Earnings Transcript for GBF.DE - Q4 Fiscal Year 2023

Bettina Schneider: Good afternoon, ladies and gentlemen and welcome to Bilfinger’s Preliminary Results 2023 Webcast. My name is Bettina Schneider and I'm here together with Thomas Schulz, our Group CEO; and Matti Jakel, our Group CFO. We start now with the presentations and afterwards, you will have the opportunity to ask your questions via call or via chat in the webcasts as in our quarterly result -- results conference calls. I would like to inform you, you’re right now in a listen-only mode and the webcast is being recorded. And with this, I hand over to Thomas Schulz.

Thomas Schulz: Thank you, Bettina. Hello, everybody. Let's start directly with the highlights of a quite successful year for our Bilfinger Group. Our orders were growing 5% organically, our revenue 7% organically and our EBITA margin really made a good development of 4.3%. Our cash flow was €122 million and for the year 2024 based on the good result, we guide on revenue €4.5 billion to €4.8 billion. And on the EBITA, 4.9% to 5.2%. We see in all regions, all markets, all industries a positive market situation for that what we offer to the industries. Our dividend proposal is €1.80 per share. And we will host a new Capital Market Day on June 12th in Frankfurt during the Arkema Chemical Exhibition. When we look into the year 2023, we definitely show a sustainable profitable growth which is in line with that what we announced at very detailed showed you all on the Capital Market Day in February 2023. Our revenue, our EBITA and our free cash flow exceeded the forecast which is in all positive and gives us the possibility with the strategy and the market outlook that we can guide €4.5 billion to €4.8 billion in the revenue side and 4.9% to 5.2% on the EBITA line. We expect €100 million to €140 million in cash flow -- in free cash flow which is in line with the targets what we gave last February that we want to have in the year 2024; the 5% EBITA, as well as a 70% cash conversion cycle. It is important to see this year as the step towards our midterm targets which is for the time 2025 to 2027, where we promised the market the 4% to 5% growth, as well as 6% to 7% EBITA and more than 80% cash conversion. We think and we see and we will have in that presentation all the elements to prove that we are on a very good way towards these mid-term targets. One big part of that is of course, our strategy. Our strategy to be the number one in efficiency and sustainability for all our clients wherever they are. That strategy implementation is well on-track and actually well on-track to deliver the mid-term targets too. The efficiency program is completed; the functional organization implementation is done and established and works very well. Our competence development efforts with the so-called Bilfinger Education Game GmbH which is a pilot for training and education of new, as well as existing colleagues, is well on the way and we actually started a little bit earlier than we had in the strategy; we started already beginning of October 2023. Our way to standardize and bundle it; that leave us well on the way and proven with the implementation of the Global Product Centers which gives us the possibility to give all the quality and competencies wherever the client is in the regions what we cover. The other lever is the de-risking; we had a big de-risking activity which is finalized in North America in U.S. and it will go on to bring more of the project business into a product business, that transformation is high on our agenda and actually well on the way. The market expansion which is the external -- which is the market-related part of our strategy is will be with the acquisition of Stork; what we think and what we believe, the closing will happen in the first six months of this year. We'll do a significant step forward but we look further for expansion in existing regions, in existing core business of our Bilfinger Group. And that part, of course, is included that we let business go which is not fitting into the strategy and with that not fitting into the group, like the coal firing service business, what we have down in South Africa; that's still on the list to divest. Out of that, when you talk about to be the number one in efficiency and sustainability, you have to prove yourself that you are sustainable and efficient. On the efficiency, I think the efficiency program actually did a big step in the right direction. On the sustainability part, you'll see here on that slide, how our business is classified by an own classification, what we actually showed in February last year, the first time, where you can say that the A to C class is sustainable business; to several degree A very sustainable and the D class is business which is not adding any sustainability to the performance of the clients and ourselves and that business we will let go. You see a slight movement into A, B, C throughout the year 2023. But in the part of the ESG, we performed two in the environmental part and scope one and two were reduced despite an increase in revenue of 7% -- we reduced 9% of our CO2 footprint. From 2023 on, we actually measure Scope 3 [ph] upstream and we have fear close to 800,000 tons of CO2 and you will see more in the coming years how to reduce that. On the social part, on the S-part which is on the upper right side of the slide; we have two KPIs. One is the TRIF and there we see an improvement from 1.31 to 1.19 [ph]. But on the LTIF, we actually see a side move which is not for us enough. And special program is initiated for 2024 to do here a good step in the right direction. The G-part with the governance, we selected the amount of audits on the supplier. And we gave as a figure more than 600 and we are close to 1,200 realized another good job of our organization. Out of that, we go to the efficiency program. It's the last time that we report on it because it's done since the 31st of last year -- December of last year, it's done. At the end, around 800 positions were eliminated and we will deliver €55 million EBITA improvement as a proto part as a full year run rate. Out of the €55 million, €30 million will go into training and education on top of that what we already do to real concrete our attempts and our way of doing to increase competence of the Bilfinger Group because the competence stands for sustainable, profitable growth. Out of that into our orders, when you look here on that slide on the upper left side, you see quarter-by-quarter since Q4 2021, our order intake. In that slide, it's clear that we had 5% organic growth from 2022 to 2023 and the Q4 came actually stronger out then we had the two quarters before. But the year 2023 was a special year in the development of the order intake because the first quarter last year was unbelievable strong; we have a lot of reasons for it what we explained when we announced the Q1 result -- we will not repeat that in the year to come. In the year 2024, there we foresee the normal seasonality in the order intake. Our book-to-bill on the full year is 1.06 and with that, well in line with that what we said on the capital market they -- with growth perspective. The orders in itself, Europe had plus 6, technology plus 16 and international was minus 12 and that was the planned reduction based on de-risking and taking that business out of the U.S. portfolio but we don't want to go on with. If you look into the revenue, there we had the 7% organic growth, same picture as with the order intake and you'll see that the fourth quarter came out quite strong for the whole year. And important in that to mention is, that Europe we’re growing with 7% and technology with significant and good and great performance, 24%. International with minus 15% is as planned. Actually international with North America and Middle East; Middle East performed on all areas significant better in 2023 than in 2022 and for us quite a good development. Out of that, I go into some of the work we do. And one of the reasons to show that is actually to work intensified on it that we are not compared to construction companies and that we are not the former Bilfinger [ph]. It’s important that we are recognized and seen as an industrial service provider throughout all industries. And if we take some selected orders, one here out of The Netherlands of our Norwegian client, Yaga [ph], it's about carbon capture, where we support Yaga [ph] in taking 800,000 tons of CO2 out of the Dutch side, bringing it over to Norway and bringing it under the sea-bed in the Norwegian area. The other part is the oil and gas maintenance work; what we do for our dear customer Shell in Louisiana, in U.S. And it's another proof that we transfer the U.S. business into the same core competencies and same core businesses, as we have the Bilfinger Group in Europe. The third one is a special one; it's out of the energy part. And in energy, we do a lot of regular work and a lot of special work. And the special work what we do here is with a smaller company, Proxima Fusion [ph], actually a spin-off of the Max Planck Institute in Munich to create a so-called atomic fusion reactor. And with that fusion reactor which is similar nuclear reaction, as you already know -- only with the difference to bring the atoms together and not splitting them up. We as Bilfinger, built the so-called magnetic field coil, as a pilot in demonstration -- actually, on a Bilfinger side here in Germany, beside Frankfurt. Out of that into innovation; we have a lot of people on customer side and of course, we are faced with a lot of different challenges and we are working on it to overcome these challenges through innovation. And one part what we would like to show here is digitalized scaffolding. Because scaffolding in industrial areas is quite dangerous and quite a complex thing and on top of it, it takes a long time to realize and it actually blocks customers to be on full production if it's not done properly. With a digitalized approach, we are actually able to save upto 20% of the cost to make it significant faster than in the normal regular way. And the safety part is significant more safe than any older or regular way of doing it. Out of that from the innovation, we go to the financial figures to Matti.

Matti Jakel: Thank you, Thomas. Good afternoon, everyone. Good to have you with us today, on the Valentine's Day, so to speak. Fourth quarter was very strong again. Like last year, revenue and orders received both around €1.2 billion but what really strikes out is the profitability as you can see from a breakeven position in Q4 2022; we achieved an EBITA margin of 5.8% and a net profit of €108 million in 2023. We exceeded our targets which gave reason and cause for the profit warning that we issued about two weeks ago. And to take a more deeper look into what's behind it, we achieved 4.3% EBITA margin which was outside the outlook for 2023. If you remove special items and one-time effects, the EBITA margin is a good and very solid 4.0%, an increase of one percentage point over last year, where we had about 3.0%. Also on cash flow, removing special items in one-time effects we came out at €123 million and if we adjust our guidance to those elements, then we're at the midpoint of €110 million to €140 million. So on both items, EBITA margin and free cash flow delivered [ph]. Across all segments, we see a positive development in our EBITA margin. From last year, fourth quarter, we were at 4.3%. If you add back the special items, that gives you €52 million [ph] over €1.2 billion and that compares to 5.8%, €69 million in the fourth quarter 2023. And that translates also into the full year, we are adding back the €65 million -- that equals about 3.2% EBITA margin. And we were able to grow this to 4.3% in 2023, also a very good and positive outcome for Bilfinger. On gross profit and SG&A expenses, we also made good progress. Gross profit grew from €437 million to €463 million for the full year. And the SG&A quota which is an important KPI, declined from 7.1% to 6.6%; €298 million, even on absolute terms, a lower number than 2022, despite the fact that we had inflation adjustments on our staff cost. In the P&L, also a few details here. A very strong EBIT performance of €190 million translates into a net profit of €181 million. That's an interesting development. Where does it come from? You have the financial results which hasn't changed from last year, you have income taxes on a much higher result. But then, we also were able to reverse an impairment of deferred taxes to the tune of €61 million which then gives us an earnings before tax of €182 million. And then you have discontinued and minorities gives you €181 million for the full year; that equals to an earnings per share of €484.84 [ph]. Now looking at dividend; we always work with an adjusted net profit where we take a normalized tax rate. And if you do that calculation, then the adjusted net profit grew from €82 million last year to €117 million. And using a payout ratio of €58 million gives €1.80 per share as a dividend that the supervisory board and the executive board will propose to the shareholders meeting in the middle of May. On the cash flow, we also have a positive one-time effect from disposing real estate in the fourth quarter of 2023. That was a transaction that took about 1.5 years to come to completion. And as you all know, when interest rates go up and construction costs increase, a lot of real estate is not being handled and transaction but we were very successful here to close this transaction at €26 million. Again, as I said, this was a deal that was coming for one and a half years and we are really happy to get this transaction closed under difficult circumstances. We paid out about €20 million on the efficiency program and the €40 million that's left will be paid out in 2024 and that is part of the guidance as Thomas said before. Looking at the cash conversion on an adjusted basis, so using adjusted free cash flow and adjusted EBITA which gives you the operational performance, we came out at 78%. That's a bit lower than last year in 2022. We had a number of advanced payments in the fourth quarter which we did not repeat to that extent. So that's why you see a bit of a decline from €136 million to €122 million but still a very good performance and within the targets of our strategy that we presented earlier in 2023. Let's go quickly through the segments. Order intake, particularly in Europe, when you look at the quarterly development, very strong first quarter will not be repeated in 2024. That's not to be expected. And then a bit of a decline in Q2 and Q3 to €700 million and €670 million but again, strong finish in Q4 at €808 million. So in total, the organic growth in E&M Europe was a strong 8% to €3.1 billion on the order intake side. Revenue shows a typical seasonal pattern with a smaller number in the first quarter and then the largest number or highest number in the fourth quarter but still a growth of 9% quarter-over-quarter and also 9% growth year-over-year to almost €3 billion in our very important segment, E&M Europe. Profitability also if we look at comparable numbers, Q4 last year was on an adjusted basis, €44 million, 5.9%. This year, 6.6%, so again, you can see the improvements working in the profitability. Full year last year was 5.1% on an adjusted basis compared to 5.4% this year, also a very good improvement in profitability in Europe. E&M International, order intake, you can see the dip midyear which was driven by the repositioning but again, ticking up in the fourth quarter to €211 million, so the decline quarter-over-quarter minus 13%, for the full year, minus 10%, really driven by giving up one business line in the United States. The revenue went up quite a bit in 2022 over the quarter. But as we finished those construction projects, the revenue became a lot more steady around €170 million to €175 million mark. Revenue declined by about 12% but the interesting feature here is the revenue split is only 30% in projects and 70% in frame and service contracts. Last year, the split was still 40% and 60%. So here, you can see the effects of the derisking. Profitability, again, I think this speaks for itself, the development in 2024 with a very strong finish 5.4% EBITA margin in the fourth quarter. We left the loss area, so to speak, in the middle of 2023 and that has set the stage for 2024 and going forward. Technologies, a significant increase in orders received and revenue, both double-digit for the full year, 16% on orders received, 25% on the revenue. And here, interestingly, the share of revenue within the pharma and biopharma sector has grown from 35% to 50% in 2023. And finally, profitability in our Technology segment, that's a development that we're really proud of, very stable profit generation in 2023 every quarter with a positive contribution and overall, 4.5% for the year. That is a very good basis going forward to 2024. So in summary, Bilfinger delivered on what we promised. And now I hand it back to Thomas to see how we go forward with the markets.

Thomas Schulz: Thank you, Matti. So the next is how does the Bilfinger world look outside and how do we respond to it. And as you know, we divide our world in four industries and let me start with the chemical and petrochem industry which makes roughly 30% of our top line. On the left side, you see the blue arrow and it shows in the regions where we act, that means from North America to the Middle East over Europe, how the industry is doing and it's a side movement what we see. And going one a little detailed more into it, we see the U.S. and Middle East right in the positive development and Europe in as a total in a slight decline. Of course, with Germany is the biggest decline that we see all over our areas, what we are covering. What does it mean? We see a growth of roughly 5% up to 2030 for the petrochemical industry. We see, especially in Europe, an aging asset which needs quite a longer life cycle and a lot of maintenance work. And we see a lot of efforts of our customers to improve efficiency and sustainability. And that altogether gives for us on the arrow for Bilfinger quite an upside, quite a positive development and we give a little bit more granularity into it. Our maintenance business is actually performing very well in that area. The product business which is standard services, standard little products, what we have is on a side move and actually okay for that activity level and the project which is predominantly and if not completely related with CapEx is actually not in the growth part. If we then go over to energy, makes roughly 20% of our top line, the industry is going in all areas positively. We see investments into carbon capture. We see investments, especially into nuclear. The nuclear has such a nice revival and we are so happy about it. And we see a lot of sustainable efforts for new sustainable technologies in that sector. If it's from district heating into district cooling if it's the part what we said with the so-called fusion reactor, where we are part of it, all over in maintenance products and projects. This is a good business to be in. So the arrow, the business for us is quite positive. If we then look on the pharma and biopharma, roughly 10% of the total, here it's predominantly CapEx into new plants because the existing or the installed base in the areas where we act is actually not that large but more is coming. Localizing off that business, being closer to the customer, shortening the whole supply side is on the high agenda list for all our clients. That industry goes up and that industry shows a growth rate over 6% up to 2028. And we see that especially our product and our project business is contributing a lot. But for us, that industry is quite positive to be in. And then the last one, oil and gas, roughly 15% of the top line. The industry goes strong and we see a lot of OpEx investment because 10, 15 years ago, as you all know, investments into existing assets were not on a high level. It was actually quite a tough market to stay in. We did. And we see with the maintenance and the product part for us, quite a good development and quite a good of prospect. And that is not only based on the LNG increase, it's actually with all the things that our BPs and Shells and all the customers are doing to make their existing installations, more efficient and more sustainable. Out of that, we look into the growth for our group. And we actually introduced at the end of last year, the so-called opportunity pipeline. The opportunity pipeline gives you an impression how much we bid on indexed to the January 2022. And when you look into that chart which is on the left side, then you see that we have a seasonality in it as we have in the order intake, as we have in the revenue, of course. And you see that actually, the year 2023 comes out stronger throughout the year than we had the year 2022 which gives us a positive outlook into 2024. If we then look into the revenue guidance and then the revenue performance, what we will deliver in 2024, you see that we come from €4.486 billion to the minimum of our guidance of €4.5 billion to €4.8, midpoint €4.65 billion. And the E&M Europe is contributing, Technology is contributing. And actually, E&M International is contributing too. So out of that, we are quite in a positive mood, not bullish but in a positive mood if it comes to that for the Bilfinger Group. Then we look into the total outlook and I will now focus on the EBITA and the free cash flow. We delivered a 4.3% EBITA in 2023. We have an outlook of 4.9% to 5.2% which is a midpoint of 5.05%.and in line with what we announced, what we promised and up to now, what we deliver and what we will deliver for our midterm targets, the 6% to 7%. Where is that in EBITA coming from? It comes from the efficiency program, it comes from the derisking efforts and it comes from the growth. And the free cash flow, we guide on €100 million to €140 million and when you look into, as Matti said, this is a cash conversion of roughly 70% as we promised last year in February. Out of those highlights and a summary, orders up by 5% organically, revenue up by 7%, the EBITA margin to 4.3%, the free cash flow to €122 million. A big thank you to all our colleagues all around the world, top job, great team, well performed. The outlook, as we said before, €4.5 billion to €4.8 billion in revenue, €4.9 million to €5.2 million in EBITA. We have a positive market in all the regions, all the industries. As explained, we proposed €1.80 per share and we will have a new Capital Markets Day on June 12 in Frankfurt during the Arkema exhibition. Bettina?

Bettina Schneider: Thank you very much, Thomas. [Operator Instructions] We have the first questions in the audio line via phone and we start with Gregor Kuglitsch from UBS.

Gregor Kuglitsch: Hi, good afternoon, thanks for taking my questions. So I've got a few questions, maybe firstly on margins. So you did a great job in getting the margins up. Last year you were kind of saying you're going to be at 5%. I guess maybe it's a bit premature and you're going to talk in June but your thinking is what, that as we go to sort of the future in the 6% to 7% margin, are we talking gradual increases? What will be the driver of sort of margin improvements kind of beyond the 5% mark that you seem to be on track for this year? That's the first question. The second question is on cash flow and working capital. So I guess I'm observing that you're, looking here at slide 33, your trade working capital position principally hasn't really moved. Your item is still basically the same as you always used to be maybe 11% of sales or so. And I guess the hope was that you can improve that. And I want to understand, is there anything you can do to improve that position to bring that down? And I guess, related to that, is your cash flow guidance. I appreciate you have a new one of €100 million to €140 million which is net of a restructuring cost but it is also before leases and interest expense. So actually, it's quite a low free cash flow still in absolute terms. And I guess one of the issues is working capital. So the question is, what can you do to sort of improve the free cash flow, I guess, particularly on working capital, please? Thank you.

Thomas Schulz: Yes. Let me, thank you, Gregor. At first, with the margins, it's actually the same what we announced in detail per segment as well as for the group on the Capital Market Day in February last year, initiatives to get the margins up. It's a mix out of operational excellence, efficiency program, derisking, global product center, functional organization, all these elements, combined with the new positioning going into the growth and, of course, getting with the growth more profitable. If it comes to the cash, Matti?

Matti Jakel: Yes. Sure. On cash flow, if we look at 2023, we certainly made some improvements. When you look at the first half of 2023 compared to last year, the sort of the cash usage was quite a bit lower, €39 million for the first half of the year compared to €72 million. So that's an improvement in itself and the second half was a strong €190 million in both years. The most important lever for us is getting our invoices out as quickly as possible after we have completed the work. And there is a number of organizational and structural measures that we are putting in place but we also need the help of our clients to overcome sort of their red tape. Sometimes invoices just stay for weeks unattended to and that is something that we keep discussing with our clients. That will certainly help improve our working capital. As we plan to increase the cash conversion, obviously, that will also improve the trade working capital situation in the next few years.

Gregor Kuglitsch: Okay. Sorry, just to come back on the margin point. I guess my question was, do you expect this to be a gradual path there?

Thomas Schulz: Yes.

Gregor Kuglitsch: Do you think we continue to have these quantum jumps because you're kind of improving 100 basis points per annum basically 23 points?

Thomas Schulz: I actually like that a lot, to be honest, to make like this.

Gregor Kuglitsch: I'm sure.

Thomas Schulz: Nothing bad with that. But, you know, we are very transparent. That's the reason why we came with the positive profit warning. But the thing is we see a gradual increase because the increase has to be sustainable. This is the most important. It doesn't help if we increase towards the end of the year and then we fight again for another one or two years. It's really important that we have a sustainable improvement. The improvement what we have in the first part of that strategy time is, of course, more internal. And towards the second part, it's more external with more profitable growth. And that is what we already see. Stork is on top of that.

Gregor Kuglitsch: Maybe one final question on Stork. So do you know how it performed in reality? Do you know what it actually made last year in '23 and, I appreciate you don't own it yet but do you have any insight into the financial performance of that business and how it's faring compared to what you announced when you bought it?

Thomas Schulz: We have a fairly good view on it. But please don't forget, it's still a competitor in the market until closing is done. And of course, the information, that we can have is only what is legally available. And we stick to that what we said. They delivered over €500 million on turnover and profitability, what we are aware of around 2%, a little bit more than 2%. 2% to 3% in that range. So that's how we see it. Closing will happen in the first six months and we are very excited to get the colleagues as Bilfinger's colleagues into our family.

Bettina Schneider: Next one is coming from Michael Kuhn, Deutsche Bank.

Michael Kuhn: Good afternoon, thanks for taking the questions. Firstly, on sales growth and, let's say, some scenario analysis. Looking at your bandwidth, it's pretty much 10% to 15% from lower end to higher end per segment. Where would you see, let's say, the margin of uncertainty or the risk? Is it more client behavior? Or let's say, more on your side by, let's say, bidding very selectively to get the gross margin up?

Thomas Schulz: Yes. We don't see that as a risk if we bid more selectively. If we bid business, we have to be profitable, in line with that, what we want to have as profitability. So we see the growth actually in all areas, in all industries, in all segments. But we are happy, we are actually very glad that our organization understands volume without profit is not a good thing to have. So when we then look into the different areas where we see quite a lot of growth, it's actually all with efficiency and sustainability. We will let go all the other business and decreasing that part of it. So the growth scenario, what we gave in February last year with the 4% to 5% growth in that midterm target is including, as we said, the decrease of the so-called E-Class in the group. That means the non-sustainable, non-efficiency improvement part of our business.

Michael Kuhn: Understood, thank you. And following up on the gross margin topic, would you be willing to give us an indication on where you expect the gross margin to go this year?

Thomas Schulz: I would not, because we don't.

Michael Kuhn: We don't guide on gross margin. But an indication, it's going to go up.

Thomas Schulz: Yes.

Michael Kuhn: Fair enough, thank you. Then on E&M International, I think in the release, you mentioned there is still some U.S. legacy business to be finalized. Would you have a timeline for that and let's say, remaining volume? And is there any residual, let's say, risk involved in terms of negative contribution by those projects?

Thomas Schulz: Michael, as a matter of fact, there are two projects left out of about 20. One project is still in operation to the tune of about 20 million volume for this year. The other one is completed but we still are in the warranty and defects period. So there's a little bit of work to be done for those two projects or legacy projects..

Michael Kuhn: All right. But let's say that part is pretty much derisked is how I understood you.

Thomas Schulz: It is derisked for all intents and purposes, yes.

Michael Kuhn: Thank you. And then one more on South Africa, where you, I would say, once again, state you are intensifying efforts to sell the assets. Any indicative time line here? Would you expect that over the course of this year?

Thomas Schulz: I've been working on this transaction for four years and I've been proven wrong a number of times on timing. But let me tell you this much. We have never been this close to completing a transaction. So I keep all my fingers crossed short before breaking them that this will happen this year.

Michael Kuhn: All right. Then I'll keep my fingers crossed with you. Thank you.

Bettina Schneider: All right. So the next one is coming from Christoph Dolleschal, HSBC. Christoph, the line is open.

Christoph Dolleschal: Yes, thanks, Bettina. Hi, Thomas and Matti. A couple of questions from my end as well, the first one in regards to Europe or E&M Europe. Did you see some pulling forward of maintenance efforts? Because obviously, as you also said, Germany had a pretty bad year in chemicals. So there was a lot of idle time. So we hear from some of the names that was used to run some maintenance that would otherwise only have been done a year ahead or two years ahead. So any pull-forward effects because of the dull situation of the chemicals? That would be the first one.

Thomas Schulz: Yes. Hey Christoph, it's actually a very good question. We have that all the time. Some customers always try to take something earlier because they have a shutdown or they have a change in production schedule and so on, that flexibility we have. But a general movement throughout the industry, we don't see. But it is clear and I have to say that clear in the time horizon three years, four years, if production is not coming back, we achieve in Germany and EU and with that, a lower production level which then in three to four years will have an impact on the total volume we can bid on which is then lower. And we measure the production index or the production figure KPI which went down from 84 - 85ish to roughly 77 - 78. And that's only for Germany. We see other areas in Europe actually growing and leveling out what happens in Germany. And we see, of course, North America and the Middle East, where we are not that strong yet in that part that we can counteract on that. So with the timeline with that how we are organized and how we take any change in the market early enough, we are actually quite okay with that development. We are not happy. It would be nice to be in Germany in a growth market. But yes, doesn't happen.

Christoph Dolleschal: Okay. And following up on that, if we look at the order level in E&M Europe, we had €808 million in the fourth quarter which was down 3% in organic terms versus last year. And I'm trying to get a bit of a better feeling on what a reasonable run rate going forward is also given the fact that the first quarter in 2023 was so exceptionally strong. So would you say €800 million at that level is a decent run rate to expect? I mean also matching, let's say, your sales guidance?

Thomas Schulz: Yes, it's definitely a level which is where we can live with. But please be careful with the Q1 to come because last year, as you said, based on industrial issues, lack of fear of lack of labor available and so on, a lot of things that happened in Q1, 2023, we had extremely high order intake. Actually, in the quarter which is in the seasonality of the Bilfinger group obviously, the weakest in all areas. So we will not repeat that. But when you look into the guidance that we gave for E&M Europe, on the revenue line, you see that we are actually quite positive on the development of Europe. And on top of it, we gave a 4% to 5% growth outlook for ‘25 to ‘27 in the midterm targets last year. And we really stick to it. We think it actually fits very well to what happens in the market.

Christoph Dolleschal: Okay. Thank you. Then a question on Stork. Basically, where do we stand with regards to the closing, because you're saying it takes until midyear. So what is taking the time? Is it legal stuff? Or is it that competition authorities still required to give their stamp on it?

Thomas Schulz: The competition authority is not the issue here. We actually proceed quite well. And we said that it will happen in the first half of the year. That doesn't mean it will definitely happen on the 30th of June, that can actually happen earlier. We don't see any roadblock today that the deal will not go through. But of course, a lot of parties are involved, authorities and so on, legal stuff and that just takes time. It's not that complicated case but bureaucracy in Europe is something where we are definitely a world champion. And that, of course, has a time issue and impact to it.

Christoph Dolleschal: Yes, I can only confirm that part. That's true. Then probably some two housekeeping questions for Matti. What is the tax rate going forward to expect? Because obviously, there was a tax impact in the fourth quarter now. So I mean, I think a lot of analysts are running on, say, around about 30% tax rate going forward. Is that reasonable? Or would you think there's any [indiscernible].

Matti Jakel: That's difficult to say. What we expect for Germany is that we will be paying about 1.5% tax going forward. But obviously, we're paying taxes in other countries and that mix rate is really hard to predict. It really depends on how much we generate in countries but there's a significant decrease on the German tax rate.

Bettina Schneider: In a normalized fuel on the adjusted net profit, we, at least for ‘23, used the 27% normalized tax rate.

Christoph Dolleschal: Okay, thank you. And then so the 27% would be something just roughly also going forward where you wouldn't be disagreeing with, right? In that magnitude.

Matti Jakel: What do you mean disagreeing with?

Christoph Dolleschal: So, I mean 27% would be also a reasonable assumption for the future.

Bettina Schneider: Yes.

Matti Jakel: Yes, please. Yes.

Christoph Dolleschal: And then one last question. Then coming to your presentation pages 22 and 23, where you kindly elaborate on how the regions are doing. Could you remind us what the difference between in your definition difference between product and project businesses?

Thomas Schulz: Yes. Product business is when we go in and we have to customize to make an offer. We have to take data, we have to take the landscape and so on. If it's a product, it's something that we did before several times and successfully finalized. That's actually the difference.

Christoph Dolleschal: Okay. Thanks very much.

Bettina Schneider: Thank you, Christoph. Now I would move on to people asking questions in the chat. [Operator Instructions] So first question from the chat comes from Nicolas Tabor from Moneta. I read it out loud. The expected range of revenue and EBITA contribution for Stork in 2024 on top of the guidance.

Thomas Schulz: Yes. We will have a Capital Market Day on the 12th of June. And we expect to that point of time that actually closing has happened. So the 30th of June would then not work, by the way. And we expect that we then have all the data and we will give you a very transparent overview. What we expect in the revenue range is above €500 million on a full year and 2% to 3% EBITA deliver in that range. But we will see when we have it. I have to repeat from legal reason point of view, it's a competitor still until closing happens and there are limits what we are allowed to know. Sorry, it comes of course, on top of that, what we guided for. Stock is not at all in the guidance.

Bettina Schneider: Next from Nicolas. Could you give us an update on the 2025 and the 25% to 27% midterm guidance where I might already say, we have not given a concrete '25 guidance yet but we have given midterm guidance.

Matti Jakel: Yes, we can give an update. It stays as it was announced in February last year. And I actually dream about it. It's, of course, a 6% to 7% and we will deliver that. We will deliver a cash conversion over 80 and we will have a growth 4% to 5%.

Bettina Schneider: Next question from Nicolas. How much tax savings for the German subsidiary should we expect over the coming years?

Thomas Schulz: Again, it's in euro terms, it's difficult to say. The tax rate will be 12.5% and it really depends on how many -- or how much profit we make in the German Ex grouping.

Bettina Schneider: Yes. But the line behind tax loss carryforwards, we have are quite significant, we have to say and they are also published in the annual report. So the next one comes from [indiscernible]. Could you please comment on the working capital degradation?

Thomas Schulz: I would not say there's a degradation and I can only speculate what you mean. What we have seen in 2023 compared to 2022 is a lower level of advanced payments from new project contracts. That was a real wave that came our way in 2022, third and fourth quarter and that was not repeated to the same -- in 2023. That did have a real impact on working capital.

Bettina Schneider: Okay. We move back to the phone line, Michael Kuhn, Deutsche Bank, with another question.

Michael Kuhn: Yes. Thank you. I would come back to, I think, pretty much the first question from the call and on the working capital topic once more. Looking at your free cash flow guidance, obviously, we have the margin. We have a rough idea about depreciation and cash out from provisions. But on the working capital, could you give us an indication on what cash consumption you have assumed for that item? And maybe also the other remaining building blocks to get to the €100 million to €140 million range. Thank you.

Thomas Schulz: There are two main building blocks there. One is that we assume a cash conversion rate of 70% on the EBITA. And then the second one is the €40 million payout on the efficiency program. Those are the two building blocks that come up to €100 million to €140 million in our guidance.

Bettina Schneider: And maybe it also helps if we have a net CapEx orientation. We look for a net CapEx cash outflow of 1.5% of revenues on average. And this is, I think, all you need to build up also the working capital change. Okay. So as of now, there are no further questions. [Operator Instructions] Yes. I think that's it. So with this, we conclude this call or this webcast. Thank you very much for joining us this afternoon. It was a very positive day for us. I hope it was the same for you. Still, if there are more questions, please don't hesitate to contact the IR team and see you next time and talk to you next time, latest in May for Q1 figures. Thank you very much and have a good afternoon.