Donat von Muller - Head of IR Helmut Schmale - CFO Jurg Oleas - CEO

Max Yates - Credit Suisse Andre Finke - HSBC Sven Weier - UBS Sebastian Growe - Commerzbank Peter Reilly - Jefferies Glen Liddy - JPMorgan Sebastian Kunne - Berenberg Gianmarco Bonacina - Equita Wasi Rizvi - RBC Michael Kaloghiros - Bank of America Merrill Lynch Ben Maslen - Morgan Stanley Peter Rothenaicher - Baader Bank

Thank you for joining GEA's conference call on the first quarter 2016. Present with me, our CFO, Helmut Schmale will go shortly present in the numbers and our CEO, Jurg Oleas, and they both together later answer questions by sale side analysts.

Let me now hand over to Helmut.

Thank you, Donat. Welcome to our quarter one call.

So the first slide summarizes the key messages for quick overview. We shall address all details to you in the course of today's presentation.

Now yes the main theme of this quarter is that the sales development stage noticeably behind the model increase in order intake for reasons that we consider to be transitory in nature as I shall explain in a couple of minutes. This naturally caused negative operating leverage on margins, which we ever could over-compensate by various savings and to deliver improved EBITDA margin of 10% nevertheless.

If we adjust this quarter's EBITDA by some minor adverse effects among the non-operating companies and only look at the consolidated contribution of the two business areas and solutions, the margin even increased by 86 basis points as noted in the box in the middle of this slide. So I think it's fair to state that altogether we quitted our sales respectably margin wise.

Order intake as already announced to you at our AGM is April grew by about 2% before content structural impact, which is consistent with our model and sales growth guidance for the year 2016. As I will show in more detail a couple of slides later, this model had increased on balance and present a marked increase of orders over €15 million on the one hand.

Largely dairy processing projects and the market decline of small orders up to €1 million in both business areas on the other hand. In terms of customer industries, oil and gas and dairy farming are important elements here.

At first sight, the sales development looks odd compared to the order intake development, but it has to be viewed in this context the changes in the order composition by size, which I just pointed out. Large orders naturally take longer to complete, which explain why at the early stage, they proportionally contribute to revenue recognition.

Small orders against that turn to sales more immediately which explains why a reduction is small orders invariably entails a loss revenue in the same quarter. Large orders were still in the initial stages of processing as were large orders from quarter four 2015, which had been booked only a few days before Christmas as you may remember.

Besides the order composition effect, we see another temporary effect of revenue recognition at work, especially in the business area solutions and this one is largely related to application centers and finance departments still getting used to their new interplay in the new OneGEA organization. Process solutions appears the same as the old process engineering segment is undoubtedly the most complex organization in terms of interdisciplinary coordination we have.

We have reasons to believe that this quarter was affected by process inefficiencies leading to lack of topline sales as well as margin drive, it's abating inadvertently the composition of the order backlog effect I talked about before. Both these effects should be of only temporary in nature as evidenced by the fact that the order backlog went up accordingly.

We believe that the coming quarters will improve its processes with the settlement of the new organization and plenty of the time means during the year to turn the order backlog attending to sales. We certainly don't believe that this sales anomaly in the first quarter changes our outlook for the full year in any way.

The year-on-year drop in sales had an adverse effect on margins. The business area equipment proved more resilient than the business area solutions, while the former had some positive mix effects the start of the year 2016 with a moderately lower margin and the backlog then in 2015, a late consequence of the softer demand conditions during most of quarter three and quarter four of last year.

Given the promising pipeline data of the BA Solutions, we're confident though that the margin and the backlog will improve again. If we only look at how the business area is flat from a consolidated perspective, we find that the operating EBITDA improved by 86 basis points.

That is not so bad given the discussed billing impact from the volume drop. Let me comment on the drop in operating EBITDA based on the next slide here that operating EBITDA as reported from prior year to this year's first quarter.

The obvious question to ask is where did the sales for 2020 go. The answer becomes clear then looking at the P&L according to the so called total closed method, i.e.

distinguishing cost by the functional type rather than their purpose. The operational gearing had the most significant negative impact.

We lost €29 million in gross profit due to the decline in sales and affect here that cost profit stands for total cost -- for the total cost method in a sense of total performance minus material cost. In the total cost framework terminology, the gross profit means the total performance as I said, management here cost incurred in the production, the €29 million was merely volume induced for the Group as a whole, the gross profit percentage even went up by a couple dozen of basis points.

So project relative to material was not the issues overall. Next as an industrial group doing business in countries subject to collective bargaining, we naturally face wage inflation here and there.

Year-on-year, this yielded profits by about €7 million, but of course we also held against those adverse impacts fit for 2020 yielded more than €16 million and personal cost savings as most of you had probably expected. Beyond that, we were able to release another €5 million in personal cost savings, which were not attributable to the problem fit for 2020.

Last but not least, we managed to bring down the other operating expenses proportionally to the safe decline by €11 million. So while the volume induced top in gross profits may look sobering, this gross profit is not lost for good, but rather it’s waiting in the order backlog to be realized rather sooner than later.

I hope this slide gives you comfort that we at GEA Management Team are working hard also on the adverse conditions to maintain the margin. As mentioned before, revenue recognition challenges in this quarter did not affect the gradual margin progression and we see ourselves on track to deliver at least 13% operating EBIT margin by 2017 order intake by size.

I have touched upon this before, but let’s look to more details here. Year-on-year all but small orders were up, large orders, larger than €50 million even substantially.

As I said before, most large orders were about dairy processing in regions like Eastern Europe, North America and South Asia, one order larger than €50 million was about instant coffee. Small order decline affected both business areas as you find depicted on Pages 28 and 29 in the appendix.

In the BA Equipment, a lot is explained with further deterioration in dairy farming, including a small bit of dairy farming service as well and also a bit in oil and gas related component sales. Cooling compressors also saw the end of an R22 replacement boom effect, which affected its order intake.

In the BA Solutions, small orders such as component systems from the oil and gas industry declined for cooling solutions. Our BA Equipment mitigates its weakness in small orders by an increase in medium sized orders while the BA Solutions would even overcompensate its weakness into more orders through medium and large orders as you can gather in more detail again from the Pages 28 and 29 in the appendix of material.

Let’s then turn to the regions. As a backup picture comment in terms of adjusted numbers the following, first of all I would like to remind you we are now reporting a new regional partition that reflect the sales regions as we group our country organizations.

It made sense for us to make that shift because all the information we have about regional development is provided in that split internally as well. North America was affected by lower demand notably for cooling solutions in the gas tracking industry as well as less dairy farming CapEx in the time of subdued home prices.

The better part of Europe had up relatively well, Northern part including Benelux, U.K. and Nordics was particularly affected by dairy farming and the absence of large order revenue recognition this year as compared to the last.

Central Eastern Europe is the German speaking countries had up reasonably well, which is off to a good deal by the fact that given the regional order mix of the past that they did suffer from a decline in sales of the BA Solutions as a group as a whole. Southwest EMEA was particularly affected by the decline in cooling solutions, the region Asia-Pacific was affected by the cooling demand in China in general and uncertainty about the timing of the dairy recovery in New Zealand and Australia.

Latin America last not but least, suffers from the milk business in particular and from two large economies, Brazil, Argentina struggling with their economic situation. Sales by customer industry, the big picture is that dairy related sales have lately come down a bit.

Although for daily processing, the trend will soon improve again given the recent large order intake since December 2015, while the sales trends for dairy farming is now in a clear downturn even that Pharma globally are starting to survive given subdued low oil prices. Predictions vary when exactly oil prices will recover to stimulate dairy farming orders again.

Beverages are trending up, food is flat and Pharma and Chemical also go up a little bit. But you see more detail on the recent changes on the following page that describes order intake trends.

Almost two thirds of our customer industry exposure are up by more than 5% year-on-year, which is the second column from the left. Most notably in terms of waiting dairy processing, we had three large orders this quarter more than in the previous quarter -- in the previous record quarter even.

Chemicals and other industrial applications represent the other faster growing industries. Given the accelerated decline in dairy farming in the first quarter, we are embracing ourselves also for potentially high single digit decline here for the year as a whole.

The macro situation is such that a couple of countries in Western Europe, notably Ireland, the Netherlands and Denmark are still increasing mill production to an extent that mix supply from the European Union as a whole grows by mid-single digit magnitude. This is not easily absorbed by dairy important countries, even though there is evidence that China has stepped up its imports noticeably recently.

Order backlog, the order backlog is on five years level than adjusting for currency effects, the same holds for the portion that is invoiced on the next nine months, which is more than 70% of the backlog. This largely ignores sales of more than €300 million per quarter, which has fast turning orders usually never seen in the backlog for long.

Return on capital employed, the one-off profit for 2020 again on the unaddressed for OC, a ratio based on last 12 months figures. Adjusted for one-off expenses return on capital employed is now at 25%.

At physicians cost, the adjusted ratio to drop slight in the recent past, this dilutive effect is driven by accounting mechanics and is transitory in nature. Working capital; the working capital is still at slightly over 13% or up above boundary guidance for the full year.

As I said last quarter, there is a room for improvement. The positive aspect is that the seasonal swing from quarter four to quarter one proved much less mark this year than in the past.

In that sense, it’s not a bad start for the year. Cash flow driver margin, as we said also the orange line again depicts the unadjusted cash flow driver margin, which was impacted by the various charges around fit for 2020.

The adjusted margin in the last 12 months average keeps creeping up and we seem to be on a very good way to deliver 10% to 11% for the year as a whole. Now, let’s turn to the net cash reconciliation, before discontinued operations and uses of funds such as dividend and acquisitions, the net position improved by some €125 million -- €155 million year-on-year.

Adjusting this variance for currency effects and one-off charges, this costs comes to a cash generation of €328 million. Please mark that we mean by paid out €133 million, we forgot to one-off expenses in cash.

The service business, again the GEA OEM sales making for our share of in terms of meanwhile 30% of Group revenue. Reaching the 30%, which we targeted in 2014 should not be over in top position though as it comes on the back of weakening machine sales in the quarter.

While service too moderately grew, the growth rate has declined though. The service share of each segment is displayed at the bottom of the bars, contrasting 2015 with higher year and the outlook for the year 2016, this brings me to confirming without any qualification of previously given guidance for the year 2016 and let me be very clear here again on what I said initially about the transitory nature of weak revenue recognition in this first quarter, we believe that and we see absolutely no reason why we should call our previously given guidance into question.

On the next page, you will find some additional parameters for the guidance and of course, we’ll update these individual parameters given here, once we have concluded on the acquisition of the Imaforni business, which was only closed in April. So, thank you for listening.

This concludes my remarks and my presentation and Jurg Oleas and myself, we're now happy to receive your questions.

Thank you very much. Just two questions for me, just firstly on the decline in the EBIT bridge that you showed of €29 million, obviously that decline on a revenue loss of about $54 million implied by your minus 5.5% growth implies quite a large drop through on lost revenue.

Could you talk a bit about that and I think you mentioned in your comments that there were some lower margin projects coming through the backlog? And did I hear that correctly?

Should we assume going forward that is the kind of drop through on revenues going up and down. It seems quite high that was the first question.

If I may answer your first question directly then, this is the total cost method of the P&L. That means the gross profit is nothing else then fruitful minus material and that whereas in the range of about 50%, so don’t mix it with the gross margin, which normally, you need to look at if you are aiming to explain volume related ups and downs in the reported numbers.

Okay. but just on that comment as you said that -- am I correct in thinking that you said in the second half of the year, there was some lower margin business coming through solutions and as you took new orders, the margins on those new orders should be better than the ones we're seeing come through the backlog now, was that the summary of what you said?

Yes, in general the large projects of Solution, they have a lower margin than the equipment business. As it has always been historically, the difference can be quite substantial between parts of equipment and parts of solutions.

And as you may have seen in the past Solution has been growing much faster than equipment. So, there is a kind of a dilution from this order backlog margin.

But once again on Solutions, we are emphasizing once again on taking, picking on the high margin projects again in the future. So, I wouldn’t say that this is a problem also for the future.

But there has been a certain dilution from stronger growth in Solutions specifically, process solutions compare to the equipment.

Okay. Thank you.

And just a second question would be on some of these shorter cycle markets like dairy farming, like oil and gas, like marine, those have been certainly on dairy farming has been coming down a couple of quarters now. A, are you still expecting on a sequential basis this business to continue to decline?

Obviously it will on a year-over-year basis, but are we anyway near a trough in this business or do we expect actually on a sequentially basis further declines from here?

I’m afraid that it could further decline on a sequential basis during 2016. I believe we’ll see the bottom-line in 2016, but I would not see that this has been in Q1.

So, I would not be surprised to see a further small decline in Q2. There was already a substantial decline due to the milk prices and to constraint most of the pharmacy most parts of the world have, but unfortunately it still continuing.

In comparison to that, what we do see and it's not a contradiction is that the milk farmers are producing more milk despite that the prices are low, but they're really squeezing it out now through the investments. So, they're trying to milk more milk with less investment due to the milk price.

But all that has a certain limit. So they are leveraging out their assets.

They are sweating it out. They are also sweating out the consumables, etcetera.

We believe that the limit, we will see this year, but I’m afraid that Q2 will be a further decline compared to Q1.

And I take, when I look at the service business slowing down obviously dairy farming in the old division structure with the one with the high share of aftermarket. I would guess the real change in the service business is the aftermarket within dairy farming turning negative is that, correct?

Yes.

But it's also in emerging markets.

Yeah.

Okay. Thank you very much.

Yes. Good afternoon and thanks for taking my questions.

The first one relates to some of your comments on small orders. You mentioned the weakness in January on the first month of the year.

Does this imply that we have seen some pick up in March and may be you could comment on the start of or activity in the second quarter? The second question relates to restructuring costs or one-off cost generally may be you could provide guidance on what we should expect for the full year and may be also for full year 2017?

And may be also comment on the tax rate whether the 19% guidance for full year 2016 should be -- we can see something similar next year or we come back to the 24% return level? And lastly, do you have any indications as of now on the additional savings from the streamlining of production and improvement in and procurement at this stage.

Thank you.

Yes. Thank you very much.

I'll take question number one and four and then hand over to Helmut for the other two questions. First your questions regarding to the weakness of small orders, yes, the month of March was on a high level and the normal high to high level of order intake.

So the weakness of January and February we couldn't see it March. When I say high, it was amongst the highest month in the last 8 or 10 months when it comes to small orders in March.

Your last question regarding additional savings or procurement and global footprint, we're in the starting phase of the project, but we're not going to indicate anything before our capital market days. We have to said that when we are at the capital market day somewhere in October, we're going to lay out the detailed plans and also give some ideas about the potential savings out of that.

Thank you Jurg. And back to the restructuring cost in general, there is no new guidance to that.

We said it will be two times of €125 million savings to the max. And this is what we still have us as a sealing in place and I do not see any reason to give here new updated guidance on that one.

With regard to the tax rate, it will hold the 19% for the remainder of the year and then it will come back in the next couple of years to 24% tax rate as we had it before.

Thank you. Could you maybe just as a swap indicates whether the strong trend of March just continued into April or is -- if could share.

I haven't seen it personally the April numbers.

Okay. Thank you.

Thank you. Good afternoon.

Couple of questions from my side please as well. First of all if you could give us an update for the end market outside of very I think last call you also spoke about the beverage market for example and maybe you can elaborate also a little bit about food, how happy you are with those markets at the moment?

What your pipeline is for the rest of the year? The second question maybe also coming back to dairy farming, you said that the aftermarket was weak.

Could you also give us an update on how the milky robot business is doing as that continuously do very, very well at the moment? And then lastly I had a question also on your EBITDA bridge on the swing of the other operating expenses.

So wouldn't it be the best thing to do to take the 29 minus the 11 to come up with a number like 18 and put that into relation to the sales shift to come up with a reasonable operating leverage of what's really the main positions behind the other operating expenses? Thank you.

Let me start with the end markets beverage, if in general is not doing too bad. However, we have withstand to take some really intensively in fighting for orders because of the margin.

As I just indicted a minute ago we're focusing also on the larger projects on higher margin projects because we have limited resources and we want to invest them in better margin projects and the beverage projects they are arriving at quite lower margins that the average of GEA because it seems that for several competitive seem to be very strategic for their literally taking them at any price. When it comes to the food business, which contains a lot of things, we're extremely happy because I would say that's the a kind of a core, of the core, of GEA and we have recently seen and talked to our teams of the food business that could grow or will grow in the order intake in a very good double-digit number of growth in percentage anything between 10% and 20%.

When I say food, that contains like edible oil, coffee, many kinds of free trying using technology food frozen vegetables and all these things and besides dairy this is the real core of the GEA food. So we're extremely happy to see that extremely strong demand currently.

It has been performing very nicely in Q4 and in Q1 and we are very optimistic for the rest of the year. When you come to the Milking Robots, yes they are doing very well, also not only our dairy procured they automatic care sale but also what we called the Monobox which is the small one the single box one obviously has very great reception with the customers.

So despite the prices on the farming part our factory in Berlin here in Germany which is the only one where the robot. For the time being is fully loaded, thanks to the robots.

We'll also have the approvals in the U.S. to promote them there.

So we're happy to have them and we believe that it's not only because of the substantially lower cost of the new robot generation, but also of the features it offers to the farmers, it comes right in the right time where the farmers due to the new prices have to face cost and increase their efficiency. Regarding the EBITDA I would like to hand the question to Helmut.

With regard to the other operating expenses, that will increase later during the year again in line with the topline recovery. However, we will not rule out that we have save a couple of million Euros here in particularly related to the reduction of the number of employees, which we have in line with our FIFA 2020 program because those employees who are not part of our organization and more they simply don't have travel and travel expenses for example as a part of our operating expenses.

So if you look into the deviation which we had within the third quarter, biggest deviations in our operating expenses were related to freight advertising of our selling expenses, travel and all types of supply and services. A part of that is directly related to sales and other part is more as a fixed expense in nature.

So you can as a combined with the reduction in volume to a certain degree also reduction in our record and this is why we say well, we believe that we will save some money a couple of million at the end but that is part of our €80 million savings guidance.

And maybe just one follow-up on your food commentary, the double-digit growth that is excluding your former convenience food system, did I understand that correctly and how is that business doing? Is that growing slightly or what are you seeing there in terms of trend?

It is also growing. It is growing in line with the overall GEA growth.

As of now, we're not reporting separately on food processing and packaging but I can disclose to that little piece of inside information on Q1 the growth was above the GEA overall growth, so food processing and packaging which is the former CFS business.

Okay. Thank you.

Yes good afternoon, gentlemen. Three questions from my side, the first one is on the voicing of project in the first quarter.

Correctly you said Dr, Schneider that they had fund issues with the invoicing of large projects which are I think related to the GEA 2020 layoffs. Can you just comment on this -- how this will progress from here and if you've already hired new staffing in this regard.

The second question is on the margin quality of orders executed in the first quarter, solutions versus equivalent just for Solutions, can you say here how much will be related margin headcount was from these particular week orders price wise or whatever has been driver here and how this thus compare to the margin sitting in the backlog? Maybe you can just give us an indication on the basis points in which the weak orders and the good orders that are now being executed and then related to this one on equipment, has this business area benefitted from any particular orders in the first quarter or was this also consequence of the better performance of the food solutions?

And then lastly on equipment and here dairy farming, you said in the initial segments that you're preparing the organizations for high single digit decline in the year 2016. Would this require than any additional action from your side or is this kind of just in line with your budgeting that you had in line when providing the initial guidance for '16.

Thank you.

Let me first talk about invoicing of the large projects. You need to see that we have a complete different setup of the organization in place where all the functions are working together across the globe.

And not based on individual local entities anymore. So as the people just need to get acquainted to the new situation that they need to talk to different people in the organization or to do the necessary details maybe of the projects in order to understand where they are in terms of forecasted margin and in terms of execution.

And, hence, you see it by the backlog which we have in hand, the backlog is there. The margin quality is in the backlog, which fits to our guidance and it's just a matter of timing and execution.

So, if you then talk about the operating margin quality here then it is the case that at the end of the day that in the business equipment we saw that as also Jurg elaborated that the large chunk of the business was doing well and we see exception of milk and feeding farmer which is naturally still based on the subdue market conditions, which we have there and little bit of reduced on headwind impact from the acquisition of former which is still not on the margin level of the other equipment business, but that is not a surprise to us that was planned for when we acquired the company. And then related to BA Solutions, yeah, all in all that margin development has to do with the execution of the large orders in the backlog and I can only tell you that a little bit of that margin reduction is related to be lower backlog at the beginning of backlog quality at the beginning of the year.

I would say also good deal of that has to do with the fact that the process of quarterly closing was not as optimal as in previous quarters or at the year when we've done much more validation compared to what we did here in the first quarter.

Okay. If I just may ask one follow-up question then on Equipment and Food Solutions, can you just give us any indication if you are still profitable in that business area and I think in Q4 you said that you were EBITDA breakeven.

Could you just give sort of indication, where you are right now and then on dairy farming, would this require, say high single digit decline in '16, any further action from your side?

We cannot report any sub BA or product results anymore as we’re working here in a completely different segmentation. What I can sense though is that on the gross margin levels we saw that the food processing is doing better compared to last year.

And I said already last year was a very decent year we forgot Food Processing. And on the second part of your question, of course milking, feeding farming that is under pressure with regard to margins.

Okay. Thank you.

Yeah. Good afternoon.

I've got three questions please. Firstly looking at the Service business you started out 2015 growing at almost 8%.

The growth rate slowed during the course of '15, but now down to just 2%. Is this a comparative issue, because you have very growth at the start of '15 and you obviously enjoyed some early benefits moving to a single service organization or is the actual underlying growth rate slowing for whatever reasons?

So maybe it’s some of the diary issues but maybe you could help us understand what’s happening in service? Second, you talked about diary processing very good order intake.

Can you give us a bit more color on what’s going on? Is this milk powder coming back or is it boarder diary processing and how sustainable do you think this is?

And then lastly in China you had quite a weak quarter growth of minus 10%. I know China has got less of diary business than another parts of the world.

So, maybe you could help us understand what’s happening inside China? Whether you see China getting worse or whether actually it’s the food business holding up and then non-food business doing particularly badly?

Thank you.

Yeah. When you come to service that, of course, is heavily affected by milking farming the diary part on the farmer because they have the highest content of service or aftermarket and also there as I said a minute ago, the farmers are queering it out to the maximum in order to safeguard the cash situation and the overall farm situation.

So that is mainly impacted by that. Sales wise, we don't see any change in the growth for service at GEA.

Your second question regarding the diary processing, the large diary orders, as I said also in about minutes ago, the overall production of milk is growing worldwide, but also in most areas of the world also in Europe, also in Germany, the production of milk is growing between 2% and 4% per annum compared to previous despite the low milk price and this milk has to be processed. And for those diary plants which are not engaged with the farmers directly in form of cooperation, low milk price is actually a good thing because it’s lower material cost for them and that’s where we see quite a lot healthy projects.

In queue -- we did see them in Q4, but we also did see them obviously in Q1 and we seem them also in the near-term future. When it comes to China, what we do see is that overall the consumption of all kinds of food products is growing.

In China, however, what we do see in many areas is that in the past three or four years there was quite a overheated investment behavior of Chinese investors. So we do see a couple of GEA plants, which have been built, which would be ready for operations, which are currently not going into operation, because the customers obviously they’ve over invested.

This also comes quite intensively from the beverage side, but also many other areas we do see that some three-four years the Chinese, they have over invested and now they’re sitting on these assets. And, of course, they have to wait until the total volume consumption of any kind of food process products or beverage products matches again in total capacity.

It's a matter of having too much installed in many areas, but else wise we do not see any change in behavior in China.

And if I can -- thank you Jurg. I can just ask follow up, coming back to the issue of the project revenues having invoicing issues in Q1, is this actual mechanical issues where the project wasn’t finished or was this bureaucratic issues, where you weren’t able to issue the invoices, because the documentation wasn’t all in order and therefore, you couldn’t actually book it as revenues?

Well. It’s not that the projects are late or that our customers are late in the process.

It’s just waste its complexity of having changed from the old segmental structure into one GEA and also at the same time, you must also see that we have done quite radical change towards the shared service. In some of the biggest countries we have started this in Germany and the U.K.

and Ireland we have almost finished it already in the U.S. and China and in Canada.

This has of course a certain impact because the invoicing and all these things will be done in the future out of the Philippines or out of Romania and you could well imagine that doing such a radical change in such a short time not everything works perfect. But we’re confident that those things will be fixed.

On the other side, also have to say that the shared service has already positively contributed also to the Q1 result. So the running benefit and running costs are if you net them, we have already running net benefits.

The part of the cost or improvement of the EBITDA a smaller part in Q1 comes also from the shift to shared serves, but as you know, we've already started with some countries, but we on purpose started with the biggest countries and the whole trends transfer process will take us up to the end of the year. And within those processes of course, not everything in Q1 has worked perfectly.

So just to be clear, this is not a problem with customers are you saying. This is a problem for you inside your organization.

No we have no delays either, which would be our fault or customers fault, no.

All right. Thank you very much.

It’s a internal paper process.

Yeah. I understand.

Hi, good afternoon. The tax rate falling to $0.19 is there any implications for your cash tax rate i.e.

for the next couple of years? And also the cost savings outside the "Fit for 2020", identified is €4.8 million in Q1, what are you expecting for that in the coming quarters?

And then finally, the dairy farm aftermarket business, you’re saying the revenue is down, how much of the decline is due to pricing pressure for the consumables or are there new people also entering the market for the consumables in the diary farm business?

Yeah. If I make that as the last question, pricing pressure on milk and dairy farming, initial price pressure it’s more an issue of net department such as sales trying to stretch out the chemicals, all the materials, the variables and consumables of the farms.

We don't see so much as of a pricing pressure and of course our waste and volumes cost back that there is a certain pressure on the prices, but it’s much more on that as we think we sweating out the assets and the consumables. Cash tax savings that cash tax rate that can vary year-over-year very largely.

So, you cannot really connect the P&L text rate directly with the cash tax rate, though we just as example even if would have let’s say a tax rate of -- P&L tax rate of 19% at the end the cash tax can well be at 30%. So, that is something which pretty much depends on timing of cash payments and is less could good predictable.

And then with regard to the "Fit for 2020" savings, I’m not sure to get your questions right but by and large the big chuck here of the net one-offs of €8.5 million of cost is related to "Fit for 2020" thought it’s a net amount of some released based on the fact that the average personal expenses which we provided for in hind side a little bit less based on individual cases and on the other hand we have new "Fit for 2020" one-offs which then balance to the total of minus 8.5.

With more on your bridge on Page 7, you highlight your "Fit for 2020" savings and then you say other personnel savings is €4.8 million, how much more it’s no, not its fine how much more of that €4.8 is there to come during the remainder of this year?

That will melt down during the remainder of the year. It's by and large these are non-theft positions, which are still open during the phase of three organizations, so will melt down early.

Okay. Thank you.

Hi gentlemen, I have a few questions again starting with dairy, in dairy farming you mentioned in an earlier call that back in 2009 and the last crisis there was some incremental margin pressure from some of your competitors. I think now the consensus is that crisis is more severe than the last one.

The strategy of GEA, are you then walking away from low margin orders or do you try to retain the market share and if so what is the margin pressure there in dairy farming equipment? Then secondly in dairy processing, there is now the talk that at least in Germany the processes have to kind of subsidize the farmers, I think that was announced yesterday, similar developments we see in New Zealand.

So basically the group of farmers and processes have less at the end of the day. So I would like to hear from you whether you see the risk that the dairy processors are eventually also saying okay we are bit cash constrained and we will have to reduce our investments later on.

I would like to know if that's an incremental risk for you. Then on the backlog, order backlog, I would like a confirmation actually if the margin that you have implied in the backlog is at the current level or better than your businesses in the past.

So if there is a margin improvement in the backlog and then Pharma chemicals I would like to hear what the momentum is there, the moment you see a declined quarter-in-quarter, but what is your general take for the investments from the chemical side and the pharmaceutical industry? And then finally on the marine oil and gas segment, do you see the trough being reached there or do you also have some incremental or lower expectations there you need that you might have to cut capacities again in marine and oil and gas.

Thank you.

Yes there was lot of questions. I can take them all.

Regarding the price pressure and margin pressure on milking and dairy farming, I just answered that to a previous caller. We don’t see actually price pressure.

We do see a lack of volume. It's more a problem of volume.

Then your second question, dairy processing in combination with the farmers, I also said in my previous answer that in for those dairy processes who belong to the farmers, they are of course in a crises, in investment crises, but that's not new. They have been in that almost for more than a year.

We reported about that also regarding Fonterra and many others, which are owned by corporations by the farmers that they are sustaining for investments in order to support their farmers and to give back some more dividends to the farmers while they earn less by the milk prices etcetera. So that's nothing new.

However, there is another world of dairy processes who are not linked to the farmers and for them, the low milk prices are something positive and people their own etcetera and they're investing heavily and that's what we see in our order intake. Then you -- could you repeat the other questions please?

Yes, the order backlog you see an improved margin potential in the backlog or have booked better margins in the backlog already?

Yes, the projects we're currently booking in Q1, they have better margin overall. However as I indicated also some minutes ago, we have to be careful about the different growth rates.

We've been seeing over the past month that solutions is growing faster than equipment and the order intake, you may remember the very large order intake in Q4 and also very strong order intake in Q1, which we're reporting now. And solutions of course has a lower overall margin than equipment and if that is growing faster than you have smaller margin in the order backlog than you had it in previous reports because I will call it a product mix, different process of the two business areas.

And then the last one about the trends in the industry, if I then read into our global demand index, then it looks like as if in the next three upcoming months, we see a bit of a recovery, we see a little bit better business environment compared to last month in the marine, oil and gas business and same holds for the pharmaceutical industry, where we to the contrary the chemical industry short term see a little bit of lower or less good business environment for ever looking further down the road in the year also chemical likely recovers a bit.

Okay. Thank you.

Then I have a follow-up question from Glen actually. He asked a question on the consumables being replaced by maybe new players.

You said that the farmers are stretching their hygienic products and so on, but don't you see the risk that farmers say, okay, I am so cash constrained now, I use an alternative product that is cheaper, maybe not as good as the GEA product, but I have no choice at the moment, but to swap consumables.

You of course can never avoid that, but also GEA has a let's say a kind of low cost brand in order to safeguard if somebody wants to swap there.

Okay. Thank you very much.

Yes, good afternoon, just one more question for me on Page 7, the bridge for the 2020 savings, I remember you said last year you had little bit more than €20 million in savings, most of that I think you took in the second part of the year. So can you give us an idea of the quarter-on-quarter incremental saving because €60 million versus the Q1 2015, but how much did you increase the savings versus the Q4 and if you also can give us an idea of the let's say incremental saving in the next couple of quarter?

Thank you.

Yes, you're right that this comparison on Slide 7 is year-on-year comparison. The savings of slightly more than €20 million of last year, you have to remember that was a capacity adjustments we did over the whole year.

So it's not only Q4 and we if €16.4 million which assumes Slide 4 is exactly in line with our plan to save for the full year the €80 million annualized. So, if we have now save €16.4 in the fourth quarter in order to save the $80 million, So €65 million or €64 million something like that missing and that will come in the next three quarters.

What I can confirm is that when it comes, so the capacity adjustments, we are very close to have achieved it. If I may disclose from roughly the growth adjustments we have to do, we have achieved by beginning of May this is not Q1.

This is beginning of May, the last report I have in mind about 83% that’s what we have achieved. And from the remaining is still to be adjusted capacity of about 17% or 18% more and half of it is shared service, which we cannot yet adjust because some countries will be handed over to shared service only at the end of year.

So we’ll still need people and only about 150 adjustments still need to be outside of shared services. If we have agreed those 150 adjustments then we're basically done.

So, I’m extremely confident and almost sure that we will have the €80 million at the end of the year.

Thank you.

Good afternoon. Just a couple for me.

Just firstly on your those March order trends, I guess it’s very clear that it was up sequentially, was that up year-on-year as well?

That’s pretty much to be seen in the Slide Number 9 there you have a quarterly drill down into the split of our composition of orders by size and then you find here that if you compare year-on-year it was also clearly up although it’s orders which were €50 million and even beyond €5 million. So, you will find the detail drill down on Page Number 9, which should answer your question.

No, sorry I was referring to the small orders right, you're talking about March being better than January and February. I was wondering whether March was up year-on-year as well as sequentially?

Let’s say March was a very good month referring to small orders. I cannot give you the detail on a monthly comparison here, but it was a very solid month.

Well, as we said March was much better than January, February. So it was essentially to the previous month it was up.

Okay, but you can’t say year-on-year?

I don’t give any monthly comparison, that’s too much volatile given the fact that these are small orders which are highly depending on for example the farmers whether or not they're not going to place individual orders but take it for good that much with respect to normally let’s say like this.

Okay. Great and then just if you could talk about solutions or does the mix, so its sounds like the margin in the backlog were better.

Could you talk us through why that is a change in market, is a change in competitive behavior or raw materials because I guess one point to understand is an improved margin in the backlog something sustainable or are we seeing some short term effects.

I think its pricing discipline, our managers having to deal with solutions projects as they got clear instructions at the beginning of the year what our margin ambitions are and our pricing ambitions. So I’m quite confident that everybody knows now the rules for 2016 and they're following that.

Okay. Great.

Thank you.

Yeah, hi good afternoon. I just wanted to come back quickly to your comments Jurg, that's where margin was better.

Just wanted to know where the weakness is coming from in Jan and Feb. You just mentioned that may be your farmers made much good of the planning business.

Where was the Jan and Feb weakness please?

Michael you did not come over very clear, could you may be in one or two sentences repeat your question again?

Yeah, sorry. We just wanted to understand on your comment that January and February were really weak and March was better on a normalized basis.

Just wanted to understand where the weakness was coming from in Jan and Feb, especially as you mentioned that you were expecting sequentially that farming business will be down probably in Q2 versus Q1. So just wanted to understand what has picked up in March really?

I think across all of GEA, so it was not specific area or specific industry, which picked up. So in principle it was across all of GEA.

I think it may also have to do with the fact that Q4 was a record quarter for GEA in many aspects and the organization was quite exhausted I have to admit with the finishing of Q4 on time and concluding all the capacity adjustments and all of this. So and there was maybe in January and February not the same focus as in Q4 regarding this small order, small orders they need a lot of attention and focus and it went back to normal level that Helmut Schmale just pointed out back in March again.

Okay. So maybe more something internally than really end market weakness?

Yes.

Then just wanted to hear your views on some of your competitors come and saying that quotation activity in the farming business and dairy has picked up for them. So just wanted to understand is it them specifically or are you not entering in some lower price contract maybe.

Just your view compared to your competitor's comments?

Well I would procure which competitor say that because our main competitors are Tetra and Lily and to my knowledge none of them have said anything like that or I’m not aware of it. I don’t know whether you refer to ASPIC, but ASPIC is not competing with us on dairy farming equipment.

They are the two competitors is Tetra Laval Group and the Lily Group when it comes to the robots and then beyond those two main competitors you have some much more smaller on a smallest case than Tetra and Lily. We don’t see any change but we do see actually quite an intensive activity on the robots and as I also mentioned in one of my previous answers, we are also taking an advantage because we have just at the right time obviously a very well received product to offer when it comes to either large atomized farming equipment or to the mono box.

Very good. Then just maybe just two technicalities first on the FX, the impact on top line and we know it was couple of percent I think in the quarter and very limited impact on profitability.

I think the previous quarter was positive, a strong positive impact on profitability. Just as we look through the year and just given your backlog and the ventilation geographically of your backlog, what should we expect right now in terms of FX impact?

Should we expect higher than GEA Group margin impact or lower than good impact. And then as we’re just talking on technicalities, on the interest line you mentioned that you had lower interest income in the quarter, just wanted to see that is going to be reversed later in the year and as well you mentioned some -- some increased financial expenses on change of discount rate on non-current provision.

So maybe you should just -- if you could just comment what are your expectations for total interest cost in the year please?

I will start with the backlog, all the details in order intake sales and EBITDA and the impact from currency and translation and also for more details you find the main currencies where we are dealing with also in the additional material on Page 33, there you have all the details how the currencies are impacting us, but this is only translation, translational impact. We do not or cannot measure transaction impacts.

What on the other hand its affect is then ever we have foreign currency exposure based on our contracts, which we're signing with sales contract or supply contract, we meet -- we expect current exposure. So that we take out this volatility once we have signed the contract and then we just execute orders based on the fixed rates.

So this is why talking about the backlog, it’s for us more translation impact and the transaction impact that’s of course something which it's hard to measure.

Okay.

And with regard to the interest rate, well this is something, which is a bit special here and what you need to take into considerations that we have paid down the bonds in April this year so, that will give us about $9 million savings in interest expenses. On the other hand we have an increase in the interest on long term provisions as you rightfully mentioned.

So I compare this last year where we had our net interest expense of €40 million, I expect this year to be let’s say around €35 million something like that.

Okay. Thank you very much.

Thank you. Yeah, three questions please.

Firstly you had two very good quarters now consecutive of large orders, just how does the pipeline look and do you think you can -- it's realistic to assume, you sustained the level of large order wins you’ve seen over the last six months where it would normalize from here, that's the first one. Secondly, just on the dairy farming cycle and where we are in it at the moment, can you give us some color on how far equipment demand has fallen from peak levels and how much downside you see based on current order or enquiry levels.

And then finally if you just clarify the comments you made on the margin that you see in your incoming orders or your order backlog. And as I understand there is two opposing affects.

So, one is better on a like for like basis in terms of the large orders that you're taking, but you see a negative mix because you're getting more solutions demand than equipment. If that’s the case, I guess just which effect is more powerful when you consider the overall margin in your backlog?

Thank you.

Yeah, looking at the order pipeline we don’t see any major change. Of course Q4 was a record with a lot of orders.

And also very good Q1. As I said in the so called application food, we see still quite a lot of -- or that's why we see the most of the mid to large orders coming that also why we are very optimistic to have a very, very strong growth in order intake in that application.

So we don’t see any major changes. Of course there might be a quarter up and down because those large orders too fall into the same quarter it has severe impact and two are missing in one quarter, it has also negative impact.

But overall we don’t see any change out there in the industries in the market. When it comes to the dairy farming and the cycle, as I pointed out, I believe we're not yet at the bottom of ordering in the total volume.

So I think we may see in Q2 or Q3 the bottom and certainly I believe that in 2016 we will have seen the bottom because the level of squeezing out the assets is coming now to really at the edge. Then which margin impact is more powerful at the growing or more focused on solutions margins versus faster growing, I think the product mix is more powerful because the difference between margins, between equipment and solutions is quite substantial.

So solutions would need to have an extremely stronger margin improvement which will not be the case in 2016 to overcome the product mix effect between the two business areas.

Okay. Thank you.

If I may one commentary here maybe you need also to look not quarter-on-quarter, but in 12 months cycle and then you would see that both business areas are developing pretty much in line. So we don’t have a major shift between the two parts of our business.

Got it. Thank you.

And if I could just follow-up as well and then on the dairy farming equipment cycle, can you just give us a sense of how far your revenues have fallen, just to understand how cyclical the business is? And then secondly within large orders in solutions, is there any margin difference between food or beverage or dairy processing projects for you in terms of profitability?

Thank you.

Well when it comes to the revenues of milk and feeding or dairy farming, we have seen a setback year-on-year in the range of around 15% of decline in order intake for revenues because it's almost the same. Could you repeat your second question?

I didn't get that.

Yes, just within Solutions and the large orders that you have been booking or you plan to book, is there any margin difference between the different segments food, beverage or dairy processing for GEA overall?

Yes, well it depends on applications and some sub applications. What I can say in general dairy is on a good level.

The application food is on a very good level. The margin, the coffee, the edible oil and all these technologies we have to offer and at the lower end our the pure beverage has improved beverage orders.

All the other applications are somewhere in between or more average.

Got it. Many thanks.

Yes, hello gentlemen. In your report, you have some additional information on your recent acquisition Imaforni.

So with around €85 million sales, purchase price of €143 million looks not cheap. So can you comment and if profitability is that strong or did you pay a strategic price or if it was in the typical multiple range you typically have.

And second question regarding your M&A activity. So how are you progressing?

Can we expect here further acquisitions for the upcoming future?

Yes, regarding the price being paid for Imaforni, what we said for both for Comas and Imaforni we paid less per EBITDA than we got [Agix] even for the margins of both acquisition targets Comas and Imaforni, substantially higher than [Agix]. That's why we think it's very -- those were very accretive acquisitions for the overall GEO performance and when it comes to the further M&A pipeline it looks good.

We're not going to disclose now on what type of contract there are negotiations, but the scope or the number of target we are now going into NDAs, into negotiations, into management presentations etcetera is larger than it was a year before.

Okay. Thank you.

Yes, thank you very much for your attention and we will be pleased to talk to you latest in one quarter again about the half year results and as usually we're quite confident that it's going to be -- Q2 is going to be a good, positive quarter for GEA and diversity of GEA is showing it's strength that we're not only depending on dairy that we also have -- we do see now very strong growth for example in the coffee area. We're following very closely quite a few orders in that area and I could name here many other industries.

But it's starting to be quite an exciting quarter Q2 and once again thank you very much for your attention and talk to you then soon.