guidance is very valid. So the increase of the revenues in the low double-digit percentage range. The EBIT margin we see in the middle positive single-digit percentage range and the EBIT margin will stay in the low positive single-digit percent ratio with the situation that we see. We keep our guidance in the way we have published this in the beginning of the year. So far from our side, thanks for having us here, and we are now looking forward to receive your questions.
[Operator Instructions] So first question comes from Mr. Ruzgar. Mr. Ruzgar, you should now be able to unmute yourself and ask your question.
The first one is on your earnings development and here on the MBS segment. We see some fluctuations in the earnings development in the Q2 EBIT looks quite high. What were the drivers here for the strong performance? And do you consider this as more than the usual cautiously calculated project costs?
So there are different drivers. First one is the Britishvolt that [indiscernible] of this project and also clearly to mention here, it's not a decision against Manz, just a project on the new owner of the project is postponed. And therefore, we decided together with the customer to cancel this project, which has one effect. The other one is the topic that we were able to close really some important projects where we have invested for our customers with amendments and also support in the ramp-up of the lines, which we did without the necessary order intake or the money was spent and we received now as a commitment from our customers, the payments, which was an increase in the EBIT area here and was highly appreciated by our customers.
And the other one was the effect of our income machines like the BLS, which we sold with very, very low headaches and a very good margin. These projects -- products are delivered in 3 to 4 months and are able then to get SAT or final acceptance on our customer side very fast and with a very low effort from our engineering side and low risk.
These are the 3 effects which have this impact besides the Q1 effect of the swap deal we had in Customcells, but these are the main drivers for this positive development in Q2 and as an outlook, this is ongoing. So we still see with the projects we actually developed with our customers that there is a strong need within Manz to support, and we see further development also here in the service department, which has a very good margin in this direction. And on the other hand, we have a huge interest now coming also for welding technologies and anchor machines from our side of customers which will support us in the direction of having here a good EBIT margin.
So in a nutshell, it's now the developments and the investments we have taken the last 2 years in process developments and machines are now coming really back to us that the risk is reduced, and we have the potential to increase our EBIT and margin in the projects in a parallel effect that we have now a different situation in the components area. So the market for components is coming down. There is no really need anymore to pay more to get components and parts earlier delivered from [ some ] suppliers. This was a huge headache of the last 1.5, 2 years. So also we see here some effects that the negotiation with suppliers is much better than we had this before.
Okay. And maybe can you provide us the impact of the Britishvolt termination on the EBIT?
So overall, we recognized the first portion of the contracts in revenues and EBIT were EUR 10.7 million. But it is very important to see that the costs in connection with the projects happened already last year. So this is only, let's say, a delay recognition now of revenues and EBIT in this context.
Okay. Fine. Got it. And my second question is on your order situation. And I guess, the situation in the Industry Solutions segment is somewhat different than in the MBS business. There was a slight improvement in your intake in Q2 versus the first quarter, but still on a low level. Where do you think is the industry in terms of the cycle for the large orders, mainly in the display area. And what are the signs you get here from your customers for the second half of the year?
For the display industry in Asia, mainly here in China, we see some revival of the industry. So there was nearly 1 year nearly no projects on the market and the few projects or tools, which were requested from customers was a highly competition with the players in the market. But now 2 or 3 projects coming up in the display industry. Actually, one is in final negotiation in the next weeks, which is a long-time customer of months where we see a huge chance to get the order intake here, but still a very, very strong competition in this field and very low projects on the market on the display industry that's why we focus here on the FPOLP technologies and IC substrates, where it's really a different business, which releases us a little bit of the cycling market here in the display industry.
And I see here really some -- after this roadshow in the U.S., some projects coming up also with fast decision-making process for the first line. So the first product pipelines are here in discussion, but even these lines are already of a really reasonable value and also in the Asia and the area we see that the FPOLP technology is requested as well here in Europe, we see some projects. So based on that, that this revival of the display market is coming back, the potential for electronics with these 2 new technologies and then additionally, the digital printing technology gives us here really a good opportunity to have an improvement of order intake in the next 2 quarters and then let's see how this develops for 2023.
But I think with the new technologies also here, we have some good chances. And here in Europe for the Industry Solution department, we see also quite good chances for order intake. Also the decision-making process is ongoing. A lot of these decisions is driven by uncertainties due to support of the government and subsidy programs and driven also by a discussion about cost of energy, especially in the area of the inverter technology. And for the battery production, as mentioned, it's really here in the final stage of the decision-making process. Also now these processes are so far delayed that they need now to decide. It doesn't matter when they build the [ fab ] then in Europe, outside Europe, in the U.S. or elsewhere, but the decision process is to be made not to lose further time in this direction.
Okay. And yes, my last question is regarding your corporation or the corporation partner, [indiscernible] has acquired a few weeks ago, the automation specialist, [ PBS ] Automation. What does that mean for your cooperation and also for the potential contribution of [ BBS ] to the overall corporation? And do you consider [ BBS ] as a competitor of yours?
No, there is no impact from this deal, which [indiscernible] make with [ PBS ]. We haven't seen [ BBS ] the last 5 years as a competitor. So they are in complete different fields, acting it's more or less more related to [indiscernible] as they are also in the technology of manufacturing of [ hairpin ] technology or binding technologies in the area of e-motors. So there is a potential let's say, field where we have some friction. But as the e-motor is not part of the corporation, this is beside and [ BBS ] is not part and not visible in this area. We have a clear structure who is responsible for what.
So Manz is responsible for the entire cell assembly technology means after the electrode manufacturing, Manz takes over the responsibility, thus the assembly of the entire cells. And at the end of the line, then [indiscernible] takes over and is responsible for the module and pack assembly.
And just to give you also you a little bit more insight, so we finalized now our reference hub, so we call it. So it's a complete set of 10 gigawatt hours with a complete footprint with a really advanced layout and setup, which is let's say, much better than what we know and see on the market. So it means the footprint of the surface is lower. The logistic processes are lower. We have digitalization concept in, which is fully driven by MES system which is developed by [indiscernible] . They have a huge experience out of the industry of paint technology and also [ body-in-white ] technology where they have already achieved here with their setup of digitalization availability improvements of 6% to 8% in existing lines, which we can make use out for our industry and the technology in the battery manufacturing.
And we will have now a road show in the next 2 to 3 months and visit with our setup and with our capabilities, the main interested customers here in Europe, which have us here in the focus. So all 3 C-level members will have here road shows with dedicated C-level meetings on our customer side to show them the advantages of the collaboration and also the capabilities and really the drivers, which gives there are a possibility to reduce their cost per cell or cost per kilowatt hour.
And I was really proud to see this 2 weeks ago when we had a huge internal meeting to show then the changes and the advantages out of this development, and it's really impressive what we have as an outcome here compared with the competition. For sure, still, cost is a topic for the equipment. We know we have higher costs, but as I said before, if you have 70% of material cost in and you produce more than 20% or 30% scrap in the production line, if you can reduce this by 5%, even then the higher CapEx investment for the machines based back in several weeks or months, whatever at the end of the day is the size of the fab. And I think this is our huge advantage, and we will explain this now to our customers and discuss with them the next projects out of the corporation. First is already ongoing, and the next ones are really in the pipeline.
Thank you, Mr. Ruzgar. So the next questions are coming from Adrian Pehl.
So first of all, housekeeping, just to be very clear on this EUR 10.7 million from Britishvolt that you mentioned. So accounting-wise, you did talk this as revenue, and that was obviously following them through to the EBIT line. Is that correct?
Yes.
Okay. And a question linked to that, so I understood that was for the first phase of the contract, right? So should we expect additional effects like this coming up in the current quarter?
It's right, but not in this huge amount, it's going to be much lower.
So like what EUR 2 million, EUR 3 million maximum or something like this?
Roughly. A little bit higher but roughly.
And then you said something on IPCI inflows. I'm not quite sure if I got this correct, but should we expect inflows from the program anytime soon or in the current quarter or only in Q4? Or what is the additional money that you might be getting.
So normally, this is explained on a regular basis quarter-by-quarter. So we can hand in the cost which happened in a quarter before. And then it is, yes, checked and then pay according to our subsidy ratio in the following quarter. So due to some internal delays in executing on these tax on the side of the government, delays. So this was a late payment which we received and this was around EUR 6 million to EUR 7 million, which we got now, and there will be another amount that's coming off [indiscernible].
Right. So EUR 6 million to EUR 7 million have already been booked first half?
It's not in the cash. It's not in the cash but this is -- this happened in after June, the beginning of July and [indiscernible] visible in the -- in our cash position.
And can you -- I mean, you showed your net debt has increased quite significantly, obviously, I mean clearly when looking at your cash flow statements, actually have been burning cash in the first half quite substantially. So could you give us an idea of the free credit lines that you're going to still have and at what cost is are you refinancing the cells at the moment?
We have still enough credit lines free so that means an amount to EUR 22 million to EUR 25 million. In addition to [indiscernible] at the end of June. And as we already mentioned during the presentation, we have received additional orders from customers in running projects with additional cash impacts there. So this has a not yet been seen in the cash position at the end of June. So that overall, of course, we see, as you have recognized also that this delay order intake has a negative impact on our cash situation. For sure, this is nothing which we cannot discuss. But nevertheless, given the perspectives, which we have in order intake in the second half of this year and given the additional payments we received, so we are on a still stable level. But nevertheless, the influence [indiscernible] cash flow from operating activities.
Can I then ask and I think that's probably the most important part actually, what are your financing options actually besides the EUR 20 million to EUR 25 million because while at the end, I think given liquidity is coming down to more than EUR 7 million, let's say, on cash that is shown at the end of June is not a very comfortable situation. So are you discussing alternatives to increase the liquidity because, I mean, long term, it's probably not an option to just increase that step by step. Maybe there has to be a more structural solution to that. Are you also contemplating changing the structure of the group to some degree? Is it too early? Is now not the time right to do that. So I'm just getting my head around how you could improve the situation.
Because you rightfully said, I mean, obviously, you're expecting more orders, but I'm a little bit concerned despite the fact that you are getting prepayments, if business revised as you desire that you are in a position to pre-finance working capital and [indiscernible] items that come with it.
So one important remark, we do not have to pre-finance working capital because we only order new materials when we get new orders. So this is a big advantage of our very volatile business that we do not pre-finance any orders or even start doing construction work or design and engineering works before we get the necessary down payments from customers. So that's very important. So no pre-financing necessary.
On the other side, you're absolutely right. Of course, it's my task, and I'm working on that to improve the overall structure of financing the whole group. And these are the typical ways, there's nothing extraordinary. So this can be -- it's a bank consortium with syndicated loans. This could be some bonds. This would be capital increase. This could be some smaller financing lines. So that's a healthy mix of all the actions which we have now and so therefore, this is ongoing discussions, but it's on our also product development, which in our business. It's not yet done, of course, as you have already mentioned, but we are in a good way to restructure and to bring the whole financing situation of the group in a more stable -- in a stable manner step by step.
Are you already contemplating selling some assets or some businesses you might not necessarily consider as core going forward? Is that something you think about?
Well, of course, not at the moment. Of course, this could be an option later on, but this is nothing which is right now on the table.
All right. So -- and then finally, last question on this topic. Actually, given that you said you have EUR 20 million in credit lines, I mean, given the cash situation and the negative operating and free cash flow is going to prevail for some time, I mean, obviously, things are getting quite tight by whatever just before Christmas or whatever. So there has to be something significant coming up, I guess. So are you in talks with your shareholders also when it comes to additional support, which you might have seen -- which you have seen last year, for example, in terms of additional financial backing. Are you contemplating, I mean, you said already obviously some measures you are considering. But I think at the end, the pressure must be quite high at you at the moment, right?
Well, at the end it all comes down to the necessary order intake which we need. And as we have mentioned already, the pipeline is pretty strong. So we see a growing interest in the market. We have our cooperation ongoing. So this is focus #1 here. Not only on the board level, but also on the level of all our employees here in the group. So we have seen some delays, but we think currently, at least what we recognize from the market that is getting installed step by step. And in parallel, we are working on some background financing. As I mentioned, in order to stabilize the situation in regards of order intake and further progress of our business development. So that's key #1 here.
All right. So very last question. Sorry for torturing you a little bit on this, but I think it's quite important. So is there a plan B actually if the order intake is not coming in as desired in the second half and you finally find, well, obviously, there's additional postponements we have to face probably not only for Manz, but maybe in the market. The economy is turning a little bit more [ slower ]. Is there a Plan B, actually, if that happens?
In our kind of business, project business, volatile, not really, or let's say, into a very small amount of recurring customers. We always have to have a plan B in our drawers, in our desk. So this is nothing extraordinary. This is normal business behavior here. So and also in this situation [indiscernible], but nevertheless, as I said, we expect new order intakes coming in the next month. And in case they don't come and they don't like [indiscernible].
Thank you, Mr. Pehl. Next questions are coming from [ Stefan Bauer ].
Yes, got a couple of questions. And the first one is a follow-up on the order intake or your expectations about the order intake. I mean, in your press release and what you stated right now in the conference call, is that you're quite optimistic that orders will pick up significantly in the second half. So what is actually the basis for this assumption? Or is it fair to assume that you are very close to signing new contracts with more than 1 or 2 customers in the next few weeks. And is it also fair to assume that we will already see a clear pickup in the order intake in the third quarter? That will be my first question on order intake.
Then the second question is based around the margin quality of your order backlog. Are there any loss-making or 0 margin contracts still included in your order backlog? And if so, will these orders -- when will these orders be completed?
Thanks for your questions. Maybe first one for the order intake situation, I'll give you some insights. I don't know if you can remember, a few quarters ago, I mentioned that we have a clear strategy to grow our growth path with 3 to 5 core customers. Unfortunately, Britishvolt disappeared, but 2 or 3 are still ongoing. And there we have quite deep insights on the development structure and have also quite close discussions with them for further investments. Also, sometimes here postponements are on the table, but that's our business, that's life. But at least we have some assurance like for the projects you have seen in the past with [indiscernible]. Also some of them were postponed, but we have a clear view what will come and if this is reliable or not, then there are some others where we have the same focus and same insights in that one.
In parallel, we are working to replace some like Britishvolt, which unfortunately didn't make it at the end of the day. And also here, we are already in deep discussions and to give you some insight how this normally works, first of all, it's always about giving the customer really the competence level of Manz, giving them really the trust that we can solve their issues and doing some test examples of welding processes and so on. And based on this feedback, we get a quite good picture how are our chances, then we get deeper in contact with our customers, seeing how they plan, how they develop their fabs, what interfaces they have we can support them on the planning level. And then so become deeper and deeper into the connection with our customer, getting more and more information.
And there, we have actually 2 new customers, which we see a huge growth potential with them and to go along with them. And this is now really directly with Manz. And additionally, we have the same thing in the corporation. And a clear signal is always if we get into discussion about terms and conditions, which we try to do always before we do the final negotiations. And we see then -- if customers really highly interested to get these things clarified with us, this is also for us a clear signal that there is another decision-making process and also the board meetings on the customer level on, let's say, really a short-term time ahead, for sure, also [ earsome ] postponements are always possible. And it's not really that we can say the exactly, but also for these 2 customers, we are really hearing in deep discussion in final negotiations, and we really see this positive that we can generate in the next weeks and in Q3, a much, much better order intake than in the last 2 quarters, what we have seen.
So that's the way how we do it and why we are here quite optimistic. And as well, as I mentioned, the existing customer -- long-term customers we have today have some investments ongoing, which were actually in final discussions. So this gives us here clear picture and also a clear view into the future, at least from our part of the assumption that the necessary decisions will be made quite soon.
Coming back then to your question of the margin. So actually, no really big pain projects, which are not already reflected in our margin level. The projects which we have are mainly going very well and are on a good margin level in both divisions. The 1 or 2 projects, like you always said, which are somehow critical in regards of some single processes, we have under control, and we see that we can close them quite soon. So actually, there is no further risk coming out of projects with less or low margins.
Okay. Perfect. And then I would have 2 more questions. One on the Industrial Solutions business. I mean, if I got to drive competition, looks quite intense here at the moment. So is it fair to assume that you're seeing above-average price pressure when negotiating with customers about new contracts? And the second question would be then on the material costs. I mean material cost ratio looked quite promising in the second quarter. What's your expectation about material cost development in the next 12 months, especially given that we are hearing from other engineering companies that material costs and component costs are declining?
So regarding competition, like always that there's always competition. And due to the actual situation in the machinery business, which you can see on the [ VDMA ] numbers, there's also for all the others, high pressure on the order intake, especially for these companies, which coming out of the combustion technology, of the main automotive industry, for sure, they need to search for new playgrounds and feels for bringing their tools and their equipment in. But as I mentioned before, we have now made it really that we are competitive to the Tier 1s. We do not also put the margin level. What helps us here is our newly front-leading technology advantage we have, let's point it that way. So we already hit here really some good developments with different customers. So we have a huge experience which gives us then the trust to also reduce some types, the process machines and the amount of machines which are [indiscernible] as we can rely on the processes and the experience. This gives us some advantage and also tailwind in these directions.
And then we also have here with our suppliers and partners, very good contracts, and we also were able really to push back some of the additional costs coming from our suppliers with our clear focus on growth and the industry we are in. So this is of huge interest for our suppliers and also the big players here in the region for components. See Manz here really as one of the leading players they want to go with, and they are also taking some of the burden of the lower margin and costs. And therefore, actually, I'm not afraid in the area of margin. So in the main fields, we can keep our margins.
And if not, then our team here is quite capable to have the right answers and design to cost and further negotiations of our purchasing team with the suppliers to bring them to the level which is needed, that we can supply in the [indiscernible] point while I'm actually not afraid of this is because we have now really here a good team, which is capable to handle these projects in cost, time and quality. They are also now quite a good experience to handle these projects and that's normally where you lose money in the projects if you have longer time lines, if you have problems on site, this is where you lose money at the end of the day.
And in the most of the projects, for sure, not all -- but in the most of the projects, we did hear a very good job, and the team did do a really good job, and this makes me confidence that this is also then in the future in this direction, the truth for the situation we will face.
And then on the supplier side, as mentioned, as bigger the projects are getting, so the lines in increase in the more components, you have inside this products, which we have contracts with our suppliers, the more we can reduce the prices and also out of our corporation, still [indiscernible] Manz. And we have here a huge interest. And also, as you can imagine, also a huge pressure to the suppliers and to the market out of the corporation to reduce further the prices, and this is also beneficial for our other division, Industry Solutions, as -- so for us, it doesn't matter if we negotiate with the supplier, the price of a component, if it's for Mobility & Battery Solution or Industry Solution, it's for Manz and therefore, it's also beneficial for the other division we have in Manz.
Okay. Perfect. Very helpful. Maybe one last question. Let's assume that you receive the orders as planned and the related down payments. How should we think about the free cash flow development in the second half of the year?
Well, I think that's pretty straightforward. So of course, the contract liabilities will increase again. It will have a positive impact on our cash flow from operating activities. Of course, it depends on the size and the amount of the project. But of course, you see this immediately, new contract liabilities, bringing the cash flow of operating activities out of this heavily negative region towards a much healthy development then.
Thank you, [ Mr. Bauer ]. I think we have currently questions opened from Mr. [indiscernible]
The discussions were now a lot about cash, cash flow and other situation. But maybe we can get a little bit more concrete. So in terms of cash flow development in the second half of the year in terms of operating cash flow, do you see it as a possible chance that operating cash flow will be positive in the second half of the year?
Well, of course, as it depends on the order intake and you see that the main driver of the negative cash flow is coming from a decrease of contract liabilities. So this is the most significant position in the cash flow statement. Having a look on this again, you see that the decrease in trade payables and contract liabilities is EUR 43 million. If we get down payments in such an amount, of course, then the cash flow would be much better. So it will be only enough to get EUR 28 million of down payments from the size of the order, which we have in our pipeline. This is not unlikely. But nevertheless, it has to be signed first and we have to receive the customer down payments before 31st of December. So that it really turns into positive figures is today not really predictable. But for sure, it will improve significantly.
Yes, but for second half alone, so.
The second half only? Yes, I think so. Yes.
Okay. And then in terms of order momentum in July, did you see already some pickup in the order situation in July? Or is it still pending?
Some projects already -- smaller projects already decided. So we see here really a pickup of the decision-making process, but 2 or 3 orders we are actually discussing with the customers are not yet decided about, but as I mentioned, in final stage. And hopefully, we can make it before the summer break of these customers. If not, it will happen then in early September.
And if you talk about bulk orders, these are in a volume of low to mid-double-digit million area?
Correct.
Thank you, Mr. [indiscernible]. So currently there are no further questions. [Operator Instructions]. We'll wait for a couple of seconds -- I wanted to say Mr. Pehl has another question.
Just to be clear also on the remaining order backlog that is the book related to Britishvolt. How much is that actually?
That thing has been removed because [ returning ] both contracts.
Okay. I got it. So that's already cleared. Fine. Thank you.
And then we have a question from Mr. [indiscernible].
As an additional question to all the others before, I just want to focus on the share price. The company value without debt is now almost onetime half year revenues. And as I remember, [ Daimler ] Truck signed a capital increase of EUR 34 and the Chinese investor even paid even more money. Do you see the idea of these guys pushing you into another capital increase so that they can have a cheap takeoff in the long run because it's very surprising that even the family Manz obviously, is not willing to buy shares at that very low level. So that's my concern.
The drop-down every day, very low volume. So nobody seems to care about the share price. Sorry to say that. That's my question. What are your plans about this?
So mainly, for sure, we are also not happy with the development of the share price. We also don't see that the share price actually or the value of the company is really reflected. I think, our potential and even the market size and the technologies Manz is capable to handle and to deliver normally needs to be reflected in a much, much, much more higher share price. But needless to say. So we will not accept this in this direction also with the good outcome of the half year figures, so we will have several roadshows, and we'll have here also more action from our side to explain this more detail to the market. I think it's not really well understood from everybody outside what potential is in especially also like mentioned, with our corporation ongoing and really the high-class customers we have in our portfolio.
So I think this is not reflected, and we are not well, let's say, imbalance from the capital market, and this is something we will improve also with our Capital Market Day, which will happen also in the [indiscernible] with our open house, which I mentioned before, where we show some new technologies. I think it's due to this really road block we had with Britishvolt, which was not our responsibility. If this project normally will develop with the plan they had and further gigawatt scale lines engineering done, we would have a completely different picture. It's now up to us to show that other customers will replace, like I mentioned. This need sometimes, you need to build up trust.
You need to understand the business model, you need to develop the necessary process or at least sharpen them and that's our view we have in this direction. That with coming orders, we also will see here a different evaluation of our share price and the value of the company. And actually, you can believe me, our shareholders have a lot of discussion with us because nobody is happy about the share price. And for sure, we will take all the necessary measures to improve this, but all shareholders are currently see the future and the potential of our company, especially we mentioned [indiscernible] Truck and they are still planning to have their increase in investments of equipment.
In fact, I see the additional value of Manz in other directions. So I'm not afraid that they will not support Manz in all potential ways. And we are working in all directions to improve the situation on share price.
So currently, we do not have any further questions. That doesn't seem to change. Okay. So since there are no further questions, we will close this conference call now. Thanks a lot for joining our conference call. Hopefully, we see all of you on our Capital Markets Day on October 18 here at our site in [ Woking ] and also in [ Timingen ] and I wish you a good day from our side. Thank you.
Thank you so much.
See you. Bye-bye.