Donat von Müller - Head of Investor Relations Helmut Schmale - Chief Financial Officer Jürg Oleas - Chief Executive Officer

Klas Bergelind - Citigroup Max Yates - Credit Suisse Lucie Carrier - Morgan Stanley Denise Molina - Morningstar Inc Peter Reilly - Jefferies LLC Sebastian Growe - Commerzbank AG Glen Liddy - JP Morgan Wasi Rizvi - RBC Capital Markets Daniel Gleim - MainFirst Bank AG Jack O'Brien - Goldman Sachs Felicitas Bismarck - Deutsche Bank AG

Yes, good afternoon and welcome to our third quarter conference call. Helmut Schmale, our CFO will comment the numbers before the CEO, Jürg Oleas, and he together will answer analysts' questions.

Thank you very much.

Good day and welcome to our conference call. I would like to start with the presentation of the key figures of the quarter - third quarter 2018.

So the first page summarizes as usual the key numbers and the order intake from a year-to-year perspective grew by over 10% organically, not just large orders, among them again Dairy Processing even coffee orders, but all size brackets contributed to that. Given the seasonal fluctuation that is quarter two and quarter four regularly standing out, quarter three brought a certain sequential decline on boycott of the previous quarter two, 2018.

By the way, we are cautiously optimistic about what we negotiate currently as part of the quarter four pipeline. Sales increased moderately in organic sales by 2.8%.

The headwind from currency translation of some €25 million was overcompensated by about €50 million contribution from our most recent acquisitions Pavan and VIPOLL. Let me add that order intake and sales on a new record level for third quarter.

The operating EBITDA amounts to €138 million, which is comfortably up over last year. And let me add for the sake of clarity on the level of the BA Solutions, we had the headwind of some €40 million from the bottling provision last year, while on central level we had €7 million tailwind from real estate disposal.

On balance headwind of some net €7 million in 2017 in comparative terms. Let's go on then with some more details by Business Area.

The Business Area Equipment reported 8% strong growth of order intake, adjusting for [a fix in] [ph] Pavan acquisition, the growth was still about 2%. The separation business goes strongly during the quarter fee based on, for example, strong business development in China.

Our Milk and Dairy Farming business was somewhat down against a very strong comparable from 2017, uncertainties among U.S. farmers about the outcome of the trade negotiations with Mexico, have our biggest dairy export destination of the U.S.

and Canada induced a fair amount of uncertainty, which now should be resolved as a consequence of the new U.S., Mexico, Canada agreement. Providing for enhanced access off U.S.

Pharmaceutical Canadian markets. On the other hand as a late consequence of the drought, we might see some further fallout of the protracted drought over the summer in our call European markets.

BAS, the euro intake for Business Area Solutions grew by 18% or organically by almost 20%. If the exception of beverage and utilities, we observed strong growth in all APCs.

Daily contributed the most with in terms of order intake Dairy Processing for BAS now seems to have turned the corner, while on that later in the context. With regard to sales, the reported sales increased by 5% or 2.8% organically, on the platform also strong growth for BA Equipment of almost 13%.

For BA Solutions solution reported sales were down 1.7% sales in Dairy Processing were down in particular. The EBITDA increased by some $70 million, as I already mentioned, supported by the non-reoccurrence of one-off effects in 2017, which was on balance net charge of €7 million in the year 2017.

Some more details for our Business Area Equipment, the volume increase including the acquisition Pavan explained by and large the growth in operational EBITDA. The profitability increased by about 50 basis points to 16.7%.

The improvement from BAS originates from what I mentioned with regard to the provisions for ABF technology on the one end, and on lower margins in Dairy Processing and beverage on the other end, but partially mitigates however by the improved margins for the remainder of the business and good service ratio in the quarter three 2018. The next page provides you with a better impression on the order intake and sales trends over time.

In summary, we can observe that dairy farming order intake levels, likely dropping off further. While sales top surgeon [ph] order intake and sales are catching up with growth over the last four years.

Dairy Processing order intake has turned the corner, as I said already sales will continue to drop for another couple of quarters as a late consequence of order intake falling until recently. Beverages volatile sideways movement in orders, for food we observe, then it is going for quite some time meanwhile, however, includes our latest acquisitions as well.

The pharmaceutical and chemical business was sees the sideways volatile development for a couple of years before recent slight upwards strength. Overall, the other businesses remain stable.

Now, the next page we added freshly to our presentation of today to give you a bit more insights on the dairy business. As a snapshot of the market conditions in Dairy Processing as far as it relates to the Business Area Solutions.

We would like to offer this here. For the awards of drought, this excludes any component sales of Business Area Equipments into Dairy Processing applications.

Since quarter two 2018 the order intake has turned the corner, but it yet remains to be seen how sustainable that will turn out to be. As to the sales expectations of the next couple of quarters, by and effect that since quarter two 2017, the book-to-bill ratio has been smaller than one.

It will take a few quarters before the comparatively low order intake of previous quarters will have been absorbed by the - in the sales development. Among the new orders, we see good demand from emerging markets, for example, India, China as well as typical Western Dairy surplus countries, such as Ireland or the Netherlands, who invest in whole milk powder or high value added downstream products such as drink milk, cheese or infant or nutritional formula.

As usual, the book-to-bill ratios are highlighted on the next slide that differentiates the weighted average book-to-bill ratio of 1.04, by geographies and industries. The ratios are calculated on last 12-month basis to smooth out seasonality and random quarterly fluctuations.

To summarize, the picture along its two dimensions in terms of geographies Latin America, Northern Europe and Asia Pacific have the highest book-to-bill ratio. North America and Western Europe are about one.

And German country - Germanic countries like Austria, Switzerland, and Germany et cetera. And Eastern Europe are trailing a bit behind with 0.95.

And in terms of industries, smaller industries such as chemicals, oil and gas, and marine stand out positively, while every industry shows at least a book-to-bill ratio of 1.02. And as usual the lower books gives you the weights of the cost sections.

While the intake development by-product group and applications. For both of you are interested in more detail drill down information from the business area perspective this slide offers somewhat consolidated view on order intake trends organizational units.

The dots on the left indicates a relative cost margin profitability of these businesses, including service vis-à-vis the group average. Green means in that sense above group average that of course means then below.

And more to the right, you see the approximated weight. To transparency, we have this time indicated the exact numeric variances to the slides.

With all that mentioned sales in quarter three, the backlog sequentially state puts on the same comfortable level like in quarter two and the book-to-bill ratio here is indicated yet again 1.04. And let's turn to working capital, while the last 12 months average is even 10 basis points below prior year working capital is picking up again from the levels we had.

At the reporting date working capital increased year-on-year for both business areas mostly from inventories and trade receivables. The increase in inventories of about €150 million is mostly related to Business Area Equipment on the background of working process, finished goods and merchandise.

Most of this increase needs to be seen in conjunction with well performing order intake, the load in our large factories and the acquisition of Pavan. The increase in trade receivables other end of about €95 million originates with about two-thirds on the Business Area Solutions.

The request of our clients for extended payment terms is one element in here. The Business Areas have different working capital intensities.

The BA Solutions in the single-digit, because of advance payment and BA Equipment in the trends, because of inventories. To the extent BA Equipment order are outgoing BA Solution, just like at the moment.

The working capital to sales mix was adversely affected. The next two pages give a standardized view of the relative magnitudes of advance payments, inventories and receivables including POC receivables.

The search in days of inventory outstanding is directly correlated to the strong recent increase in order backlog, and hence a natural side effect of [our otherwise we can grow] [ph]. The advance payment long-term benefit, which is however favorable as they are a liability.

On the next page, you'll find the receivables, the intensity is going up as a consequence of adverse changes in the payment term mix. As I said already, net of advances and POC liabilities increase is less pronounced.

Cash flow driver margin. The recent deterioration of the cash flow driver margin reflects just discussed increase in the ATM broken capital sales ratio mainly.

Again the orange curve is an unadjusted for the structure and one-off as usual. The free cash flow from continued operations over the last 12 months, adjusted for expenditures for strategic project is about €125 million.

Most of the items in this which are self-explanatory. The buckets are includes payoffs for pensions of about €40 million.

Let me point out the consequence of above average of our Business Area Equipment here, where working capital sales ratio trends exceeds EBITDA margin. Higher share of the BA - the sales mix of the group in valuable results in absolute working capital going faster than the EBITDA for the group.

This is a mixing effect temporarily of weighing on the net liquidity position. This effect would be easy in future, if for example of volume and sales BA Solutions would start to grow faster or BA would slow down a bit.

On service, it's worthwhile to note that we have still a very good service share with about 31% and we manage to grow the service business by about 5% in reported terms even 8% adjusted. Then let's turn to the outlook, as I amended already in a preliminary release on October 10, we have modified to 2018 guidance.

Before currency translation effects, we now expect for the full year 2018 the following. Revenues to grow by about 7.5%, and EBITDA margin of about 11.1%, which corresponds to EBITDA margin of 11.3% in reported terms.

And an operating cash flow driver margin of about 8.5%. As an additional information we added here the slide on the strategic projects.

Our prediction for this year spent on strategic projects, be it OpEx or CapEx has not yet changed, so we reiterate it here the next couple of weeks, where we will be at the lower end just at the corridor. Thank you for listening.

That concludes my little presentation of the keysets of numbers.

Yes. Hi, Jürg and Helmut.

It's Klas Bergelind. A couple of questions from me.

I'll take them one at a time, if I could. The first on dairy, we have likely one negative and one positive ahead here.

The negative being Dairy Farming, and to what extend volumes can - we can further into year-end on tariffs, the European drought. And then, the positive which seems to be a growing pipeline of large orders in Dairy Processing.

If you could comment on both please, to what extend should we be concerned about further weakness in Dairy Farming, whether the NAFTA agreement can provide offset. How is October trending versus September in farming?

And what do you think in processing in the pipeline and by region please, is the activity in the pipeline higher now versus when we listen to you during the summer? I'll start there.

Yeah. Thanks for your questions.

Let me start with Dairy Farming and milking. It still is okay, but our view is that it will flatten out, there is a certain risk that it might cause slightly down because of the issues you have mentioned.

There are some country effect, as Helmut just has raised in his presentation. The agreement on trade zones also regarding the products between Canada and the U.S., which is resulting in some opening of CapEx there, but that's also of course limited.

There aside, we also are aware that for example in New Zealand, Fonterra [Decio] [ph] has announced to his farmers that you will have to lower the milk price. So he has asked them also in that letter to save costs and to not invest too much CapEx, because it's some rough time coming ahead in Fonterra, when it so they will not be able to process all the milk.

So it's a mixed picture, I see that flat for the next two, three, four quarters with some risk that it could go downwards, when it comes to Dairy Processing from Business Area Solution, if we were able to book some nice projects now in Q3 mainly in September. I - it remains to be seen whether that a single event or not.

Going down of order intake in the last two, three quarters, of course, put some pressure in some dairy companies that they have to order and that they have to come to a decision. I would not be yet too optimistic on that, if we would see the development we have seen in Q3 for another one or two quarters, and we could talk about the stabilization.

But I would like to draw your attention to that slide, which Helmut showed that currently sales is turning down, because order intake has been for four or five quarters way below sales. So that needs to be recuperated over the next three, four quarters, and only then hopefully then sales is also recovering if order intake continues to be as it was now in the recent quarter.

Yeah, thank you. That was helpful.

Then my second one is on the services, 8% growth last 12 months, it's the highest growth in three years and it's a big step up, if we back out the third quarter itself. To what extent if this only price increases by you to compensate for the cost headwinds versus volume improvement, which in terms should be driven by self-help and aging fleet?

What I'm trying to gauge as to what extent, is the renewed service effort within GEA starting to pay off?

We certainly can attribute apart to that to what you just said us latest - all the initiatives we have launched on the service together with our country organization. So that is certainly shows some results for the time being, then of course, also on the pricing level, I would say that 1% or 2% or so we were able so far to introduce into the market.

It's very difficult to push that into the market, because in the service business, pepper business, very often customers to have price lists, which for a certain validity. So we cannot just pull them out and replace them by new ones, we have to adhere to a validities of prices lifts, et cetera.

But I'm optimistic on service, cautiously optimistic that our initiatives will start to work. And the focus is certainly there and we are currently also even strengthening more to service organization and we're also building up people in this service organization, where we believe are still opportunities.

So I'm cautiously optimistic on the service and it will continue to grow.

Okay. That's good.

My final one is on cost, you're previously alluded to increased wage inflation on the back of wage creeping Europe, higher wages there. But now, when we have a little bit more clarity on the tariffs, and to what extent this can impact the cost line.

Can you guide a little bit maybe in terms of impact from tariffs, both in terms of pure raw material increases, but also from increased cost inflation through to supply chain, please?

Yeah, on the material side, it's quite difficult, because we have thousands and thousands of different commodities we buy not only commodity, but also tailor-made products for us, which we then implemented to our projects, so it's not that easy to make that, but certainly, we have seen. As we also said in the last two quarterly calls, we have seen since the second part of last year increase in some, or for us relevant commodities, prices, such as certain alloys in steel, and others and energy, et cetera, which we are trying now to factor into the pricing into the bottom up calculation.

And I think, we're quite successful in transferring that in the end to the top line means to the customer. When it comes to wage inflation, we have been able, I mean, worldwide we do assume currently that wage inflation for all our personnel costs or personal expenses is trading around 2.5% or 3.25%.

We did assume when we planned the current year 2.75% wage increase per capita compared to 2017, of course, in Germany where we have tariff agreements, which we cannot influence, it's above that. It's rather in the area of 3% to 4%, but then we have other countries or non-tariff areas in Germany where we can limit that increase to maybe inflation.

If you look at the personnel costs per head in this year, they are currently trading almost at the same level as last year. So we have been successful to limit, that increase also compared to the year 2016.

But of course that all has a certain limit, and we also of course are limited and reducing the contract workers, and also gain some momentum or positive cost momentum on that side. So currently we do have to wage increases on the control also the acquisitions of [indiscernible] Pavan, brought the average wagers per capita slightly down, because you can imagine in Italy pay less than in Denmark or in the UK or in Germany as a neighbor, so that is diluting a little bit and helping us.

So the wage increases per capita is currently trading at a very similar level as last year.

Thank you.

Thank you. Just my first question is on dairy processing.

And I think, you talked about, when you lowered the guidance, the effects of lower earnings in that business, and I presume that's coming from lower sales. So what I wanted to understand is now that book-to-bills have turned positive and it seems like sales growth will come back in maybe a few quarters time?

Is that dilutive or is the impact on margins just a function of low utilization of the engineers? Or is there anything actually in orders that you're taking, which suggests that pricing as well?

So what I'm trying to get to is will there be a natural margin uplift, just because the people will be utilized that previously have been working or do we then have to wait for pricing to pick up to actually see a meaningful step up in margins on the sales in dairy processing?

It is both on one side, as I mentioned, I think six months ago we cannot just lay-off our engineers due to the declining order intake, which we did observe and which you can see in that curve, which I would have presented. So the occupation of those engineer was much more [certification] [ph] quotations, et cetera, so called non-paid activities by the customer so not into the gross margin, but I think, it gets to do that.

The higher number of quotations, of course, also has to do with the tougher fight on the market for the remaining dairy projects, where it needs more investment to win them. And last but not least, unfortunately, you also have to compromise, when it comes to the bottom up calculation, when the volume and the available projects out there in the market has been reduced and competitors are still the same.

And to my knowledge, non-relevant competitors have restructured this. And it's all the overall capacity of engineers, GEA plus the others is still there.

And they're fighting for lower volume. That of course leads to negative pressure on the gross margin in that area.

Well, it's called naturally up, of course, if the order intake will develop as we see it on that slide, which Helmut presented that would be, of course, very nice, because in our engineers would work more for the direct gross margin, and less for quotations, and standardization. By the way standardizations, of course, something which is absolutely needed and it's good.

That's the number of quotations per order intake has become worse and that goes to the detriment of the profitability, and it remains to be seen if it would go up as it is here that would be of course good news for the APC Dairy. But as I said, a minute ago, it remains to be seen, whether that's a stable uplift for another one or two quarters before we draw our conclusions out of that.

Okay. Just as a follow-up to that, could - I mean, could you give us a sense within your sort of 2018 EBITDA guidance of €550 million, whether the Dairy Processing parts of solutions will actually be profitable in the second half of the year.

Just to trying to understand sort of where margins have come to and how dilutes of this business is, will it be making money in the second half within the guidance?

We usually do not disclose margins or profitability of individual APC's. But what I can tell you that if you take new machines or new projects APC Dairy, it is currently trading below zero.

But of course, you always have to see that in combination with service and if you add on service there it is profitable, not highly profitable, but it is profitable. But you cannot detach to service and to new machines or the new projects.

But new project is not that good for the reasons, I just explained.

Okay. And just my second question would be around working capital.

Obviously, it has increased in Q3, but I think within the cash flow driver margin guidance it is implied that you will have a much better development in Q4, so maybe it's sort of not commenting on average working capital. But if you could talk a little bit about where you would expect year-end working capital to be relative to where we were at the year end of last year?

Thank you.

Yeah. Helmut here.

If I may take that question, then with regard to the working capital, I gave some explanation during my little presentation on why it has developed. The way it is, what we are looking further - if you're looking further into the quarter, what we are aiming is to bring that working capital down, let's say, €1.5 million so to go substantially below.

The number you see in quarter three 2018, which will then have an also an impact on the cash flow driver in order to achieve that around 8.5%, which we said.

Okay. And just a very final one IT investments.

So I think you said sort of years ago part of the IT investment was bringing all of the different entities onto sort of singular SAP system. Could you maybe give a little bit of color around how that process is going, how many of the sort of 100 entities have been brought on to the same system?

And maybe just a little bit of a color around what it now has allowed you to do that you haven't previously potentially makes the business easier to run than where we were a couple of years back? Thank you.

Thank you. What we have done meanwhile is that we have [fixed burning] [ph] platforms as I would call it is some down tier migrations to well-functioning existing systems of GEA.

And by that we have addressed about 25 sites in order to facilitate this. And we forgot to the new one ERP template, we have done so far.

The collection or blueprint of what is the future demand for such a system in order then to think about the process house and to also build up the necessary governance structure in order to handle such a system and then we will start from next year onwards to with the implementation one ERP template. That is - it is delayed compared to what we initially were targeting.

However, we have achieved a lot with down tier migrations, which we needed to do first in order to [fix the burning] [ph] sites so to say. And as we said previously then it will be an exercise or the next couple of years said we are going to further harmonize the ERP landscape for GEA.

So we are in the middle of the process.

Can you give us any sense of how much of the organization is now on a unified SAP system, so I think there was a target out there of, I think, it was 18% by the end of 2019. Correct me if I'm wrong, but any progress, any status of where you are relative to that target?

No. We are not yet on a harmonized platform.

As I said, we are harmonizing to the big systems which we have still, which are well function and which are - see SAP based or [based] [ph]. And we have started that process toward in the first step of the burning sites into that platform.

And we never said that we will have harmonized all about 2019 to the degree of our ERP landscape. What we said is that up until 2025 or 2027, we would like to go there.

Okay. Thank you very much.

You're welcome.

Hi, good afternoon, gentlemen. Thanks for taking my question.

The first one actually is a follow-up on the previous question we had on orders. And I was wondering, if you give us an idea of what is the current margin in your order backlog and how does that compare with the margin you're expecting for 2018, so a little bit around a bit more than 11%.

So how do we trend in the margin in the orders? And then the question I had is, I remember earlier in the year you had some issue of kind of benchmarking, the moves in FX maybe increasing prices for raw materials, because he was not truly kind of included in your contract?

And so I was wondering, whether you have kind of slightly changed in terms of your contract. How does that - how can - could that reflect better at the potential changes you are seeing around sourcing and an FX?

So that's question number one.

Yeah, the order intake margin is good, and it's in line with what we expect for the remaining part of the - or has been in line, because basically the order intake is almost ordered it in the books for the remaining three months of this year in Q4. So I do not expect any surprises from the margins from order intake to very little one, which remains to be catch to generate sales for the remaining three months.

When it comes and then looking forward for the next year, I think, we have put a lot of effort in standardizing pricing activities besides the normal pricing activities, it mean just passing forward wage increases or material price increases. So if you may remember also in the value project, so-called value pricing initiatives, and we have pushed also culture now within GEA that all the managers are aware that pricing is a key item at GEA, because we have good products, we have good technologies, and the customers they do like our own products and solutions, and therefore that also pricing initiatives.

So provided that the global economy is not turning down or cooling down and provided of course that we do not have to set, further set pack in dairy, et cetera, as we have suffered in the last four or five quarters. I'm optimistic that pricing will support the margins into the future, when it comes to FX, in the Business Area Solutions, we mostly, mostly go bottom up cost plus calculations.

So there's a very little exposure on the FX pair cost us usually when the contracts are signed. Fixed rates are fixed for the exposure there is very little.

On the equipment side, where we have price lifts et cetera. We have to still educate our customers that we have the flexibility to adjust those price lifts, when it comes to FX translation impact, which and of course also has a transaction impact.

We're working on that also to have more freedom to renegotiate prices, which sometimes as a little bit take 12 months in order to if something happens on the FX front that we have more flexibility there. So I think the FX, which compared to the dollar has can't down a little bit, but we have other currencies like the ruble, like the Brazilian currency, et cetera, not to talk even about Turkey and other countries, which is still an issue.

And the problem is even if we pass through those currencies, we hear quite often for example now in Argentina and Brazil, or in Turkey. But our sales people are telling us that look whatever you calculate here with the right fixed rates customers cannot afford it so they may even postpone projects.

And they are doing this, because they sale for us in Turkish lira or an Argentinean pesos this is by far too expensive, and we do not have to bunch, so that's the downside of it. But I think we will not have an FX exposure - relevant FX exposure in the future.

Thank you. And then just, if I could come back on your comments for 2019.

Are you confirming that the orders you have taken this year so far in 2018, that will be executed in 2019, because some of them BA solution have a longer lead time. Do's orders have a stable margin versus what you are seeing in 2018?

Overall, for all of GEA would say, yes. But then, of course, there are differences between the individual product groups and APCs.

And as also explained something it's ago on the APC Dairy, of course, we have to compromise more of the pricing or on the margins in order to stabilize that business and do as a doable business volume that APCs. So there are certain areas where, of course, we still have to compromise.

But overall, I think for the pricing of the quotations we have done and which we have converted or are converting now in orders is fine also for the future.

Thank you. My second question is coming back to your Slide #10, where you very helpfully give us the detail in terms of order momentum by application and businesses.

I mean, clearly the driver in the quarter is very much on the BA Equipment around the Food Processing & Packaging. And I was just wondering, where that is 44%, we are seeing year-on-year.

How much of that is really organic and how much is really driven by your M&A business. Just to try to get a better sense of what the end market is really contributing to on an underlying basis?

Yeah. There is - of course, there is quite an impact on the - out of the acquisition of Pavan in there and it's in Pasta, Extrusion & Milling and Pavan in itself compared to the business plan is running on a very high level, when it comes to the order intake.

So we are happy with that. However, but also the so-called Food Processing & Packaging, which in the past we called convenience for the food solutions, it's in many areas also running on a very high pace, which is driven many by the poultry, chicken business.

We do observe globally there is high demand for products derived from chicken. And what has to do with chicken, beef, nuggets or pieces or for sandwiches et cetera.

We are also nicely profiting there. But it's not only Pavan, but of course a big part of is Pavan.

But also in Food Processing, we see double digits growth in some of the last quarter due to high demand for mainly chicken.

Thank you. And just my last question is more kind of comparing, which you usually disclose the new information.

At the back of the presentation, you have had I think put in a completely new slide around your maximum leverage, and what is now to your sales point available at €161 million valuable cash. Can I maybe just ask, what is the read, the message of the slide, is it say that there's not much more room in terms of capital allocation that you can do in terms of a return to shareholder or there's not much room in terms of M&A.

Just to understand a bit more of the meaning of this new slide, please?

Yes, Helmut Schmale, if I may take that. We continue to repeat that, we believe it is important for the company to stay within the investment grade.

And this is why we have added that slide tool - the deck here in order to highlight two things. The one thing is that of course the actual work is actually increase, which we have seen takes away some of the financial flexibility, as it called for to be followed by the use of a cash.

And the other main impact is that there is a remainder of about €160 million of cash available, if you will take it from strong rating point of view. And that of course, you can use then for even go forward the business or you can use it for any other potential consideration of cash allocation.

But the point for me it's important to highlight that that has certain limitations at the point in time based on the fact that we have already on the high gross that because it's not - it includes of course all what is added to pick for pensions and operation lease, which are also to be reflected and considered in what is our financial level. So this is why we added that slides to the set of information here.

Thank you.

You're welcome.

Hi, just a couple of questions on the working capital, in terms of the receivables. You've alluded in fact that there has been some low level receivables and the underlying receivables may have improved subsequently.

And if you talk about your efforts to improve the receivables, and if there is the way to give us an indication, whether or not the quantification how much of that 150 is not the underlying, it's actually much longer than that? And then the second is on the manufacturing footprint, whether or not you've need any steps to [indiscernible]

Yeah. Thanks for your question.

I mean, as I said during my presentation that this is driven by payment terms, we - that is one element in there and you will certainly heard about other peers telling the same, and you can read also into the news flow of our customers, they are also from their side being picky on the working capital development. As such and what I would maybe like to add here, it is not an issue, but the overdue receivables in particular more than 90 days are going up further being of work that, in particular, also for quarter three.

And it's more from the underlying business development have them from anything else.

So Jürg, what you expected in 2017, if you had - I think, you had some receivables more than - much more than 90 days, you can even if it's not the top line, but it can change now, but you've actually been able to recover some of the receivables?

As I just said, if you take the receivables, which over to more than 90 days, you would start as a 103% of sales end of last year or beginning of the year 2018, we are now down to 200% over sales for that bucket. And that is the development we actually observe, so we are actively aiming working it down.

Okay, great. And then the manufacturing footprint?

Yes, particularly your question on manufacturing, because I have a difficult line.

I'm sorry. I just have been able to strength the manufacturing footprint, you had talked about in the last Capital Markets Day.

So I'm just wondering, if you maybe had progress on it?

Yes. We - with the project and we've seen from the announcement.

We achieved a big milestone with our marine separation factory in France, which we could find an agreement with another company to not have to close. But they are taking it over and we will have some contract manufacturing agreements with them for a very - for a certain short period of time.

And then we will go out of that. We prefer that solution instead of closing it, first of all, it comes as a bit more costly for us.

And secondly, we've also working places for the employees to not cause any irritations there. And we're working also on all the other initiatives to downsize or concentrate to do the multi-purpose things, so that's on track.

But I think one of the biggest milestone was that site in France to get that behind that, it has been closed - the transaction has been closed beginning of this month.

Okay. If you start to announcing on closures in the next six to 12 months?

Yes. We will have - not all them being a complete closure, but downsizing optimization putting together of sides, and then of course also transferred some of those things to our factory in China, also what I have just said from that products, which we have been doing in France.

We are gradually ramping up the production of those pieces and elements in our Chinese factory.

Okay. Thanks very much.

Well, good afternoon. Question for you.

Yeah, this is probably your last presentation, I guess, I imagine the next month is going to be done jointly with theme step until about. Two questions, one is what advice you can to give the new CEO in terms of the age priorities, what are the things you need to focus on given there the problems of the last couple of years?

And then secondly, does it mean until you takes over and gets fully in charge of the company, there's going to be built at all strategic progress, because a lot of stuff has to be put and until he can come in and take his own decisions on where the company is going?

Yeah. Thanks, Peter, for those questions.

Of course, it's going to be a great moment. And Stefan Klebert is taking over, as you know, he's going to join us in about two weeks.

We are preparing currently together with him a very extensive tour to our customers, our own sites and the production sites of our customers. So that he as quick as possible gets a deep insight into the business and the products, which we are doing, we're already of course sharing with him a lot of numbers, et cetera.

So I have no doubt that his on-boarding will be very fast and very successful, because he has also a very good track record of what he did in the past. When it comes to the question of where the priorities will be different or way to some of the strategic actions will come to a stop.

I - as far as I have learned to know him now, he's a very hands owned manager, I don't see that, I think he's a type of person who will not analyze for months or for years, before he did take his own actions. I think, he is the type of CEO for well, of course, understand the issues and the challenge if it is a priority.

And in fact, I personally don't believe that those priorities will be very different to what we have been doing in the past two or three years. But nevertheless, it's of course up to him and it's always good to have a certain view from the sites from somebody come from the outside.

And he may see certain things a bit different, that what we have seen so far. But be assured that the character type of differently with somebody whose hands on and will address the issues quite fast.

And, you happy to say what you think is priority should be in terms of manufacturing footprint or cultural IP systems or improving stock overall, or it is a combination of all I think at the same time?

It's all of those don't have basically at the same time, because pricing is very important. The global manufacturing footprint, I think, he comes from a heavy manufacturing company at Schuler.

So I believe he will see that quite fast, this is a crucial issue that we have too many factories, too much scattered around that we have an issue with the wage costs also not only, but of our high concentration of manufacturing here in Western Europe. So I don't see any reason why he would see the different.

And if I can just please come back, because if you see the overdue receivables. It sounds like, you still have a lot of receivables, which a long way past due date.

When do you decide you have to take a write off, because I look at the long term trend, your day aside with a long way above where it was two or three years ago, I presume it's some stage. You have to buy the products and say, actually we're going to get this money back and so we have to take a write off.

You're getting close to that stage?

No. I mean, every time, and every quarter, and year-on-year, we are assessing the over new receivables individually.

And that is done during the closing procedures. And hence, the way which we have provided for the relief, it's in line with what needs to be place.

And I do not see from today's point of view that there is a massive move in that particular issue.

Okay. Thank you.

Yes. Thanks.

Good afternoon, everybody. Two questions, one on service, one on Business Area Equipment.

On service first, and in terms of follow-up last question before, and you pointed 5% organic growth in the service business, you targets which you not reached in the third quarter on the share? Can you give us a sense how much of the intended price hikes have been implemented or differently what are average contracts and service contract.

So that idea that simply have is evenly further certain headroom around and that would how much you have done and what might be done. And on the equipment business area, the organic order growth has been slowing quarter remarkably from 11% in the first quarter and now about 2% in quarter three.

I was wondering, what the drivers here, so it's a pure hesitation in light of greater macro uncertainties where do you see. Even you link to the price hike, that you have been talking about before?

And is there any region for end market that's in out here that you come down? Thank you.

Yeah. You have to interrupt me, if I have an assertive wrong, because we have here a very bad line.

So I try to answer your questions, which I believe I understood from you. Service pros and pricing, the pricing initiatives are in place.

Some of the growth, I think did come through pricing, it's very difficult to your market, and how much is volumetric growth and how much is pure lifting the prices and certainly there is an impact in there. The important thing is that many of those tools to focus the culture is fully there, and it's fully on the focus to us for the right price.

If we will also, we have many other initiatives in service to improve even more service with customer surveys, et cetera, make it more very easy for the company, make it ordering process to order some spare parts or whatsoever. In order, because customers have told us that the easiness of ordering is very important also for them, when it comes to the more commodity type of spare parts of the more simple solutions.

So as I said with one of your colleagues, service initiatives are on track. We're making a fine tuning of the structures now also in service, learning the lessons from the past two years, where maybe not everything was hit perfect.

And we're fine tuning this and quite optimistic for the service. I have mentioned that also another occasions, GEA, if you want to look it from a different side.

It's a service company, living out of service to 50% or 75% depending on what type of margin you'll take. So we need the new equipment on your project to generate the installed fleet and to make it growth.

So GEA is very much depending on service, that's why we're putting so much emphasis. On the order intake growth on equipment, we did see some weaknesses in new projects besides service in dairy farming.

As I just said recently, remains to be seen how that develops into the future then we're also to see that in some areas like to dairy components, separators, et cetera, for the dairy industry also has suffering lately in your order intake. It's not - let's say, one fitted all answer for the slower momentum in growth of equipment, of course, second question remains to be seen has it to do with the pricing some of our sales people would complain, and say, yes.

I rather believe not - that's not relevant thing, I think, also the global economy, the cooling down of the global economy has also to do with a slowing down of the very strong momentum we had in the last four quarters, because it's already started in Q3 and Q4 last year with organic intake in equipment.

Okay. Very helpful.

And quickly follow-up on services again. Can you give us a sense on the average contract channel, what's the duration normally of service contract, so when you get really a hand on renegotiating return.

And then, as a very little as a follow-up, I think, when looking at equipment in particularly you are running that's close to €1 billion of last 12 months rolling service revenues. It's that physical limit to certain extent or should we think about the measures that can still eventually lift the growth here, and yeah, hopefully think about that?

Yeah. Service timing is not a simple question to be answered, because we do have very simple, very highly standardized spare parts, which customers can even order via the Internet.

And that goes immediately like an Amazon over the desk, so over a couple of days they received their spare parts, order replacement, and then it goes up to revamping debottlenecking projects, which special in service solutions can take up to 12 months those type of projects, and then you have the whole variety in between. So the answer is not that easy.

However, having said that we usually do assume, if we put all that together and make a very broad, very rough estimate that time lag between order intake and sales volume in service for all if you put everything together at GEA is around two months.

Okay. Very clear.

Thank you.

And then, you asked about the capacity of service and equipment. Yes, it has been growing quite fast, we do have limited projects where our business cases, where our people is bringing this up here, when they want to invest more people.

And we are hiring currently in different areas of service in the recent countries, but also in the business area people, so we are expanding the personal capacity there, of course, always following a reasonable investment case. We have a project, which is called internally feet on the street, which is a service project where we say that in the areas, where we can prove or people can prove to us.

It makes sense to increase 10 or 20 employees and we allowed for that. And by that we have constantly expanding the capacity currently in the service organization.

All right. Thank you.

Hi, just wanted to come back to pricing. If you were quite clear that prices going up in places like Turkey, because of currency were making things on affordable for some customers.

If you look at the more mainstream markets, the price rises that you're pushing through to recover raw material costs? Is that resulting in delays or cancellations of orders?

No. We don't see that, of course, I'm always talk by one sales guy out there in the world that he last in order, because we asked or we push for too much prices, but then you have to look very carefully of that.

But I don't see that at this moment that in the normal markets if the exception of Brazil of Turkey, et cetera. Normal markets, we're losing orders or decisions are being delayed, however, so far the economy was good.

It remains to be seen, where with all the uncertainties out there in the world. This continues to be like that.

And in places like Turkey, our customers having problems getting financing, even if they are placing orders?

Yes, because we would want them to pay in Europe, so we are also forcing in some other critical countries like Argentina, et cetera. We are forcing our sales force to make mainly, not exclusively, but mainly contracts in Europe, and that creates for them sometimes difficulties to get to euros, in order to pay us in euros, because we do not want to hedge this.

We just would want to have in this very volatile countries contract in Europe.

If I may at the time, I'll now speaking of the level of cancellations, which you have in the year 2018 is clearly below the level we have seen in the year 2017. So there is no indication from that point of you that we see increase in the level of cancellations of orders.

It has increased in recent months?

No, it hasn't. That what I said is also like from the selective products.

I can - that's great. Thank you.

Yeah, good afternoon and thank you for questions. Firstly on China, I was interested in what you're seeing generally to start with, because I can see the last 12 months order intake unchanged, but it was going to come out.

So maybe talk about what you're saying kind of more recently. And then secondly on to dairy processing, it's kind of also trying to link.

Could you talk about the various components within it. And in particular kind of asking about that milk formula, because if you listen to some of the manufacturers, they're worried about some the restrictions on in direct selling coming in China, whether they will see any change in confidence activity there?

Can you maybe repeat the first part of the question? Sorry for asking.

Just what you're seeing generally in China, because I can see the last four quarter ordering book-to-bill was 1.28 from the slides at the back. But obviously, we don't know what's come in and come out.

So could you tell us what you're seeing maybe this quarter, last quarter just the more recent kind of view as to what China looks like to you in terms of market growth?

Our Country Manager of China is also quite optimistic for the first quarter, we do believe that the year - the year full year will be a very good top line year for China. The reason behind that is from internal issues, but also from internal issues, internally means that we have divided the region internally, the management of the region, Asia Pacific and China into two parts.

China one Country Manager and the rest of Asia Pacific and other Manager in order to give allowance for both to them to focus very strongly or either China or the rest of Asia Pacific. So I'm optimistic for China, because momentum has been so strong that I don't believe that it's going to continue its strong momentum into next year.

When it comes - could you please repeat your second question?

But just interesting dairy processing…

The components of dairy processing, yes. So the biggest part is powder to conventional powder.

And that's actually the one which has mostly been affected in the past, when we applied about dairy. Then we have other things in there, for example, cheese.

Cheese is developing, it's of course much smaller than the dairy powder. Cheese is developing on a good pace, we had some restriction force there, but - and some negative developments from the top line in the past.

But think currently developing as it should. Then we do have in their infant formula, a special proteins, et cetera.

We, of course, in that area, we do not disclose now for each of these we call it internally to sub-APC's that we do not disclose to the market, the development of those. But I can tell you, what is powder related is one which is the most effective.

So if I say the conventional milk powder, then where we also have seen in the recent past downturn is in the market milk products. Where we do see the stabilization or even the growth is in nutritional formula.

It's in other dairy products, which are very small, small issues there, it's rather flat, and the rest is actually rather flat. The big setback, which we have seen for many quarters or even if conventional milk powder and unfortunately that's our biggest sub-APC nutritional formula and infant milk is tricky thing, because especially in China, where they have forecasted with a lot of order intake for infant formula.

Then they have to say that to consolidate to put much more pressure on quality issuance. To safeguard the delivery of quality into China itself and that has told a lot of investments, we do hope that this would then come back as soon as today have assured themselves to government.

That - and the rule is that quality is being secured and is there, because from the fundamentals China needs that infant formula. But currently we do not see it a relevant upturn in that product.

Okay. Thank you.

And can I just follow-up on the pricing question earlier, just coming from a different way, I mean, you was currently put in prices driven. And I think, your peers have also said that putting prices up.

So do you think that that was given as an any element of people buying ahead of the price increases well ahead in the quarter or you don't think that's the case.

No. I don't believe that this was the case of the reasons for our strong auditing.

Thank you.

Yes, good afternoon, gentlemen. Thank you very much for taking my questions.

Your leverages on the volume trends that you see coming for the next couple of quarters. Also you mentioned that in terms of current order gross margins you would expect them to be more flatter.

Just wanted to make sure, I don't understand this commentary correctly on the margins that there will be no meaningful impact from procurement and pricing measures for the gross margin in 2019?

Well, we do have our measures to reduce through our supply chain activities, procurement activities as part of the value project to optimize. And by that, of course, are trying to reduce purchasing prices for money or for components, which we source outside so, and that we will continue to do.

Of course, peers are doing the same and then it remains to see how much you can keep for your own balance sheet, for your own P&L, and how much you have to make concessions to the customer, because others are doing I would assume a similar exercise so the key question is we have invested now. And also a lot of effort in order to make sure that we can have a good control on how to make sure that some of those initiatives are then partially kept in our pocket and now flown to the customers.

But of course, we are not alone in the market. And we see, of course, competition out there and some are doing better than in the past, some are doing not so good for the insights more, also on the pricing front that be assured sure that we will fight very hard to keep to savings from our initiatives in our pocket.

And only, as really required give it to the market in order to stay competitive compared to our peer group.

For the gross margin might be a neutral or a slight positive into 2019, to start the fair summary of your statement?

Well, the gross margin for GEA depends for many things, it depends also very much on the product mix. We do have product lines and APC's with very high gross margins as you can see from one of our chart with color dots, and then when you have some of them with below average gross margin, and then it remains to be seen, which APC or product group is outgrowing.

The others are shrinking, so that on the gross margin if I look backwards for the last couple of years, the biggest impact on positive or negative on the gross margin was relative across between a different product groups and the APC's. However, also the gross - the different gross between new equipment and then service because there we also, as you may understand a very big difference in the gross margin with new machines and service.

And that depends, of course, also how much service relatively would grow compared to new machines or new projects. But nevertheless, we have this pricing initiatives and all being equal I'm confident if the economy stays as it was in the last nine month, that we will see an impact on the gross margin.

But I have to emphasize all equal means positive relative mix of our product groups and applications and that versus service.

Very clear. Thank you.

Maybe on the overhead into next year, if you could briefly touch upon both the operating business and the central functions, I recall, you had some cost toppling for the time of the transition of the organization, we received some release in 2019 over 2018 on that front. Obviously, you have to measures underway for the production footprint.

We already see some net savings in 2019 over 2018 or something more medium term perspective?

When you will look at the P&L at the end of the year, you will see a phenomenon, which we will explain that there will be a shift between gross margin and SG&A. As you may remember, we've launched sometime ago to OneGEA finance projects, which is coming now almost to an end.

We have almost introduced all our legal entities into the OneGEA finance. And overall, the OneGEA finance and others have to do that we have standard definition, unified definition of all kind of cost items, whether it's in New Zealand, in Argentina, in Sweden, in Denmark or in Germany.

With any place of GEA, we have exactly the same definitions now, but we have observed that this leads to a shift a bit lower gross margin. And at the same time a bit lower SG&A.

So you will see that when you look at the P&L. And of course, it doesn't change with EBITDA, but you will see a shift from the gross margin to the benefit of yesterday.

And that's only due to a full standardization of all the cost line items, there are hundreds thousands of cost line items, which have been standardized now. So the overhead, we are working on that and all things equal.

I also believe that the overhead would go down, I say it would, because we have - on the other side, we have headwinds from other things within the IT platform. I think, we explained that also was that lifting and shifting all our software and tools - IT tools into the cloud costs us quite a lot of money, which goes into the P&L, in the past that money was spent on CapEx for our hardware service, played around the world.

Now we're closing down more and more of those hardware services and everything has been shifted into the cloud and that costs, of course, it's money. And secondly, we also will have to invest and are currently investing or half invested into data protection systems, et cetera.

This is additional burdens, which goes into the out - overhead coming from the outside - from outside governance requirements. And of course, we're following that very carefully and intelligently.

But I also have to - have said to you that this costs money. So this is headwind into the overhead.

The other side, we have cost savings, we also are constantly negotiating and monitoring the spending to our inventor, our service supply in order also apparently to a benchmark that concept with service quality and try to the bigger we are to have lower cost per FTE or per computer et cetera. But the overall overhead, I don't see that that will grow, it will be a shift between the thing to savings, I have told you some additional costs from the IT and governance, et cetera.

With the headwinds be only reported the low operating EBITDA line?

No. Things like this going to the cloud networks and service system.

And that is in the initiation phase, yes, we labeled that for this year. Then it will be somehow, which is a kind of one-off looking forward into the years to come, of course, a certain point you will have to kind of normal situation that you need to know that if in the normal result.

During the phase of services, are you considered that as a strategic project same - we will address with regard to the data protection that is yet to be seen how much that will cost GEA, and that is too early in the face of the budget process to say always something today.

Yeah. The cloud services are already today in the ordinary operational basis, so that's not below the line.

It was in 2016 and 2017, when we installed and made to whole set up and preparation work. For example, and that's quite a high number it's in high into single digit millions close fully into the EBITDA.

And that's in the operational EBITDA, if you tend to be some.

But just to get a key take away from your statements. It's more likely do not the next year, we will not see a net positive impact on the adjusted line as of yet?

You mean, below the operational EBITDA?

No. Not that line, because you mentioned the headwinds will be included in the adjusted figure as well.

I'm just wondering, whether we would see any move from the - on the margin side from the points that you just mentioned, it seems like it will not, because you're not breaking them out next year.

No. There will be strategic projects also next year for example from what we are still going to do with regard to many affection footprint.

What is their operational business like normal license fees for things, which we are using up from center, for example, that is and will stay with you operational is out.

Okay. Thank you very much.

You're welcome.

Hi, it's actually, Jack O'Brien from Goldman Sachs. Just a question on, if we cast our mind back to the end of 2016, when you had the first profit warning.

You also point to the fact is like execution issues, some technological issues. Can you just comment on where we are with those during 2018, because it strikes me that even growth has been a key for 18 months or so, but you continue to disappoint on the margins?

So I'm almost more interested in the other factors that could lead you to continue to disappoint. And then just my second question would be on the beverages side 10% of sales are so obviously sales are pretty tough there.

And if we look at competitive then not really making any money. So have you thought about strategically disposing of beverages?

Thank you.

Yeah, in things comparable to 2016, where we had to report some technical issues besides the EBITDA, also in some prototype of projects, which we booked in the year 2012 and 2013. And then the commissioning test at the very end of the project we did find out that we have to put some more effort in some of those projects that's what we reported in those times when we did a profit warning amongst other things we explained profit warning.

In 2018, so far we have had no major technical issues, we reported the last ones with the provisions for the ABF [rollout] [ph] in September last year, where we made that from Helmut addressed provisional €13 million or €14 million. So far we do not have made, you have always technical issues, challenges et cetera.

Here and there, but we're talking here in the order of magnitude, where you have to make provisions of €1 million or €2 million, in order to fix technical issues, but not in the magnitude as we have to do it in 2016 or such as mentioned in 2017. The disappointment this year, which you addressed the good volume is that currency development, which started to be a real headwind for us as of end of last year and then of a major challenge in Q1 in order to pricing issues or what we have just discuss.

And of course a very disappointing volume then towards the end of this year, when it comes to the application center dairy, there are of course always execution issues you have to all, but I think, gradually we have been increasing, we are still doing the risk provisions et cetera. To match the risk profile et cetera, but also have to say that in some of the larger projects customers have become have also changed their behavior.

It has become more a business between lawyers from our side and from their side. And some years ago, it was more a business between engineers on both sides also customers have invested a lot in contract management and get some warranties et cetera.

So the issue, we are becoming very careful in taking larger contracts, because we do observe besides the working capital issue, which Helmut addressed the payment terms, which have also quite worsened with this larger project. We are becoming very selective and we may have to become even more selective on this - with large projects, because behavior of the customers have definitely been changed, when it comes to beverage, yes, it's a tough environment.

I think, we have good technology with the acquisition of VIPOLL, we acquired also a unique technology which has developed very nicely as soon as we consolidated it into GEA. We also has exposed or exposing that into the trade fair, which is called brew, a good technology.

So we are trying to convince customers to pay for a decent risk reward profile by offering superior technologies and also they're being very selective, because environment is as described it, some peers are even making money or maybe only after five year service et cetera. Have we considered to divest that now, because beverage comprises a lot of things.

We are currently analyzing the portfolio, as I have said. I would not like to disclose, what is in that analysis.

But I think, beverage is in the areas where we are active, it's a good business and we have to limit that, and we have to be careful with the larger projects, because their contract conditions are certainly deteriorate.

Thank you.

Yes. Thank you very much.

I still have one follow-up on the on the working capital, I'm really sorry. But did I understand correctly that you said you're going to turn around by around €100 million in Q4, and if so could you just mentioned how?

You're going to do that?

Yes. That is what we are looking to now if the normal exercise to be a bit more cautious from our trade payables for example.

That we address that to offer more than like our clients are doing that with us. And if you observe some, yes, in the past we did as well.

In the past, that - by that we were able to just mentioned also all working capital as customers do on the other side as well.

Okay. But the product mix issue, for example, is not really going to go away in Q4, right?

So it's the usual thing of turning around in the Q4, but it's not something where you really introduce some new measures, anything like that?

No, no, no. That's a cost of business and focus of the organization.

Okay. And the other question I still have, when you're looking into 2019 in terms of growth especially.

Equipment orders are slowing down, and I mean for a mixture of reasons apparently, but this really seems to be a temporary thing. And solutions will be a track in 2019, so is it fair to assume that we are again missing the 4% to 6% organic growth that was once planned for in the mid-term guidance?

Well, I would not like to disclose now the discussions, we've had for the budget for 2019, we are currently the alignment meetings with our regional sales people and to find what we believe is the right volume, organic volume for next year, there of course plus or minus, as I just said. And it depends a little bit also on the economic environment development of potential trade wars sort of development and models.

We are currently observing, of course, a massive slowdown of our business in Iran. Hopefully, Saudi Arabia is not going to also be on that band list and we have some other trade barriers, because of the currency like Argentina, Turkey, Brazil is one.

But on the other side, we also have a lot of initiatives such as I mentioned some of them on the service area, et cetera which then are positive for the volume. We do see that our conditions, in which we integrated beginning of this year are developing very nicely, so there will also contribute in the future to a further organic development.

Okay. Thank you.

Yeah, not much to say. Thank you very much for the very interesting questions and your patience.

And we will continue as always work hard on GEA to also close this year as a good results. Thank you very much.