Donat Müller - Investor Relations Helmut Schmale - CFO Jürg Oleas - Chairman and CEO

Sven Weier - UBS Michael Kaloghiros - Bank of America Klas Bergelind - Citi Max Yates - Credit Suisse Sebastian Growe - Commerzbank Glen Liddy - JPMorgan Sebastian Kuenne - Berenberg Gianmarco Bonacina - Equita Lars Brorson - Barclays Frederik Bitter - Exane Wasi Rizvi - RBC Capital Markets Sebastian Ubert - Societe Generale Avi Hoddes - Sandbar Arash Roshan Zamir - Warburg Research Daniel Gleim - MainFirst

Good afternoon, and welcome to GEA Group's first quarter conference call in 2017. With me here are CFO Helmut Schmale, who is going to present the numbers, and CEO Jürg Oleas.

Together, they will answer your questions after the presentation. I'll now hand over to Helmut.

Many thanks, Donat. I'm actually not sure whether our presentation is online, as I have a black screen here in front, but it seems to be okay.

Okay. Then welcome to the call, and I would just like -- we have a quick overview of the key messages.

Because the large orders were down by over €18 million, orders were slightly down all together for us. Sales were up, also helped a bit by the structural effect of the Imaforni acquisition.

But operating EBITDA grew un-proportionally, as we already reflected at the occasion of our AGM in April. Return on capital employed and cash flow driver margins were impacted by the adverse development in operating profit and working capital during the second half of last year.

Let me give you a little bit of an update on the share buyback program. As published in weekly updates on our websites, we by last Friday, May 5, have spent about €96 million, or some 21.4% of the funds set aside.

By last Friday, we had purchased around 2.5 million stocks, or 1.28% of the shares outstanding before the beginning of the buyback. We started buying back our shares some two months ago.

At the current rate, it would be conceivable that it takes about 8 to 10 more months, latest until the end of February 2018, to spend the entire volume of €450 million. Let me talk about our strategic initiatives and projects which we have meanwhile launched in order to complete the OneGEA.

Well, in this little slide here I present all of these initiatives which we have raised and started in order to raise the productivity, the transparency and also to advance the integration of our OneGEA organization. In an accounting sense, not all expenditures in connection with these themes here are to be capitalized i.e., will become CapEx, but there will also be one off charges affecting the P&L.

Our best prediction on the expenditures for those strategic projects from current perspective is a bit more than 1% in CapEx to sales, plus exceptional charges in the P&L in a similar order of prior year 2016. What are these projects about?

Firstly, steering and control systems; hence, increasing our transparency. With the introduction of harmonized cost reporting, we have achieved a first major milestone of our OneGEA finance controlling system.

Transparency of cost types across legal entities in a standardized format is now available for all managers through a dynamic reporting ERP tool. The reporting perspective matches that of our global functional responsibilities arching across individual legal entities.

In its ultimate stage, OneGEA Finance will allow flexible driver analyses, with drill down functionalities in high granularity along the cost and profit centers perspective of our new OneGEA steering dimensions across all legal entities. A project database that generates an aggregation of the most recent ongoing profit calculations at any time is, as well, an element.

As well, we are introducing a new HR software that will allow us better analysis of capacity and cost aspects and also will allow the tracking of temporary labor; and last but not least, a new group wide CRM system which, besides the operational aspect of better managing customer relationships, will afford us higher and more continuous visibility on the order pipeline potential. Secondly, various initiatives to raise productivity, notably as already presented at the occasion of our last CMB initiatives, to adopt the manufacturing footprint and structure to our global markets, to lower material costs by bundling procurement activities and a global common engineering platform that will enable us to collaborate across the globe on individual projects.

Thirdly, driving forth the modernization of all our IT operations, notably the transformation of our entire IT server back end into outsourced Cloud services. Lastly, developing a deeper understanding how digitalization will present new opportunities to our business with our own products and services -- just think about the milking robot or remote diagnosis services as current examples -- or processes, including our interaction with customers.

Let's now come to the financials of the first quarter. The order intake could not quite match prior year given that the Business Area Solutions booked €86 million less in large orders this year.

The growth in the Business Area Equipment largely made up for the shortfall in Solutions which was supported by practically all product groups. Sales were up in both business areas, 6.7% consolidated, for the growth of its structural impact from Imaforni was €16 million, as you find explained also in some details in the backup material.

Operating EBITDA increased somewhat under-proportionally, by €2 million or 2.7%. As a consequence, the group's operating EBITDA margin receded by 37 basis points.

Among the more significant factors for that development were; a, following a rise in the second half of 2016 the number of temporary workers was still well above prior year's level despite countermeasures initiated by both business areas that, however, only showed an impact in early April; b, in our Business Area Equipment, pricing pressure from a highly competitive marine business and other mix effects which saw disproportionate growth of lower-margin product groups, as well as lower-margin geographies, expanded [indiscernible]. In our Business Area Solutions, there was an increase in overheads, like selling expenses.

And when looking at the margin variances in the lower right-hand quadrant, please take note of the footnote explaining that the variances are partially exaggerated by the fact that some €6 million more in central costs and previously not allocated costs were pushed down to the BAs in 2017. This reflects mainly our more recent charging methodology which was applied for the first time in quarter three 2016 retroactively for the first nine months in 2016 and has been applied ever since.

Group margin progression over time; GEA's margin development in a rolling last-12-months average reflects the recent quarterly declines in quarter three and quarter four of 2016 against prior year. Our aim of course will be to reverse this trend in 2017.

Order intake by size. While large orders with a value more than €15 million came down by €86 million year on year, which reflects ordinary large order lumpiness, all other size brackets increased and were almost, if not quite, able to offset the shortfall.

Order intake by country. From a last quarter perspective, our large national markets are declining or staying flat, while our core continent Europe represents a mixed picture: increases in Roman countries but decline in most other important European markets.

Now let's take the usual drill down into the order intake by industry. The dairy farming saw another sequential uptick in orders, which now translates into a book to bill ratio above one for the last four quarters.

It may well be that in a quarterly sense we are past the trough now. Diary processing order intake.

As much depends on large order intake. While all of the €50 million in large orders this first quarter 2017 were dairy processing related, that was less than we saw in dairy processing large orders during Quarter four '16 and also than in Quarter one 2016.

And since the most recent two quarters together could not match the very strong order intake of December 2015 and January 2016, dairy processing is also down from an annualized year on year perspective. Food is also subject to lumpiness of orders, albeit a little smaller in magnitude than dairy, usually.

In our view, the quarter on quarter decline is random fluctuation. We have good projects in the pipeline.

On beverages, we only saw a few midsized orders in Quarter one, after a strong Quarter four 2016 that also saw a large order in December. This customer industry continues to be under pressure, with a book to bill ratio of only 92%.

Pharma has recently been on the rise, although viewed over the last four quarters business is somewhat down over the prior 12 months period because of the cancellation of one larger order in Quarter four 2016 due to a drug failure in the final clinical testing. Chemical is down sequentially because we had a strong Quarter four 2016, which saw a couple of large orders in Quarter four '16, while in Quarter one we only booked midsized orders.

We rather interpret this as a coincidental short term lumpiness than a longer underlying trend. Oil and gas saw another sequential increase thanks to a handful of medium sized orders to different product groups in Quarter one.

Marine continues to be a downbeat industry which also has become quite competitive, as I mentioned earlier in connection with the margin impacts on Business Area Equipment. The remaining other customer industries were down quarter on quarter but from an LTM perspective still have a book to bill comfortably above one.

So to wrap it up all together, while we see changes here and there about one half strongly grew from an LTM perspective while about one third of our industries clearly declined. Order and sales trends over time.

These last 12 months curves give you a better impression on the order intake and sales trend over time. In summary, we can observe: dairy farming, bottoming; dairy processing, still declining although sales are bottoming; beverages, continuing moderate decline; food, growing; pharma, chemical, upwards trends since a couple of years; others, on the rise since last year.

Book to bill ratio. This slide differentiates the weighted average book to bill ratio of 1.02 by geographies and industries.

The ratios are calculated on a last 12 month basis to smooth out seasonality's and random quarterly fluctuations. To summarize the picture along its two dimensions, in terms of geographies the Americas have the highest book to bill ratio, while Asia Pacific and DACH and Eastern Europe are moderately above one.

Northwestern Europe -- this includes UK and the Nordics -- is weakest, and southern Western Europe and Africa, as well as Mid East, are also moderately below one. In terms of industries, food, pharma and others are comfortably above one; dairy farming and chemical moderately above one; dairy processing and marine are lightly below one; and beverages and oil and gas are clearly below one, which mirrors what I said about both industries before.

The lower box, by the way, gives you the weights of the cross sections. Order backlog.

The order backlog went further up in quarter one and is now €160 million above prior year. As an estimate, €1.7 billion are deemed to be invoiceable during the remainder of the year 2017.

Return on capital employed. The recent decline in these last-12-month curves reflects the decline in EBIT during the second half of prior year as well as the increase in the annual average of working capital.

While the blue curve uses operating EBIT in the numerator, the orange curve is unadjusted and shows the impact of the one-off charges, mainly related to Fit for 2020. Working capital development.

The typical seasonal backlash in quarter one could be avoided this year, and at the reporting date working capital sales was about at the same rate as in December 2016. The last four quarters average, nevertheless, came up sequentially as arithmetically consequence of the current first quarter working capital level exceeding last year's first quarter.

I had already commented on the inertia of the average rate development at the occasion of our last quarterly call. The next table offers some granularity on the working capital development.

The fact that working capital was sequentially about flat hides a little bit the positive effect that we managed to bring trade receivables down by €91 million, netted by advance payments even down by €109 million. Trade receivables had crept up in quarter four 2016 when revenue recognition and EBITDA realization were more in our focus after the profit warning of October.

Increasing elements were at about equal weight; inventories which is owed to the higher backlog, and creditors, which is at the core of the quarter one seasonality. Looking forward, we have now in quarter two decided on a standard dunning process, and we are mapping a host of interfaces in the still-complex interplay between sales force, finance department, and external shared service centers to come to a harmonized order-to-cash-collection process across the entire group.

Standardization is key to realize efficiency improvements in this process. Cash flow driver margin.

Similar to the return on capital employed, the cash flow driver margin is a metric based on the last 12 months. Similar like return on capital employed, it was impacted by the decline operating EBITDA in the second half of '16 and the increase in the annualized average working capital, as visualized in the light blue and gray portions of the stacked bar.

Again the orange curve is an unadjusted for restructuring and other one-offs, as well as PPA effects from more recent acquisitions. Net liquidity [indiscernible].

Free cash flow from continued operations over the last 12 months adjusted for expenditures for Fit for 2020 rose to almost €250 million again, the main driver being the last 12 months increase in working capital coming down compared to a quarter ago. Up to the end of the Quarter one 2017, we had spent over the course of roughly three weeks the first €32 million out of an intended €450 million on our share buyback, which you'll find at the very bottom of that graph.

Services. The service sales continues to outgrew new machine sales with an organic growth rate of 5%, driven first and foremost by the expansion in the BA Solutions, so that the last four quarters share is now at 31%.

As presented at the occasion of the Capital Markets Day, we regard our service business as a further potential source of growth by continually enhancing the scope of our offering and intensifying our service sales approach. Now let me come to the guidance and the outlook for the full year 2017.

We are aiming for, in the absence of any further weakening of global economic growth and, in particular, material weakening in any of our relevant customer industries, or adverse shifts in demand among those industries resulting in a negative margin impact or material adverse currency translation or competitive impacts, for moderate sales growth in reported terms; an operating EBITDA adjusted for strategic projects of €620 million up to €670 million; and an operating cash flow driver margin based on operating EBITDA and on CapEx adjusted for strategic projects of 8.5% to 9.5%. As we pointed out in our press release at the occasion of our AGM on April 20, as well as this morning at the occasion of our Quarter one releases, much will depend now on the progress to be achieved during Quarter two 2017 and which part of the guided quarter we will come out by the end of the year.

As a further attachment you'll find some additional financial information at the next page, which I will skip here for presentation matters. So thank you for listening.

That was my speech I wanted to deliver and hand in with regard to the Quarter 1 numbers. And we are now welcoming your questions.

Go ahead, please.

The first question is on your IT improvement. I was just wondering to what extent the Q1 earnings outcome had underperformed your expectations and if you feel that you had been able to get your arms around for the reasons, quickly?

Or is there still a lot of work to be done on the IT to get that kind of transparency? The second question is if you could give us an update on the temps reduction, how you proceed there and when you expect this to be resolved?

And the last question is on the cash flow. If I understood you correctly, the Q1 improvement is not really on the back of the improvement of the cash collection process yet, and that is something that still should be working in your favor then in the coming quarters, I would guess?

May I start and with the IT improvement? Well, that's of course a long journey for us to do.

We have a multitude of payers' ERP systems being standardized and non-standardized tools around the globe. And so a lot of work we always still need to do manually in order to compile all the data.

However, I would say this is not a matter of lacking transparency. It just takes more time, and its more effort for our people to do this.

Hence, we really improve the productivity in the reporting processes, and of course also getting additional transparency with all the new IT tools which we are implementing here. Just think about the database which aims to get a better visibility of forecasting volumes and margins for projects.

With regard to the cash allocation, as you have seen in the details of the presentation there is -- we achieved of course a major impact here from the reduction in the trade receivables, which was alone €90 million. That is of course an effort which we have spent in order to cash in on what we saw as fixes in our balance sheet.

Of course a new process, as such, will operate in a more harmonized way so that we continuously get better visibility and can react faster than we could have done that in the past. And that involves, as well, also the shared service center.

And I'm happy to see that -- and this is important that the whole management team is really focusing now on the working capital, which is very important for us. With regard to temps, Jürg?

Temps, our aim is to drive that number down to a level of about 1,500 from peak values. We did see the last four or five months of about close to 2,000.

However, as we said, we always want to keep a certain level of temps to transpire with the volume. And keep in mind that quite a substantial number of these temps in the meantime are also in the service business.

The service business, as you may have heard from Helmut Schmale, is growing. And we have decided to also, not by temps but by employees, to invest into the service business because we see quite good opportunities for this year.

So we have already towards the end of last year decided to invest into -- to increase the number of headcounts in the service business, and we have decided just recently to continue to do that, also for the remaining part of this year because we see it's paying back. So, some of those temps will be converted into employees because we want to keep them long term because they're contributing to the excellent performance of our service business.

But summing it up, from peak values close to or around 2,000, our aim is to drive that down to about a steady state level of 1,500.

And in terms of -- because on the back of this you said you achieved a tangible reduction in April. So is it fair to assume that Q2 should see a much more tangible earnings improvement and that the whole year earnings improvement is not more back end loaded than it would usually be?

Well, we are not giving a guidance now on what is the most likely earnings for April or Q2; that I will disclose when we announce the Q2 results. But certainly by reducing the temps, we will have less costs there.

But as I said, on the other side we are investing also, not in temps but in FTEs, on those areas where we clearly see now growth opportunities and which are currently growing.

First, one on maybe the comment on macroeconomic uncertainties that you already highlighted at the AGM and that you cite again today. Maybe if, Jürg, I don't know if you can give any comment on where you are seeing those uncertainties?

Is it customers not placing orders and is it a demand related issue? Or is it issues with delivering some of the orders in the backlog?

So if you can comment on that?

Three aspects from the global economy. We do see a very mixed pattern.

Currently we still see a very strong push in the U.S., which we say that it's coming from the new government or -- to our limited knowledge, I would not say it is because of Trump, but it's because the uncertainty end of last year ending up and now people is investing. Also if you hope that those tax issues are coming through which Mr.

Trump announced. However, we are very cautious whether that push which we see since the end of last year and which is still fully in place, whether that is a long lasting thing or whether it's something which will come to a more normal time again.

So that's on the positive side we have seen when it comes to order intake in the last couple of months and the activities of demand. When it comes to some other areas in the world, we do see that for larger projects customers are very cautious, cautious than what we call normally, to invest in larger projects.

That's why we have seen some of the larger projects even being canceled during the quotation process or being postponed. However, we have just in the last two months -- when I say the last two months, it's April and May -- we did see some good, nice large orders being placed at GEA in April and May.

But I would not say that this changes the pattern. I'm still very cautious there that for long lasting investments customers are still in most areas rather conservative.

When it comes to the -- and then we have a specific thing with dairy. There, we still see that some of our customers are not too optimistic.

So they are not investing into midsized or larger projects. They rather are on the small end, doing service debottlenecking, etcetera, because the oversupply or overcapacity which is a result of the boom of placing orders in the years back in 2014 into the beginning of 2015, it had just come online in the last couple of months.

And we do see a lot of caution as part of customers when it comes to dairy processing.

Understood. Second question, on the performance in Equipment, the margins.

You mention in the release that there is a mix effect from both products and geographies. Looking forward, as you push more into emerging markets into those new countries, should we expect this kind of geographical mix to continue in the coming quarters ahead?

Should we think of this as they are just, like, ordering lower-end type of products? Or is it a competitive environment that is different in those emerging markets?

First of all, we continue to see, as Helmut said, a strong demand or, let's say, better and stronger penetration of GEA in those emerging markets, which is for the top line very good. The trends we have seen last year in countries like Mexico, Latin America, India, et cetera, we continue to see that to have continued into the first couple of months of this year.

So it's is a good thing. But you're addressing a very valid point.

It's not that those markets are, let's say, more competitive than others. But due to currencies, due to the particularity of the customers in those countries, the ability to pay for performance over quality is maybe somehow lower than in some of the emerged or classic countries.

That plays a role, and that also plays a role -- we should not forget that in the working capital in the payment terms, because in many of those countries customers are used -- we are trying to educate them towards more standard ways of payment terms -- but they are more used to have payment terms of whatever down payment, followed by 180 days, 200 days, et cetera, which in the developed countries is a different profile. But nevertheless, that will not mean that we don't go for those markets, because we see a very strong growth opportunity there and we want to get an advantage of that.

But you are addressing a valid point. The ability of those customers to pay for performance is a bit more constrained and also when it comes to the payment terms.

Maybe just two housekeeping questions. First one, you've got that slide where you showed the strategic projects that are ongoing.

I think, Helmut, you were highlighting similar one-off costs this year compared to last year. Some of the projects, I guess, are multiyear projects.

Should we expect similar pattern of one-off costs over the next couple of years? And then, second one, on the central costs, I think you highlighted €6 million were reallocated to the divisions.

Is it something when we look back at last year we should also kind of adjust for the first quarter of the year where you hadn't already changed the way you reported? So kind of like this quarter is a good run rate?

To start with your second question, yes, that is exactly why I highlighted this. So that is something which is distorting the comparison.

So the situation would look different if you adjust for it. And the other remark with regard to the strategic projects, we said already a long time ago that for quite some period -- for maybe one or two years you may expect that the CapEx level will go up.

And now we have detailed out all the initiatives being this GEA One Finance, operational excellence, IT excellence, and digitalization -- and there is a lot of individual initiatives behind -- so that we now have a more clear view on the one-offs, where the biggest part of that will be then within this year 2017, where I said together with the remainder of Fit for 2020 it could well be in the range like prior year.

It's Klas, from Citi. A couple of questions, please.

Firstly, coming back to the new margin pressures, I count at least three: the impact from higher growth in low margin emerging markets, the mix between products, and then the impact from marine. And then we have the cost for the temps.

How should we think about the margin going into the second quarter? Obviously the cost for the temps have peaked, but do you foresee the mix issues also to fully remain in the second quarter?

And how do you feel about the completion margins out of the backlog in Solutions part of the €55 million? Do you think that will be the same negative impact in the second quarter, or less?

I will start there.

Well, as I said, I would like to ask for your understanding that we're not going to give guidance of development for the Q2. What I can tell you is that in Q1, as Helmut the numbers he reported, we did see a stabilization in most of the areas of the Business Area Solutions, a slight increase in the gross margin.

So that's pointing into the right direction. But I think it's mainly coming from the fact, as we also discussed in our Q3 call last year, that we had to take some orders at lower margins towards the end of 2015 and we underestimated the ability of the organization to turn these into better margins over the course of the year.

And as my colleague Niels Olsen in that call explained to those of you who were in that call, we have taken contraction at that time, and it seems that those things are paying out so that the gross margins are going up. I'm not saying what the margin is going to be for Q2, but it's not an easy thing to predict because it's a question, as you rightly addressed, about the geographical mix and the product mix.

But [tendencially] when we look at the fundamentals of where we had some negative hits last year in Solutions, we do see that the gross margins in the first three months have improved.

Okay. That's good.

My second question is on cash flow. The collection is now improving, which is good, but you keep the guidance for the cash flow driver margin.

Is the reason that you're perhaps a bit cautious on the payment terms worsening? You will, for sure, have better cash flow as you go through the year, but is collecting cash also structurally more difficult?

Is that the reason for keeping a conservative guide?

I have to say that we had a better start into the financial year 2017 with regard to the swing back of working capital as we were expecting it, which was built into our guidance of the 8.5% to 9.5%. And now we just need to wait for a couple of months how we further can bring down the working capital short term and how the results and the volume in Quarter two will come into play.

And then I would need to reconsider that maybe, if I have a better visibility. But your observation is right.

We had a quite good start into the year as the underlying assumption was that the swing back in quarter one was more strong than it actually were.

Okay. My final one is on larger orders.

50 million in dairy processing, nothing in food, and you're still shying away from taking orders in beverages, given the competition. You're talking about increased macroeconomic uncertainty while we see the global economy doing better than in many years.

I just want to come back to why customers are reluctant. I know you have talked about the border tax before.

But can you confirm that price pressure is not spreading to other industries, similar to what we have seen in beverages, which means that you're perhaps reluctant to take on larger orders also outside of beverages?

No, I would not say that outside of beverage we deliberately have restrained from taking large orders because of the price pressure. There, it's indeed what we perceive and believe is a slower pace in placing those larger orders.

However, I must say that, as I just said in just recent times with some good orders which we were able to book which we would categorize to the larger orders, but those also took quite some time to work on them until we concluded. But it's not a question of the price pressure outside of the beverage scene.

I would say it's rather a matter of the number of projects and the speed at the customers to proceed with the projects.

Just my first question was around cost savings and wage inflation. Could you give us a little bit of a feel for the Fit for 2020 savings you had this quarter and whether those were sort of fully offset by wage inflation?

I think the wage inflation, as we have said, as an average we granted to our people around the world, but of course it's very different in different areas, but I think it was something around 3.3% to 3.5%, following the standard indexation in the countries where we have our staff. Then you can even calculate what it means in Euros if you look at the P&L of last year.

When it comes to the Fit for 2020 savings, we are on track, and of course those things are coming now to an end and being overlapped in the meantime that the organization is living and is changing. And I said we are restarting some parts of the organization, not because they are understaffed but because we see opportunities.

And here, we are talking mainly, mainly about service, where we are investing now deliberately beyond the Fit for 2020 because we see a very good opportunity due to the OneGEA service organization we have around the world, here in centrally where it is steered but also in the country organizations. And I think the results we already did see in Q1 and we are quite optimistic that we will have a very good year when it comes to service this year; so investing there.

So it's, we are coming to a point where you cannot compare that anymore because we have been reporting this last year. I think we were always on track.

We are, also this year we've still got, what we call internally, the target size on track. And when you will look at the absolute FTE numbers in our Q1 report, you have to keep in mind that we have decided to increase the organization of service.

And in some very specific areas like, for example, the food area, we also decided to increase because of the opportunities there. And some of the temps are being converted into employees there where the growth can justify it.

So that's [indiscernible]. But to answer that very short, the target size was achieved.

Also in Q1 we were actually slightly below the so-called target size.

Okay. Just a second question.

When I look down the sort of book-to-bills of the various countries, China stands out as sort of being relatively low. Is that primarily down to large orders?

Or could you just give a little bit more commentary around sort of what you've seen in the last 3 to six months around China?

Yes, it has been quite lumpy, the performance in China. I would also say mainly, as you just said it yourself, due to missing large orders.

There was substantial overinvestment in the liquid some years ago, but also in the dairy. In infant formula, there has been several times predicted that infant formula will restart again, but we haven't seen that yet restarting.

There's a lot of consolidation going on there. Soome of it is also driven by the government for quality purpose, et cetera.

So it is not, let's say, a very active market for us. It's good, but we do not see in our business currently the growth which you would expect if you look at the global economy in China, which is growing at an LTM ratio of anything between 6% and 7%.

So if I look at the Q1 book-to-bill of China, it's not much better than the last four quarters.

That's what I'm saying, [indiscernible].

Okay. And just a final question.

Obviously you're buying back shares. Your balance sheet is still relatively strong.

Could you give a little bit of commentary around your acquisition pipeline, whether you think the business is in the right shape, given lots of sort of implementation of various IT programs, to continue to absorb acquisitions? And where is this on your priority list at the moment?

It has become a key priority again. You are right that -- and we've said that.

Also we discussed that last year, that we were rather cautious not to disturb the organization while itself integrating due to the OneGEA transformation. However, we believe we are beyond this.

We have learned to live with the organization. There's certainly here and there some fine tuning and some further adjustments needed.

But we consider ourselves to be ready to also go for mid-sized acquisition targets. So we are currently in discussions with some targets.

However, I would always like to remind you that we at GEA consider M&A as one of the most riskiest business you can have. I have several times mentioned that we have learned our tough lessons from food solutions.

Even so, now I can also say that our people proudly can say that food solutions is making us in the meantime very happy. So we were able to turn that around in the last three years, and we are happy to have it as an alternative to being too much exposed to dairy, the same as the acquisitions of Imaforni and Comas.

So we are working now hard to have one or two further good acquisitions in the course of 2017.

It's two areas of questions. The first one is on the strategic projects, and the other one on the outlook.

Starting with the first one and the strategic project that related to IT standardization, digitalization, et cetera, should we understand these projects as part of the 2020 program in order to attain the 4 million envisaged cross-savings, I'd call them, of 125 million? Or would there be a positive effect already from these efficiency improvements that come on top this 125 million savings target?

And then on the related costs, you point to about 40 million to 50 million in additional CapEx. My question here is if there is anything else in P&L items that is coming along with these projects, I don't know for example, additional consultancy charges, et cetera.

And then, secondly, on the outlook, you modified the full year outlook a bit, at least I think the totality is a bit the same or cautious. Is this qualification also due to a more sizable spillover of the 2016 execution problems that now are feeding into 2017 to a more sizable extent than previously expected?

Or is there anything else going worse than originally planned? For instance, you refer to the price pressure in marine that we should be aware of.

Helmut, here. With regard to the strategic projects, I said during my presentation that we expect also one-off charges in this year of around last year's level so let's say around €60 million, related to the aftermath of Fit for 2020, but the bulk is for these new strategic projects.

And that of course has a lot of initiatives behind it, like the OneGEA Finance where we need just capacity from consultants to support us in implementing the new controlling system and to build into our organization; and then of course the operational topics like the manufacturing footprint initiative for the One Engineering initiative; last but not least the IT excellency of outsourcing the whole and several platforms. So you see there are various initiatives behind it where we have now better visibility on what will be the impact on GEA, and this is what I just tried to outline.

With regard to the positive impacts from these initiatives, just I would like to remind you to the fact that when we made the Fit for 2020 project we were aiming for productivity increases which, in a certain sense, we achieved by reducing the number of people. Now we need to deliver the tools in order to bring that more to a normalized level again so that a lot of overload in the organization will be taken away by having these new tools then available.

Not mentioning, as well, the fact that with regard to these strategic projects a lot of that is forward oriented. Think about manufacturing footprint or think about digitalization, where we believe in the future we will need to serve markets with maybe a different production footprint, but for sure with alternative products which are also more centering around digitalization.

And for all of these initiatives we are now doing this to support the future growth. And with regard to your outlook [indiscernible].

Regarding the outlook, I think the so-called execution problem is not the main issue to be cautious here. In the first quarter, as you have just seen from the presentation of Helmut, in the area of equipment we had a very strong order intake.

We also were able to convert strong sales, or realize strong sales. Also in Solutions, including Imaforni, we were able to increase slightly sales.

But as I said at the AGM, it will depend very much on the order intake, especially for Solutions, of also larger orders in Q2, which then still can contribute to sales generation towards the rest of the year. And we don't know yet what Q2 is going to give.

And on Equipment, we need to see or we hope that this very positive trend which we did see in the first three months continues. But to be cautious, also having learned some lessons from last year, we decided to guide, as we said in the AGM, that it will depend on the order intake and the sales generation of Q2 in order to say in which part of the range we have given for the guidance when it comes to the EBITDA.

And then all from that, depending other guidance things like the cash flow drivers and the ROCE we will end up.

And just for clarification and coming back to the statements you made, Helmut, on the strategic projects, so there is no incremental savings that you really would see in the short term? Eventually it's kind of facilitating further and better business, going forward in the sort of long run?

That's the way to look at it, right?

Exactly. That's right.

[indiscernible]

At the end of last year and beginning of this year, you increased prices. Outside the area of beverage, are customers actually paying these higher prices now?

Yes. As I said, it's different by geography.

There where we are new -- or let's say not new, but in emerging markets -- it's more difficult because of the availability of funds of those customers, which puts some limitations to the price increases but also to payment terms. But we have been seeing that due to price increases which we have initiated in specific areas that we see some resistance or some setbacks.

And the procurement savings that you flagged at your Capital Markets last year, can you give us an update on what progress has been made so far?

In Solutions, those procurement savings, from today's point of view, I believe they will not support to increase profitability on Solutions; they will ensure the profitability, the pre-calculated profitability. In the Equipment area, we have certain improvements where we believe -- and our people is aiming for that -- will increase the profitability for Equipment, because there it's a bit easier and faster.

So we will see from these procurement initiatives some positive additional tailwinds in Equipment, and in Solutions it's rather to compensate for the HR cuts increase and to stabilize the margin there.

But those savings are already coming through?

Yes, yes. As I said, we did see improvement in the gross margin in most of the areas of Solutions in the first quarter.

Thank you. And in terms of quote levels, are customers still coming to you for quotes, but just taking longer to convert quotes into orders?

And if that's the case, can you give us an idea of how much your level of quotations is changing year on year?

We do following -- in Equipment, it's difficult because there it's millions of smaller quotes. So that's basically business by day, not only in the farm technologies but also in the other product related or component related business.

When it comes to Solutions, we trace that in different categories quotes for very small orders, midsized and large orders. What we have observed in the recent two to three quarters -- and that has to do with what I said initially, that the number of quotes have come down for large orders.

So the value per quoted order remains the same in that category, but the number of quotes is coming down, whereas the number of quotes for small orders and small to midsized remains at same levels. But what I have to say also is that that level when I say is the 2016 level, and the 2016 level, as when we compared it last year to previous year 2015, has increased in Solutions.

So the level of activity, especially at the point of midyear then towards the end year, has increased for smaller orders, but we do see currently a decline in level of quotes going out to the customers when we talk about larger projects.

And finally, the margin in the order backlog. What's the development now?

And how much of the low margin business is left in that backlog now?

We were indicating that at earlier times already. So we see meanwhile that the backlog is, let's say, about 100 basis points coming up in margin quality in the process solutions business, and that is confirmed by what we see today.

I have a question regarding the strategic projects. I'm still not quite fully understand the cash-outs there.

So you expect an incremental CapEx, I think by 1% of sales? So another 45 million this year, if I understand correctly?

And then on top you have additional one off costs of around 60 million also booked this year. Could you please confirm this?

And also, when is the cash out expected for this? And then I have a question regarding again Fit for 2020.

You mentioned that you are on track or maybe there's some delay on the cost savings, but eventually you will be asked where the savings are hiding. At the moment, if I compare, for example, the staff costs between now and 2014, I have actually a roughly 6% increase in staff levels, despite flat sales.

So going forward, let's say, for 2017, would you guide us for an absolute decline in staff costs, despite the wage inflation? Would you say that staff costs are coming down so we will see the Fit for 2020 savings?

The staff costs, to start with your second question, in 2017 compared to 2016 will not decline, because of the wage increases. We did reduce what we call the target size, but then you have to include also Imaforni, the acquisition, which cannot be neglected when you compare to the full year 2016.

And I said in the meantime I would assume or guess that since we have launched that towards the end of last year that we have already increased about 100, or around 100, people in the service organization and continue to increase that because it's going to contribute to our top line and, of course, the gross profit coming from the service business. So it will not decline.

You will see in 2017 personnel costs, if you look at the total cost format P&L, above 2016.

With regard to the strategic projects, I would like to confirm that these one-offs which will be reflected in the P&L. That is then [indiscernible] which, by and large, there will be also a cash impact for the year.

And the same holds with regard to CapEx. CapEx, I said it will be more than 1%.

It will be a bit up. For argument's sake, you could also say, well, it can be well up to € 60 million.

So it's 2 times € 60 million: € 60 million for the one-offs and € 60 million for CapEx. And, well, the timing exactly of that cash-out for CapEx is depending really on what will be the final track on executing these strategic projects.

And this is not yet 100% clear, but I just wanted to caution that could be the impact for the full year.

Okay. Understood.

And just to follow up, you will not guide for any incremental savings from either the incremental CapEx and the strategic costs? But instead you say this is what GEA will need to resolve the internal issues and to become proper and functional?

In a certain way it's forward-looking so that we will support future business by these initiatives with better transparency, better visibility, better cost accounting tools, and so on and so forth. And on the other hand, I would like to add here that you need also to consider well also with the old systems in place you would need to spend some CapEx to get them up and running and to maintain them.

And also there you would spend some extra money to optimize them. So you could hold that against us.

What I was just addressing here is what is the money which we are going to spend for these initiatives, which I can clearly identify and reference. Of course you could understand, as well, that part of that we in the future would also spend for obtaining and servicing the old systems.

So in that sense it's improving our landscape of tools which we have and, hence, improving our productivity of our people. And as I said, that of course is then supporting the future volume and our business development for the company.

Just a follow-up to the previous question about the, let's say, special improvement in the working capital. I understood basically you needed to invest to upgrade your IT system.

I understood that you will invest probably the majority of the 120 million for special projects, between OpEx and CapEx. But did you make an estimate of how much will be the total cost to have the full upgrade, which I think probably will not finish this year but will go probably next year?

I don't know if you will also finish by 2018. Just to have an idea of how much money you need to spend in total on a multiyear basis to upgrade your IT system.

Well, I can only answer that maybe not as precise as you want me to do. I'm not in a position to do all the forward-looking statements for the next years to come.

However, as I said to you in my speech, the one-offs definitely the bulk of that will be within this year 2017. And with regard to CapEx, of course your observation is right.

It will not be only 2017, but there is also a trailing element in 2018 and then it's diminishing over the next years, too.

I had three, if I could: one on margins, divisional margins, in particular; one on guidance; and just one, a follow-up really, on working capital for the year. Just on the divisional development -- and maybe even before I get there, because I want to hone in on Equipment margins and the drop we've seen year-over-year and the reasons behind that.

But can I just, first of all, make sure I understand your central cost, the 6 million of cost you're pushing out to the divisions? I think I understand 3 million of them, which is shared service center costs that are moved out.

But the other 3 million, which I think in the footnote says charging effects on the level of other companies. Can you explain to me what that is, please, and how, separately, we should be modeling the central cost line, going forward from here?

What is in there is two buckets. The one is simply the additional charges from the new charging model which we have implemented in the year 2016.

And the second bucket in there is then that we had some central costs which normally did also belong in the past to both segments, which we have now taken the liberty to also offload them to them as it should have been maybe also been in the past, but it was always kept on a central level for some central management function.

So how should we model central, going forward from here, then?

How can you model central, going forward? In the next quarters to come -- we have already initiated and implemented that new charging model.

So don't expect that the central result will be improving like it did in the first quarter, so as we have done the new charging already in the Quarters 2 to 4 of the year 2016. And then, yes, you could just expect that the central result will be, I would say, a single-digit million of positive result for the whole year.

Okay. That's great.

That's helpful. And just on Equipment margins, if I then strip back from the allocation of these central costs, I'm left with about a 100-basis-point decline, year-over-year, and that's on a 6% organic growth number.

That's quite a negative operating leverage. And I guess -- again you highlight three things.

You highlight marine and the pricing pressures there, but marine is, what? 3%-4% of the Equipment division.

I also take your point about emerging markets. But again, it doesn't look like a meaningful shift.

I, therefore, assume that it's the lower-margin product groups, a mix shift, that is explaining the majority of that 100 basis point decline. Can you help me understand what specifically is it within that that's driving margins lower?

From the product portfolio, the food processing business unit has shown quite a strong growth. However, of course the food processing product line comes it's increasing quarter-by-quarter its margin, as I just said.

We are quite happy with the development of that unit. However, it's of course below the average of Equipment and, therefore, the more it grows the more it dilutes the overall margin.

We also in Q1 we had a couple of projects or events where provisions could be released in the Business Area Equipment. That compared to Q1 also distorts a little bit that picture.

But it's a mixture of those things which you just addressed or which we put in the footnote, but also this food processing is impacting that, which I think is not something to the negative side, but as I always say for all of GEA, you have to understand the portfolio of GEA not only in Equipment but also in Solutions is a portfolio of quite different business and margin profiles and growth profiles. So it is then always a question on who grows more than the other one and with which margin profile.

And then that has an influence on the final result.

That's understood. And given the trends you've seen, is there any reason to believe that that adverse mix shift should reverse over the course of this year?

Or do you expect that to continue to drag through the year?

No. What of course it depends also to see is we did see a rebound on MDF, milk and dairy farming, which Helmut explained in his presentation.

And it depends to see how strong that is rebouncing whether that continues over the year, because also that business is coming in with a slightly lower margin. But of course we are more than happy to finally see that it has come back, and we do see very strong growth in robots.

We just got now the approval a couple of days ago from the FDA in the U.S., which was announced also in the press in different press releases. So we will see good demand also from there.

So I think there is nothing negative besides the marine and the things we have addressed. But at the full year it will depend very much on the product mix when we try to guess the final margin of Equipment at the end of the year.

Just as an aside, can I ask you what your margins are on the OE side in farming? It's good to see you take or regain some share in milking systems and, particularly, of course AMS with your milking robot.

What sort of margins -- is that a profitable business for you at this point?

Yes, yes. I can confirm here that all the sub-businesses which we have at Equipment, even excluding the service business, are profitable.

That's helpful. And then, secondly, if I can move on to the guidance, I think many of us think of your growth or model your growth by end market, really.

So I think it would be quite helpful if we could learn a little bit about what your thinking is on some of the key end markets in 2017, specifically dairy. Can I just start with dairy processing and understand whether you expect the 120 million or 125 million of backlog that was not invoiced last year to be invoiced this year and, therefore, with that component you expect revenue growth in your dairy processing segment in '17 over '16?

That's difficult to predict. We did see some small growth, but we also do see that still, as I just mentioned, not only in the decision making process of awarding to projects but also in executing or finalizing the process, the customers are still acting quite slower, or behaving slower, than it used to be in the boom years: '13, '14, up to beginning of '15.

So that has not improved substantially. So we do see that projects which in the past may have taken 1.5 years to finalize, for millions of reasons in the meantime in the dairy business they could take up to two years, et cetera.

So the level of slow-moving projects -- and that also comes specifically from the area dairy processing -- is bigger than in the years '14 or '15.

And could you give a little color around the other key end markets for you and what your thinking is on 2017 in terms of revenue growth?

I would say the best you can do is that maybe you grab our page 14, where you have the book-to-bills ratios which gives you a kind of forward-looking view on where you can expect short-term growth in the various industries and regions. And we added there the various shares of the industries.

So by that, with a little bit of your own assumptions, you could literally model your view on GEA. I would say that's the best you can take.

And so I guess -- and my point, just finally on guidance, is it sounds like the risk on '17 is very much on larger orders that may come in Q2 rather than base orders. I'm just trying to understand what you're seeing on the base order side currently, specifically if we strip out farming.

Because on my numbers, if I take out M&A and currency and take out farming which obviously has been quite strong for you, I'm left with a base order trend which is down organically. I wonder whether you could give a little bit of color around your comment on "robust growth" in base orders and what you see in the back end of Q1 and in April so far?

Well, I will not want to talk about April yet. But in general, the development of small orders -- but this is now of course including farm business and also the new acquisitions, Imaforni and Comas, which most of their projects are on the rather smaller side -- is developing quite robust, solid.

So there is no trend downward. Of course you can always deduct something which you want to deduct to show a downwards trend.

You can also deduct certain parts of the business to show an upwards trend. But I think at the end of the day, important is that the sum of all the orders below €1 million is solid and steady.

What I would like to add here is that, in particular, might affect that over the period of time also the marine business and the oil and gas business was somewhat getting slower comparing with the past. And if you then take the split of our order intake in the first quarter 2017, you would find that, in particular, across the board of all the ranges of clusters in volume size of these individual orders, they have grown compared with the quarter one 2016, with the exception of the very large ones where we had that downturn on €80 million.

Can I ask, specifically, if you wouldn't mind, what was the order growth in your dairy farming segment year-over-year in Q1?

No, because we are not disclosing units below the business areas.

Okay. Just finally, if I can, on working capital, you talk about a significant reduction in trade receivables.

You highlight that on the call and on the presentation. Can you tell me what the normal seasonality is in your trade receivables without POC, Q1 versus Q4?

What you find there is in the graph of the Page 18 where you find a pattern of seasonality of the trade receivables. And there you would see that actually in the quarter four '16 we were substantially up for the reasons I was giving.

And then just in the quarter one now, we were able to reduce that. And that is something, given the circumstances we were in the quarter four, where we led to be a real success, and that highlights that the teams are focusing now again on working capital.

But that wasn't my question. My question is what's the normal seasonality in that part of your working capital?

You reduced it by 112 million last year in Q1 versus Q4 '15.

Difficult to talk about any seasonality there because it has to do with structures of orders, is it fast turning small orders or is milestone payments, and depending on also the payment dates and the deferred payment terms in all contracts. I would refrain from digging out any seasonality out of that from just these report dates.

I would like to ask three questions, please, and the first one would be the review of the organization post the OneGEA introduction. Could you confirm if you have looked at all potential issues detected?

And also, sort of targeted in terms of solving them? The second one would be just in terms of the operating EBITDA average.

How should we think about the operational excellence program? And perhaps could you share with us how much of the savings you have budgeted for in 2017 now?

And the third one would be just a small one to confirm the full year '17 sales and operating EBITDA guidance. Is that without new M&A in 2017?

Coming to your first part, review of the organization, we are constantly doing this. Our internal audit has special tasks besides the normal audit which they do, which they have been doing the same style for years now.

They have a so called OneGEA audit where they day by day visit parts of the organization and they talk to the managers and check where the procedures are in place, where the job descriptions are in place, divisions of work, process descriptions, et cetera. And of course nothing is perfect yet but it's constantly improving, and we are monitoring that almost on a weekly basis with the feedback from the internal audit.

So it's one of the big tasks of internal audit is to check how the OneGEA organization is working out there in wherever -- in Vietnam, in Argentina, in South Africa -- in the different functions, be it in innovation, supply chain management, or execution of projects, etcetera. So we have quite a good overview on how the organization is performing.

However, there is not everything solved, but I think we are doing quite substantial progress. And then you come [Indiscernible] to a stage where you even in an organization which you did not change recently, you always have issues which you have to address.

And I think we are going to approach that point back to normality over the course of this year. Then of course we need to carefully look into adjustments of the organization, not because of OneGEA but because of the market.

As you just have heard in our discussions in the last half an hour, the markets are developing differently. The expectations for the markets are different.

Growth areas are different from the product lines, the services and the geographies. So there will be a constant adjustment process behind that to have the right resources at the right places.

When it comes to the guidance, 2017, on EBITDA level, that excludes potential acquisitions of 2017. I would then maybe hand over to operational excellence.

Helmut, to that project?

If you then look into the details of operational excellence, I mentioned the main drivers of that are already manufacturing and One Engineering. And we said that this is something which we do in order to prepare ourselves for even a better cost base in order to be also able to cope with the competition of the future and to facilitate also the necessary flexibility and productivity increases which we would like to earn over the next couple of years to come.

However, as I said as well, there's no uplift in any potential margin ambitions which we are now, potentially would think of.

Just a couple left for me. If I approach the income statement from the statutory presentation, I can see that cost of sales has gone up, broadly, in line of sales, but selling expenses are up 12% year-on-year whereas revenue is up 7%.

Is that where most of the temp costs are going? And then I guess looking forward, because you've said you may want to convert some of the temps into FTEs, what portion of that € 50 million year-on-year increase would you hope to get rid of by the end of the year?

And then, just secondly, if you could talk about dairy farming and maybe talk about how the consumables portion of that is going? Because I think looking at that market, prices have improved a bit, but I guess that's partly been driven by a production decline.

So what are you seeing in your consumables business in farming?

With regard to the selling expenses, I take the first point that has to do with the additional initiatives which we have taken in order to support our sales. And that has to do with what we were talking already about some additional salespeople but also service people in order to support our volume growth.

And hence, that is something which is kind of a snapshot for the moment. And the second question I couldn't hear really.

I think you're referring to the MDF consumables? That means the chemical business and the [indiscernible] business.

Well, that's developing fine. That was more robust in the decline of the oil business in the last 4 quarters, mainly during 2016, more robust than investing into new milking and feeding lines.

But it's on track. So I don't know maybe you have something, a different type of question or maybe we didn't get it right?

No, that was it. I just wanted to see if that was recovering as part of the dairy farming recovery or whether it was just...

Yes, it is. It is hand in hand, yes.

Brilliant. And then, sorry, just going back to the first one, so it sounds like the selling expenses are where you think they should be given the investments in the business.

So are the temp costs going through cost of sales then? Is that right?

Partially, yes; partially, no. It depends what type of temps you have.

So you'll find them either way. So we have them in the materials if they are directly hired to execute orders.

But you could also have them within the overheads if it is more for general support initiatives.

And then have you revised downward by some portion, I guess, how much of that additional cost you think you'll remove because you are now converting some of those into FTEs where you see opportunities in service?

That will be an element of what is lying ahead of ourselves. So as we are reducing the number of temps, at the same time we are looking into the restaffing of our own organization, because that was part of the missing efficiency during last year that we had too many temps on board.

So there is a little bit of two elements, or two sides, of the coin. And this is why the average saving lies in the middle of the comparison.

I had a few follow-up questions on these Fit for 2020 charges we have seen in Q1. Do you expect there are also more to come in the next quarters ahead so that we would have to add a portion of X to the 60 million additional charges for the strategic projects?

And if so, what could be the run rate for this year? And also with regards to the customer behavior, can you give us an update on their pattern with regards to prepayments, first of all?

Then also you talked about lately that customers get more price sensitive. Does this trend continue?

And last, not least, also with regards to the payment terms, you have indicated that some customers ask for very long payment terms of up to 180 days and more. Is that still the case?

Is that increasing, putting pressure on you and, with that, also on the working capital?

Let me start from the very end. Unfortunately, I cannot say it's releasing, that pressure.

We do see that customers are moving -- not all of them, of course -- but we see more and more that behavior that they are trying to move towards payment terms of from 90 to 180 days or even to 300 days. Fortunately, that is only in small areas, but of course it has an impact.

If only in 5% of the business you have this trend, then it already at least temporary starts to affect the working capital or the change in working capital. Customer behavior, more price sensitive?

That's also correct. We did see in our customer survey which we carried out towards the end of last year, compared to the one we did about two years, that when we asked the customers on a global basis throughout all the industries what is the priority for your selection criteria and then you're asking about quality, innovation, responsiveness and then of course price, that price went one digit up in importance and relevance.

So we must assume for the gross average of our customers that they are becoming more price sensitive. And that, in combination, also that we are having more business and income shares from the emerging markets like Latin America, India, Vietnam, Thailand, et cetera.

As we outlined already today but also in previous calls, that is not improving that situation, certainly, because customers in Mexico or Colombia they have a different behavior when it comes to payment terms or, in certain locations, they would even ask for financing of the project. So we have to face that.

I think we will manage those things. But this is just to make you aware that there is certain pressure from that side.

And I think it's a good question that you ask, and so we do not have relief from that side.

And on the €60 million one-offs, I mentioned that had everything in there. So that was also including the potential one-offs of Fit for 2020 and for the strategic projects.

Please mind the fact that with regard to Fit for 2020 we are living in the aftermath of the whole initiative because it was concluded as of last year, but some personnel-related provisions or expenses still need some fine tuning; this is what happened then at Quarter one. But the bulk of these one-offs I was mentioning are related to the strategic projects.

Avi Hoddes, here. Just on the old 13% to 16% margin target range for 2017 to 2020, can we still rely on the bottom end of that range for, say, 2018, 2019, 2020, given the factors that you've talked about today?

For example, pricing on the last question.

Well, I cannot give you a guarantee for that thing. I think it's indeed a question of one side, as we said, volume, but also of the industries and the portfolio, which industries are growing at which speed for us.

But under the assumptions we had at that time of the portfolio and product mix for the years to come and the initiatives we have initiated, and most of them behind and some still to come, what will be finalized, we don't see a reason why that should not be possible, but we are cautious. And as we just discussed today, it's not that the current environment which does not mean that it could change again but the current environment is a very favorable one for GEA.

I would also try to remind ourselves that the partially massive setback in some other industries, like oil and gas and marine, of course triggers that some other competitors focus even more on food and beverage, because food and beverage has been proven and it is a solid and steady, predictable business. But of course if you have pressure in some other areas aside that, then you concentrate even more to get the volume and fill your factories in those areas where we are mainly active.

So we cannot say that the marine and oil and gas business is only affecting us in a limited way because our exposure is in a single-digit percentage when it comes to the full portfolio, because we do see that competition is moving then into our areas in order to safeguard their volume. So the environment currently is not a favorable one, but I'm sure that we will also see again different times and we are well prepared with all our initiatives to digest those things.

I'd like to come back to your -- on the temp workers, and I'd like to ask you if you could provide us with an indication how many temp workers you were required to hire last year at the peak? And you also stated today that you plan to convert some of the temp workers into permanent roles.

Maybe you could quantify the number of temp workers you'd like to convert? And secondly, also with respect to your midterm guidance, obviously the margin range was based on the fact that you will be able to realize those €125 million of cost savings from Fit for 2020.

However, it looks like there will be some delay with respect to those cost savings coming through. So would it be also fair to assume that it will take longer for you to achieve that range?

And lastly, on your guidance for 2017, are you currently planning to provide an update on the guidance after the Q2 figures in terms of maybe narrowing the guidance range?

Coming to the number of temps, we have in the meantime a very detailed tracking and tracing of the temps around the globe. For GEA, we did decide that for 2017 a normalized level, a healthy level, of temps would be, if nothing unpredictable would occur, would be around 1,500, as I already said.

And at the peak times last year, we were around 2,000. So that gives you a flavor, which doesn't mean that if we convert temps into full FTE positions doesn't mean that we will not reduce the number of temps; of course we will reduce them.

Typically the person will stay on board and will become an employee of GEA. But that will not increase the target size of GEA, with the exceptions of some very limited areas where I just said where we will go beyond, or above, the target size, which was defined once at Fit for 2020 for GEA.

And mainly the area there is the service area. When it comes to the -- could you repeat your second and third questions?

Sorry.

I'll take here the second one, which was on the guidance for the year. There's nothing I can comment on today.

We are constantly monitoring our progression of the results and the business. And hence, we are monitoring our guidance; so I cannot tell you whether or not there is any need that we need to come back to update the guidance based on the quarter two numbers.

And on your midterm guidance, do you just sense that it will probably take longer for you to achieve the range of 13% to 16%?

Well, as I just said to the question of your previous colleague, it depends of course on the growth of the different industries and business units in our portfolio, and it depends also how much headwind we have. What I see today, we do not have favorable tailwind in order that we did assume two years ago, but we also have countermeasures in place.

And the Fit for 2020, the savings, that has been realized. Even so, you might be wondering why we are saying that, but I can tell you that we are on target size, coming to the number of employees; also in some areas even slightly below that, which is being filled up currently.

So it's not because of that; it's difficult to predict that it's more because of the outside conditions and the behavior of the competition and the growth in the different industries.

Maybe just a quick follow up, as I just want to understand that correctly. Because my understanding was that the Fit for 2020 cost savings are dependent, to a large extent, to the staff size reduction.

However, since you have now -- or you were required to hire new temp workers, how can that still add up in terms of cost savings? Because obviously probably net reduction in terms of FTEs is now slightly lower than you initially expected.

Well, you know the temps are -- it depends very much where the temp is. If a temp is directly paid by a customer or the temp generates additional business, as it is typical in the service business, then it would be foolish from us not to hire that temp just because we want to be with or without temps at the target size for Fit for 2020.

But as we said already in the previous calls, we needed to hire some temps to fill in some already reduced positions, because in some areas that may have been done too fast. And then we faced some of these execution problems which we addressed in our Q3 call last year.

Those temps are being regularly being reduced now. But as I said, we have planned this year to have a number of temps around, plus or minus a couple of temps, but around 1,500, and that would mean we will come down from a peak we had towards the rather third part of last year of about 2,000.

If I may come back to Slide number 14, there is a not so small share in the others category at the very bottom, with 12%. So around about the same ballpark as dairy farming.

Could you provide us a little bit of color on what is exactly included in there? I witness it's a very strong book to bill of around 1.8 times.

What is driving the growth there? And also if you could comment whether the share in the order intake is representative of the EBIT importiveness?

In the category other Sales, a broad range of areas, industries, which can, for example, be environmental services which we are doing their which would factor in there. So, these are just a basket of other potential industries which we are serving with our products just might affect that, with a separator by, in principle, you can serve up to 1,000 different applications.

So we are servicing also a lot of other industries, all of them to focus areas which we have labeled on the top part of the graph. And then I would like to add that with regard to the share in sales, that is not meaning anything with regard to what's important with regard to profitability.

So that's rather independent of that. That's just the weight.

As Helmut just said, the biggest part of this Others is what we used to call our GEA visuals, which is an engineering entity, highly specialized and highly successful on doing filtration technology for cement plants, for chemical plants, et cetera. And as you can see here, it's pretty high the number in Latin America.

That's because we got some nice orders in Latin America in these couple of months for mainly cement and mining plants and chemical plants.

Transportation industry [indiscernible].

Right. And the other bigger part of that is [bulk], what we called the bulk compressors, which doesn't go into the food but it goes into refrigeration of trucks and buses.

Do you expect the strong momentum to continue here for the full year? And how is the margin quality compared to the group?

Well, I would not like to disclose margins there. And as I said, in [indiscernible] it's a variety of different businesses, with different margins.

But it's a good business; else we would not have it in the portfolio. And I don't see any major change in that business for the remaining part of the year.

Maybe another question, on the working capital. If I compare trade payables Q1 versus Q4, the decline this year has been much softer than in the last year.

And since the discussion was mainly circling around receivables and prepayments, I wonder whether you could provide us an indication what happened here at trade payables? Is this rather a mix issue?

Or have you incurred any measures to achieve this result?

With regard to trade payables, actually that's a kind of normal seasonal swing-back which we have at the end of every year. It's a little bit of a good style and fashion that we also as well try to optimize our working capital.

And hence, a lot of trade payables [indiscernible] maybe in the first quarter. And this is why you see trade payables coming down here a bit.

But you are having a good point. We are not only optimizing our procurement to record process.

I have to say we are optimizing also the procurement process, and not only the receivable collection process. And that goes hand in hand.

So all of the various processes within the working capital management we need to address, because of course we would like to be very good in cash collection. But on the other hand, we need also to have a decent process in place with regard to the procurement process, and that is the other end of the working capital.

However, the better you get there, the more it hits your working capital, if I may say so. But that is, I would say, nothing else than a normal swing-back.

Well, the swing-back last year was 100 million. This year it's only 50 million.

So I was wondering whether this is something that is sustainable for the remainder of the year? And if you have renegotiated the terms, did this come at any margin dilution?

No. No, no.

It has simply to do with the fact that we were on a higher level in trade payables at the end of the year, and then we executed the payments. There is nothing like a renegotiating.

That is something which is ongoing, our procurement project. Then we are also going to talk about terms of our procurement contracts, but it's too early to talk about that.

Okay. Maybe finally, you talked about the peak temporary workers and the normalized level you are aiming for in 2017, but I overheard what the current number of temporary workers is.

And could you also provide what the cost roughly has [been for] the temporary workers in the first quarter so I get a better feeling on how this will evolve for the remainder of the year?

Well, at the end of March the temporary workers, or contract workers as we call it internally, were in between 1,700 and 1,750. And regarding your question to the cost, I would ask for your understanding that we do not disclose this level of detailed information.

But the level is below the peak, as I mentioned, towards the end of last year, and our aim is to go in the direction of 1,500. And we are now somewhere between 1,700 and 1,750.

And this 1,500, when would you reach those? Could you provide us a rough indication?

Is this more like in the third quarter? Or is it only to happen in the fourth quarter?

I would not like to give a number when we would want to achieve those 1,500. But you can see the progress we have made so far, and we're working on this.

Of course one should not extrapolate from the first three months, because as you always know to reduce the last number of temps it's much more difficult than to reduce the first five number of temps.

Thank you very much for this dialogue. I hope that we could answer most of your questions in the way you expected it.

And having said that, I would wish everybody a nice day, and talk to you then sooner or later depending on the meetings and as always, you can always refer back to Investor Relations, to Donat von Müller, who will be happy to take your questions and enter into a further dialogue with you about the performance of GEA. Thank you very much.