GEA Group Aktiengesellschaft (GEAGF) CEO Stefan Klebert on Q2 2019 Results - Earnings Call Transcript

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About: GEA Group Aktiengesellschaft (GEAGF)
by: SA Transcripts

GEA Group Aktiengesellschaft (OTCPK:GEAGF) Q2 2019 Results Earnings Conference Call August 6, 2019 8:00 AM ET

Company Participants

Fabian Kirchmann - Head of Investor Relations

Stefan Klebert - Chief Executive Officer

Marcus Ketter - Chief Financial Officer

Conference Call Participants

Klas Bergelind - Citi

Max Yates - Credit Suisse Securities

Lars Brorson - Barclays Capital

Jack O'Brien - Goldman Sachs

Sven Weier - UBS Limited

Daniel Gleim - MainFirst Bank AG

Sebastian Growe - Commerzbank Corporates & Markets

Frederik Bitter - Hauck & Aufhäuser Institutional Research AG

Wasi Rizvi - RBC

Fabian Kirchmann

Good afternoon and welcome, everybody to the GEA analyst call on the second quarter results that we published this morning. I have with me here our CEO, Stefan Klebert and our CFO, Marcus Ketter, who will jointly run you through the presentation. Afterwards, they will be happy to answer your questions.

So let me hand over directly to Stefan Klebert.

Stefan Klebert

Thank you very much, Fabian. Welcome. It's a pleasure for us having this conference call today with you. I am very happy that I have my new CFO with me, Marcus and he will present also some of the transparency of the chart to you. Let us start with page number four and let's dive directly into the results of Q2.

First of all, the most important news, we confirm our full year 2019 guidance. Let's have a look at the quarterly development now. Order intake declined by 17% to EUR1.15 billion. But this has to be seen in the light of a record prior year quarter, reaching almost EUR1.4 billion. And I can give you very good news because since some hours, we have now the rush numbers for order intake of July. And as expected, July turned out as an extremely good month. We see order intake improvement, 24%, July 2019 to July 2018, which comes from both business areas.

And to summarize, now the first seven months in order intake, if you sum up January until July, we can tell you that we will end in a range which is only minus 2% to minus 3% compared to previous years. So we are almost on the same level like previous year in order intake at the end of July after having an extremely strong order intake in July, coming from both areas, also with very interesting and good projects in solutions. And this is something which I think you should know.

So in terms of sales, GEA reached a new record level for a Q2 with around EUR1.25 billion, which is a 2% year-on-year growth. And both business areas posted record sales figures. A key reason for this is a favorable development of our service business, which continued the strong Q1 2019 development in Q2, with an increase of 7.1% year-over-year to EUR394 million.

This supported not only our sales but also our EBITDA. Nevertheless, the EBITDA before restructuring stood at EUR111 million and therefore below prior year's level. This was predominantly due to the fact that special effect in the amount of EUR30 million burdened our result and you will get further information and the explanation of that EBITDA bridge later from Marcus.

As EBITDA was down, also our EBIT before restructuring, which amounted to EUR57 million was down by 37% year-over-year. And as a consequence, ROCE declined as well from 15.5% to 10.5%, but this is also a number we have to explain, because of the changes in IFRS 16, but Marcus will tell you more about that.

So to sum it up, sales grew by almost 2% year-on-year to a new record level for the group and for both business areas. And even if we had a quite bad Q2 in terms of order intake, we really had an extremely good July now and that means, as I said, for the first seven months, we are now minus 2% or minus 3% only below the previous year, which I would say is, considering this economic environment and also having a look at various competitors this is a good and a great number. And we also have still a quite good project pipeline. So we are confident and looking forward to a good order intake also in the upcoming months.

EBITDA before restructuring, as I said, was burdened by special effects of EUR30 million. Otherwise, we would have been almost on the level of the prior year, even if we expect or would have expected a lower level for this year. And we still feel comfortable with our guidance, which we provided to you at the beginning of the year and we also, therefore, confirm it.

Now to slide five, yes, where I would like to give you a quick update on the brokers shifting into the new organization which is, as you know, a very important project. As outlined June 24, GEA will be organized around five divisions with full P&L responsibility in the future. And we are fully on track to prepare for the start, which with a gradual implementation of the new structure starting first of October. I can also tell you that we have filled, meanwhile, 13 out of 15 C-level positions in the divisions. And we have also filled seven out of seven positions for our regional heads. And further managers in the layers below will be appointed in the next weeks and are partly also already appointed. So we are full on track.

We have also nominated the heads for our new excellence functions, global production, global procurement and global technology. And as you know, we are also looking for executive board member for purchasing and production. And we already had very fruitful discussions with very good candidates here. And I think that we also will have a decision in the third quarter.

It is important to point out that with the new structure we still keep one face to the customers with our country organization, which will stay in place. So also to sum it up, we are on track with our preparations for the start of a gradual implementation of the new organization starting October 1.

On page six, let me give you an update on our restructuring of BA solutions, which is mainly focused on dairy, but not only. Also here, we are fully on track with the execution of the measures announced in May and we can provide now further details about cost and benefit. So you know that after the management change and after I had personally taken over the responsibility for the BA solutions, we announced that first restructuring program is a quick fix and we guided for restructuring expenses of EUR30 million to EUR45 million and a headcount reduction of idle capacity in between 200 to 250 FTEs.

So nowadays, I can tell you that we have detailed measures and we have a clear list and that we will end up with a reduction of around 230 FTEs, while our restructuring costs will be on the lower end of the guidance we gave. So it will be between EUR30 million and EUR35 million. In Q2, we have already booked EUR50 million of restructuring charges. And in the second half of 2019, we expect to book an additional amount of approximately EUR9 million and the rest might be booked in the next year.

So we can now also provide potential annual rate of savings, which are expected to amount of approximately EUR17 million. We expect these savings to kick in from 2020 onwards. However, the full rate will be visible from 2021. This has something to do with the time when the people we take out will leave the payroll. So to sum it up, we are on track to right-size BA solutions.

And now I hand over to Marcus to present the financials in detail to you.

Marcus Ketter

Thank you Stefan. Also a warm welcome from my side. As Stefan mentioned, my first quarterly call here. So let's continue with page eight and with some more details on order intake, sales and the book-to-bill ratio. Order intake in the second quarter of 2019 was down year-over-year by 17% to EUR1.15 billion. Last year was a record quarter, as stated earlier. However, in the first half of this year, we were only down 6% year-over-year.

The quarterly development was also affected by the deferral of few medium to large size orders which were, as Stefan already pointed out, booked in July instead of as initially expected in June. The amount of the deferred orders is about EUR60 million and which we just confirmed and it's probably for July and it's probably July now, a record month for us in the last years, I think it's even in the last 10 years, as I was just notified.

The low order intake of EUR1.15 billion in the second quarter faces a record level of sales of EUR1.25 billion for the second quarter which, of course, results then in a book-to-bill ratio of only 0.92 in the second quarter. This is relatively low compared to prior quarters. However, we are currently seeing a well-filled order pipeline and therefore we are optimistic that order intake should recover in the second half of this year, as July has already shown.

This assumption is especially supported by some positive news for the market environment for the dairy industry. To sum it up, we are looking cautiously optimistic into the future and expect a recovery of order intake in the second half of this year. Preliminary July figures confirm this view.

Let's go to page nine now with EBITDA, EBIT and ROCE. Please note that from beginning of 2019 onwards, there's a change in IFRS 16 accounting impacting EBITDA and also slightly EBIT, as you are surely aware of. EBITDA amounted to EUR111 million, down from EUR126 million last year or EUR142 million on a pro forma basis, which I want to show in the slides with the water fall chart.

There were two major effects. First, in the second quarter of 2019, we had a positive IFRS 16 effect of EUR16 million, which did not exist in the second quarter of 2018. Second, we have a headwind of special effects amounting to a negative EUR30 million. Adding back the net effect of these two factors, EBITDA would be just EUR1 million shy of last year's level.

EBIT was down to EUR57 million year-over-year from EUR91 million on a reported and pro forma basis due to mainly negative special effect of EUR30 million and additional EUR3 million in higher depreciation and amortization expenses in comparison to last year's quarter. Compared to the first quarter 2019, both EBITDA and EBIT improved as second quarter sales were up by approximately EUR190 million quarter-over-quarter.

ROCE, however, declined further also quarter-over-quarter. This is explained by higher capital employed, which is itself driven by two factors. Firstly, an increased working capital figure, which I will explain in a minute. And secondly, the phasing in of IFRS 16, which decreased ROCE by 50 basis points year-over-year. So summing up, profitability was down compared to prior year's level, mainly due to special effects. The increase in profitability quarter-over-quarter results from higher sales which reflects our general seasonal pattern from the first to the second quarter.

Let's move to page 10 with the EBITDA bridge. You might still remember last year's operating EBITDA of EUR133 million, which excluded restructuring as well as strategic projects. The EUR126 million on the left side of the bar is the EBITDA before restructuring, but including EUR7 million of strategic project costs, which we are no longer eliminating. To make it comparable with the second quarter 2019, we add EUR16 million IFRS 16 effects, which results in a starting point of EUR142 million.

Let us now have a closer view on the elements of the bridge. Volume, as you know, sales growth was entirely driven by service, which results in a contribution to volume in EBITDA of EUR13 million. The volume contribution from new machine sales was slightly negative with EUR4 million. Margin includes the burden from the backlog review at BA solutions of EUR13 million negative and also from the amortization of R&D projects at dairy farming of EUR5 million.

R&D expenses increased mainly due to higher personnel expenses by EUR3 million at BA Equipment. SG&A was positively affected by EUR5 million personnel-related provision releases as well as provision releases related to the OneGEA Finance project. The category other is mostly driven by two effects. First, the legal dispute in the amount of EUR16 million as well as the provision release in the second quarter of 2018, amounting to EUR9 million. Lastly, FX had a positive impact of EUR8 million, mostly resulting from U.S. dollars. As a result, EBITDA came to EUR111 million for the second quarter.

Let me quickly summarize the special effects in a nutshell. Three factors resulted in a headwind and one in a tailwind. The headwind effects were a provision release of EUR9 million in the second quarter 2018. And in the second quarter 2019, a provision built up for legal disputes of EUR16 million. Additionally, provision for the backlog review at business area solutions was totaling EUR13 million. The tailwind effect includes several small effects coming in, in total to EUR8 million.

So in total, EUR30 million negative special effects were a headwind in the second quarter of this year. To sum it up, this chart shows that most of the year-over-year decline in EBITDA is related to special effects of a total negative EUR30 million but included a positive IFRS 16 effect of EUR16 million.

If you follow me now on page 11, highlighting the major effects in the EBITDA bridge by segment. Let's start with the pro forma EBITDA of the second quarter 2018 of EUR142 million, which I showed in the prior slide. In BA equipment, the largest negative drivers are the provisions for the legal dispute in the amount of EUR16 million and EUR3 million of increased personal expenses. In BA solutions, provisions for the backlog review of EUR30 million as well as an increase of personal expenses of EUR9 million resulted in a headwind. The increase in service sales contributed positively by EUR4 million.

In the category, GCC/RoC EUR9 million provision release in last year's second quarter and an increase of personal expenses burdened the EBITDA development, which were neutralized by the release of EUR5 million personnel-related provisions and EUR2 million provisions for OneGEA Finance also released. To sum it up, BA equipment declined by around EUR22 million, which relates to EUR14 million to special effects. BA solutions EBITDA declined by around EUR15 million, of which relate EUR13 million to special effects and the category, the GCC/RoC around EUR2 million EBITDA burden relates to special effects.

I would like to draw to your attention now to slide number 12. The development of our service business in the second quarter. The service business developed strongly year-over-year, with sales growing by 7.1% to EUR394 million. Both business areas achieved a new record value for service sales for the second quarter. The development was about equally driven by price effects and a strong underlying demand.

At business area equipment, the clear majority of the growth came from the product groups separation and food processing & packaging. At BA solutions, growth is based on a broad foundation coming from all regions, but North America. Lastly, let me highlight that BA equipment service reached for the first time the EUR1 billion threshold on a last four quarter perspective. We feel very encouraged by this development. To sum it up, our service business has continued its positive trend in the second quarter and we see a good environment for further growth, supported by pricing as well as due to very promising, underlying demand.

Let's proceed on page 13. So the net working capital development. The increase by almost EUR59 million or 70 basis points year-over-year was driven by an increase of inventories, which is not unusual in the second quarter. The increase in the second quarter of EUR43 million was partly driven by safety stock related to relocation of production volumes. Net POC receivables increased by EUR46 million, driven by a decline in the POC liability of EUR64 million year-over-year. Furthermore, trade payables went down by EUR41 million.

On the upside, net trade receivables without POC declined by EUR72 million year-over-year. As a result, this sums up to the above mentioned EUR59 million year-over-year. To be very clear, the current elevated net working capital level is unsatisfactory and unacceptable. Therefore, we have started a group-wide project on August 1 to substantially reduce net working capital to a lower sustainable level. Additionally, the new division structure will allow us to steer this KPI much better and closer in the future. To sum it up, the reduction in net working capital is one of our top priorities now.

Coming from net working capital to cash flow on the next slide, which goes hand-in-hand. So we are on page 14 now. Starting from an EBITDA of EUR111 million, cash out for net working capital amounted to EUR72 million which was, as you can see, by far, the biggest cash drain. And this is the result from increased inventories. Tax payments and restructuring cash out amounted to EUR9 million and EUR8 million, respectively, which are broadly unchanged year-over-year. CapEx of EUR22 million is also roughly on prior year's level, leading in total then to a free cash flow of plus EUR8 million.

Further deducting these payments related to IFRS 16 of EUR14 million and interest payments of EUR3 million, our sales defined net cash flow came to minus EUR9 million. Turning now to net financial debt, which increased from EUR155 million to EUR330 million can sum this up in one sentence. This increase was almost entirely driven by the dividend payment in May. To sum it up here, free cash flow came in at plus EUR8 million in the second quarter. Net debt increased quarter-over-quarter, mostly due to the dividend payment to EUR330 million.

Coming now to financing and liquidity on page 15. Starting on the left side of the slide, GEA is solidly funded on a diversified financing structure. In 2018, GEA issued four borrower's note loans with a total amount of EUR250 million with a tenure of five and seven years, each with a fixed and floating tranche. Due to a strong invested amount, we were able to realize a very attractive pricing at that time.

Also in 2018, GEA agreed on a term loan with European Investment Bank. This is a promotional loan with very favorable conditions to finance our costs in research, development and innovation. You see this here abbreviated with the blue color EIB. The total amount is EUR150 million, of which only EUR50 million are currently drawn.

Furthermore, GEA maintains several bilateral credit lines with different international banking partners which are providing a comfortable liquidity buffer. These are the green bars that are shown with the majority in 2020. The utilization was done predominantly of credit lines on an uncommitted base and a few current lines until further notice with the notice period of six to nine months.

In addition, GEA has EUR650 million syndicated loan which serves as a liquidity backup facility and is not utilized at all. This side, the good mix and different financial instruments. You can see on the left bottom corner, that GEA financed with a well-balanced maturity profile until 2025 and will do extensions of expiring credit facilities well in advance.

If you will follow me to the right side of the slide now. GEA has a very healthy balance sheet with a solid equity position. The leverage, which is defined as total net debt to consolidated last 12-months EBITDA, there are no adjustments here, it's with a multiple of 1.3 times relatively low with an adequate headroom to our financial covenants of three times in our facility agreements. The financial headroom of EUR750 million in long term financing instruments at a moderate net debt position are providing sufficient comfort in terms of liquidity.

The good financial shape of GEA is also reflected in our investment-grade rating of Baa2 with Moody's, respectively BBB with Fitch. We are committed to our investment grade rating and our clear target is to maintain this going forward. To sum it up, GEA is in a very comfortable situation with regards to financing structure as well as liquidity and therefore well prepared for the future.

I now hand over back to Stefan, who will continue with the fiscal year 2019 guidance.

Stefan Klebert

Yes. Thank you very much, Marcus. Let's have finally a look into the remaining half of the year. As you all know and are aware, the macroeconomic framework has become a bit more challenging. The International Monetary Fund as well as the World Bank and the United Nations, once again, revised their forecasts for the global economy growth downward most recently. So we have a lot of uncertainty in the economy.

However, regarding our guidance, we still feel comfortable, especially after having now seen this very good rush numbers for order intake in July and we confirm our full year 2019 guidance, which we have published on March 14. Revenue is still expected moderately below previous year's level, in line with our most recent order intake development. And we expect EBITDA before restructuring to come out in the range between EUR450 million and EUR490 million. And please note the seasonality of our business, which is very much biased to the second half of the year. ROCE, we expect a level in the range between 8.5% and 10.5%. So all-in-all, we clearly confirm our guidance for the full year 2019.

Please follow me now on the last page of our presentation. It's page 18, our road map for 2019, which we showed you already in March. In the course of 2019, you received already a lot of strategic news and there is more to come. On September 26, we will host our Capital Market Day in London. A save the date with details about the venue will be sent out shortly. On that day, we will present you more about our five divisions and their strategic priorities going forward and what will be our future core business, the road map to improve our scattered ERP landscape as well as the measures to optimize our procurement processes and our production footprint as well as the respective savings. So we are looking forward to present further details on the day and to discuss them with you.

On October 1, we will gradually start working in the new organizational structure, which we strongly believe will have a major impact on GEA in terms of coming back to good, sustainable profitability and increase it further down the road.

And October 25, we will present our Q3 figures. And with the beginning of the full year 2020, the new organizational setup will be fully operational and that will be then the start of a new era for GEA.

This concludes our presentation and we are now open for your questions.

Question-and-Answer Session

Operator

[Operator Instructions]. This first question is coming from the line of Klas Bergelind. Please go ahead.

Klas Bergelind

Yes. Hi Stefan and Marcus. It's Klas from Citi, I have couple of questions, please. I will take them one at a time. First on services. Half of the growth is pricing and half is volume, but it doesn't create any margin impact there in the bridge, i.e. pricing seems to be there to offset cost inflation still. It's good to see that you can offset cost. But I was wondering if you think that this can be accretive to the margin at some point? So what do you see on cost inflation in services into the second half? And do you plan to raise prices further in services? That is my first question.

Stefan Klebert

Okay. So we are going to raise prices actually by the end of the year and it's going to have an effect actually then in the next year. That answers your question. And we see the possibility actually to pass on cost inflation via price increases.

Klas Bergelind

But do you feel that, my question was more on the potential gap positively developing, whether you feel that maybe you could have some accretion also to the margin? Or do you feel that this is just a pass-through at the moment?

Stefan Klebert

Yes. There's an accretion in there, yes.

Klas Bergelind

Okay. Upcoming accretion. Okay. That's good to hear. My second one is on pricing in equipment and on the product side. When I back out volume and pricing in the service business and volume in the equipment business against the organic growth that you have reported, I get that equipment pricing in the P&L is down around 70 basis points. When do you think, if at all, that pricing on new orders will start to comp out on that effect in sales going forward, i.e. can we see unchanged, worsening or better pricing right now on the new orders? You said that orders are very strong in July. Is pricing better there for invoicing further out?

Stefan Klebert

Okay. I mean if it is about pricing in new equipment, it's a bit more tricky animal, let's say. First of all, it has something to do with the mix. I mean, if you look at our solutions business, we have areas where we have higher margins because of our market position and areas we have lower margins. And therefore, the margin for new equipment is also very much influenced by the mix. That's also the fact when we talk about the equipment business although there we have different levels of margin, depending on the business. So mix is playing a major role. And of course, it is also that as bigger the projects are as more likely it is that margins are varying from one project to the other, simply because of the fact how good customers are negotiating or how strong the competition is.

Klas Bergelind

Okay. Makes sense. My final one is on orders there into July. You said it was very strong. Stefan, was that broad-based? You talked about solutions? Was it in dairy that you saw a strong growth or in other segments? And compared to the EUR18 million large order you booked this quarter, was it large orders or was it base business? And finally, within this, the EUR6 million in orders that went into July that you should have booked in June, how much of that was increase, just to understand the underlying development?

Stefan Klebert

So as I said, July was extremely good number and like Marcus said, it might be the highest July since many years. To give you a bit more detail, even if it is based on our rush numbers, but the increase of order intake in solutions alone for July compared to previous year is higher than 50%. So we have got a lot of interesting huge projects exactly that was what we were missing in the second quarter, came now in July and it also shows how difficult it is in our business to judge performance of a company based on a quarterly number because it is the nature of the business.

If a customer is spending EUR30 million or EUR40 million, it is so easy that decisions are postponed for six or eight weeks and it tells nothing about the market, how the market is bullish or not bullish. So we are very happy to see what we expected in July. I can also tell you that there are some bigger dairy projects in with interesting and good margins, but we also have beverage projects, food projects. And we also have in the equipment, interesting projects. We also have a double digit million order intake for separators, which are not yet fully included in this numbers of July and you might see or you will see the rest of this large project in August.

So we are very confident that Q3 will turn out as a very good order intake quarter and that if we sum up at the end the first nine months, we are very optimistic to be more or less on the same level like previous year, which would be a very good outcome considering this general environment in which we are.

Klas Bergelind

Thank you.

Operator

The question is coming from the line of Max Yates. Please go ahead.

Max Yates

Thank you. Just my first question is on services. Could you talk a little bit around from your time in GEA so far where you think GEA has sort of been underperforming on the services relative to the potential? Is it that they haven't necessarily been following up post OE sales? Is it kind of existing under-penetration? So maybe if you could just give a little bit of context to the growth? So is this you taking share? Or is it the underlying market? And where are the real opportunities to really step-up growth relative to what's happened before? That's my first question.

Stefan Klebert

So I mean, I try to answer this question. As Marcus said, it is a mixture of price increase and volume. What we can generally say that when we see that customers are getting a bit more cautious about the future and the economy and they might not be so bullish in investing new equipment, this has sometimes or like we also can see now impacts on services. So they use the time of maybe not having fully-loaded equipment to do some more services to make sure that the equipment is in good shape. This might be an impact.

We also see good impact of our service initiatives in the solution business area, where the overall share is not yet on that level like it might be in the future. And also Asia Pacific is a region where we see good growth development in service. So it's a mixture of many, many things. And of course, price increase are also having an impact, but it is that we also have to be aware and sure that we are making prices which are accepted by our customers and that's also important for us because we want to please our customers in long term run. And we want to earn money, which we like, which we are, I would say, are good for, but we also want to be a fair supplier to our customers.

Max Yates

Okay. And just the follow-up would be, when you look at the cost savings that you have been making around the people or the personnel reduction in dairy, that should generate EUR17 million of savings. Could you talk about, so next year when we think about that savings number, is this going to offset the internal wage inflation that you have? Or do you think about the internal wage inflation as being offset by pricing and other internal productivity measures and therefore you should see healthy retention on the cost savings that you are making related to dairy and the people leaving or the personnel reductions?

Stefan Klebert

I would somehow like to postpone this answer to the Capital Market Day where we will give you much more detailed information about the future setup also and the staffing. So EUR17 million will not fully cover the personnel cost increase. That's very clear. But it will be a part of the salary increase, which we can cover here.

Max Yates

Okay. I mean, I guess, what I was trying to sort of understand is, if the business doesn't grow because we are clearly in a lower growth environment, do you think it is still possible to get margins up with the kind of wage inflation that you face every year, i.e., will you be able to offset that wage inflation and see margins go up, if we are in a zero growth environment, which may well transpire over the next 12 months?

Stefan Klebert

I mean, what is very clear that we have a very, very clear target and this is also what Marcus and myself stand for as the new management here. We definitely want to improve our margins. And when we want to improve our margins, the difference between prices and costs must become bigger. That's the only way to increase profitability. And therefore definitely we are working on actions and measures to make that happen. So definitely, clearly we are aiming for increasing margins and that means that costs must not increase quicker and faster than revenue.

Max Yates

Okay. Thank you very much.

Operator

The next question is coming from the line of Lars Brorson. Please go ahead.

Lars Brorson

Thank you very much. Hi Stefan. Hi Marcus. Very clear, very concise presentation. Thank you very much. I think it's a much improved format from what we have been used to over the last couple of years. Thank you. I have three questions. One on sort of one-off items, one on working capital and one on order intake to get a little more color, particularly on the dairy side of things. Maybe we could start a bit boring and on provisions, restructuring cost, strategic projects and now other special effects as it were. Just on provisions, can I be clear that there is obviously a EUR13 million write-down for the order backlog in Q2. That follows the EUR10 million or so in Q1. EUR23 million now this is behind us. In other words, is this review 100% complete? And can I, therefore, assume that for the full year, what we have in terms of provisions year-to-date, EUR39 million is really what we should be penciling in? Or is there anything more to come as you see it now in second half?

Stefan Klebert

No. We did a review of the projects, but we did not review all the projects. So that was not possible during that time but what we did was with certain assumption we were making. And right now, with the assumptions which led to the EUR10 million and EUR13 million in total, which we were just mentioning, we feel comfortable actually that we do not see any other write-downs from the backlog. However, of course, I mean, it's a contracting business. But right now, as I said, we feel comfortable. We have no indication that there will be any further write-downs necessary at this point in time.

Lars Brorson

Clear. On restructuring cost, we have had, what, EUR34 million or so or rather EUR25 million in the first half and then another EUR9 million to come from the FTE reduction program in the second half, so EUR34 million or so. I am assuming there's more to come from the Capital Markets Day around footprint, supply chain, et cetera. Are you able, at this point, to give us some indication of what to pencil in 2019 full year?

Marcus Ketter

No. Well, we are still actually making progress here for reorganizing the company. And when you look at the restructuring cost, I will give you the precise numbers. When we look at EBITDA, we have EUR15.5 million restructuring costs for the first six months and we have an additional EUR24.6 million, if you look on an EBIT level to give you detail. There will be some more restructuring expenses and we are working diligently on several projects and we can give you more detail actually on the outcome of the restructuring expenses for this year on the Capital Markets Day, but there are some more to come. It's going to be very big. I don't think it's going to be very big, but there definitely will be some more cost out for this year. And also, we are planning further for the next year's changes in footprint, production footprint, procurement and getting more efficiency into the company and that means that we will also see restructuring costs for 2020.

Lars Brorson

And on that, for 2020, what about strategic projects, I know it's a concept you want to do away with, but it's still a material earnings headwind today. We are targeting EUR50 million or so in 2019. Do you see something similar in 2020? Or do you think that starts to fade next year?

Marcus Ketter

Well, when we didn't have that many strategic projects any longer, so the EUR15 million probably includes the special effects we were presenting today. If not, let me know. But we don't call them strategic projects. So our number is really EBITDA before structuring. Nevertheless, we wanted to show you that there were certain we call, let's say, one-time items we think it's also non-operationally in the sense here of when we have a legal dispute actually, a measure of the dispute that we take, accrues on this or that. In 2018, we released a provision of that. That was good information to really judge how the operational business of the company is going. Nevertheless, our clear KPI is EBITDA before restructuring and we will not show any strategic projects. We will do strategic projects. One was mentioned, for example, that we are going to implement ERP system. That will be, of course, costly. We are going to give you details in September, but we will not call this strategic projects.

Lars Brorson

Okay. Secondly, if I can move on just briefly to working capital. I appreciate your point that it's unacceptable, I would agree with that. It's just not good enough, quite frankly and inventories continues to be the big issue as far as I am concerned, up year-over-year. So I am not talking about a seasonal swing as you normally get in Q2. But my understanding is the relocation of production is a low-teens impact in million terms in terms of inventories. Clearly, there has been some inventory build in the equipment division, but you have now had three consecutive quarters of negative order declines there. Growth is flattening out. I would have thought we could start to see some improvement. We clearly aren't. And again, with order intake picking up, I would have thought, perhaps, there's more inventory build then to come in the second half. Can you help me a little bit understand this new group-wide program? What exactly is that? Where will the improvement come? And when might you start to see an impact from that?

Marcus Ketter

Well, we will start throughout the group. We will look at especially the inventory, accounts receivable, management and of course, also talk to purchasing in regards to the terms for our suppliers. We have just started in beginning of August and let us go into it then we tell you in September, actually, if we are going to see a material impact already this year. The goal is clear to have a material impact also already this year. But let's see actually what we can do because we are a very scattered company, as you know. We have over 200 operational companies. But I think that with the new divisional setup, it will be very, very helpful to see the business again and to bring down net working capital considerably. As I said, the beginning of August, let's see if a material impact already until December. We will work on that, but definitely going to be beginning of next year.

Lars Brorson

Helpful. Finally, can I ask Stefan, just for a little bit of color on the dairy industry? I appreciate you see some recovery across the dairy processing business. I was curious as to where that is coming? Is that on dry powder? Is it more liquid? Or are we starting to see some initial move around some of the bigger plant-based investments from the likes of Danone? Is that starting to show up in your order intake?

Stefan Klebert

I mean, if we look at the order pipeline, it is quite a wide collection, I would say, of our dairy processing portfolio. But if we are looking at the order intake which we see now, also in July this is very much focused on milk powder or more specific of the infant formula. There is, again, what we see increasing demand. You know that this market was going down three years or so. And that's also what we see with our project pipeline. We see a good development and these kind of projects are obviously coming back and we booked in July, two large milk powder factories.

Lars Brorson

Helpful. Thank you.

Operator

The next question is coming from the line of Jack O'Brien. Please go ahead.

Jack O'Brien

Great. Good afternoon. Thank you very much for taking the questions. I just want to follow-up on that last and market-related question really. It strikes me that given the strong July, you are now expecting 2019 order intake not dissimilar to 2018. And you have talked about good services growth, which is great. When you look at the sort of original equipment through the rest of the year, what gives you the confidence that, I suppose, we can achieve that order intake outcome? And where are you seeing sort of strength or weakness by end market? Just interested to drill down a bit more into the end markets, please.

Stefan Klebert

Okay. I mean, that's a very good question. And you know that every prognosis is difficult, especially if we talk about the future. So we have, of course, our project pipeline, which is the most reliable source for us. So we can see what our sales organization is negotiating with our customers. And this pipeline is, as I said, very good filled. So we always, of course, check go-and-get rates. And that makes us quite optimistic.

But on the other hand, you also know how volatile the world economy is at the moment. And we do not know what makes a customer, at the end, maybe in October or November or December, finally, to decide if the customer wants to do that project or not though. There remains a very high level of uncertainty, I would say, because as I said we are in a very volatile economic situation and we read every day some other strange news about trade wars and so on.

So it will remain very, very volatile but, and this is what we clearly can see, we have now, if we sum up June, January to July, it is a fact that we are around about on the same level like last year, that we are 2% to 3% below. But if we look at the orders not yet booked because we don't have the down payment yet, for instance and if we look at the project pipeline, we are quite optimistic that it will be an acceptable year.

Jack O'Brien

Okay. Thank you. And perhaps just one follow-up. You mentioned a couple of milk powder orders that have recently come through. When you look at your end markets, which are the most challenging at the moment?

Stefan Klebert

I would say that U.S. at the moment for us, especially when we talk about milk and dairy farming. This is what we see. It's also bit impacted by the separation business in the U.S. So if we talk about regions, it is clearly at the moment, U.S.

Jack O'Brien

Okay. Great. Thanks very much.

Operator

The next question is coming from the line of Sven Weier. Please go ahead.

Sven Weier

Yes. Thanks for taking my questions. First one is also on order intake. I appreciate the fact that you now provide us monthly data here. And I was just also wondering, obviously your guidance implies a EUR200 million sequential uptick in the order intake in Q3, in a quarter that is normally seasonally lower. So EUR60 million you guide. And I was just wondering on the remainder, as you previously said, is it just a function of the down payment where you got the order already? Or is it still something you need to sign? That's the first one.

Stefan Klebert

Good. Hi Sven, nice try. But I wouldn't like to promise that we are providing you with monthly order intake figures in the future. It was just for the sake because you know we had a very sad Q2 number and therefore we thought it is not only worthwhile it is, I would say, even very much important to give you the right impression of our company that we disclose the July rough numbers, which are really very, very fresh and brand new. I got these numbers today in the morning, quarter to nine. So this is really how it is.

And I mean, I simply can repeat what I already said. I mean, it might remain a very volatile and unsure rest of the year. However, if you look at the environment, if you look at our competitors as well, I think we did a good job so far and the organization did a good job. And we hope that we can continue like that with the order intake, because as you also are fully aware, the order intake from the second half of the year will determine very much our sales and our start in next year.

Sven Weier

Right. And also regarding the milk powder projects you mentioned, are you also seeing the benefit from SPX FLOW pulling out of the market because, obviously, they seem to want to get out of this big dairy milk powder projects? Is that also something you see happening?

Stefan Klebert

I mean, competition is always there. And we also see that it always depends on the region or country. And sometimes, we see the same competitors being very weak. Sometimes we see them very strong. I wouldn't say that this will make an impact, especially about this big numbers and big projects, there is always a very tough competition and I am sure that this will remain like that.

Sven Weier

And then lastly, just housekeeping on the second half EBITDA bridge because, obviously there are some moving factors here because if I look at the starting point of last year, it was roughly EUR320 million. I think you had like a EUR15 million provision release in H2 last year. And if I did my calculation right, you have a remaining EUR30 million on the strategic costs that needs to be adjusted because you only had EUR12 million in the first half. And then I think there's an additional EUR24 million IFRS impact here. Anything else we have to think about in that bridge like further wage cost inflation, which I think was like EUR13 million in Q2? Should we take that times two for the second half and anything else we have to bear in mind here?

Marcus Ketter

Well, you have to definitely take into account the IFRS 16 effect, which is EUR60 million for the quarter when you do the comparison there. We don't foresee anything really specific now for the second half of the year. But as time goes by, of course, there will pop up something. But usually, actually, when your personnel expense increases, we can also get this through our price increase in the topline. So expect actually to see that we will reach our guidance. And from today's point of view, we don't see anything. But as I said, as the time goes by, we didn't see some of these which were here, they are materializing later on.

Did this answer your question or were you more specific on something? Yes. Go ahead.

Sven Weier

Yes. Just also on IFRS 16, because I can see in your presentation slides, you say EUR56 million for the year, but it will take the 16 times four, I obviously get to EUR64 million. So I was just wondering if there's a lower impact in the second half or whether there's anything to keep in mind?

Marcus Ketter

The current set is actually EUR64 million for the year, not EUR56 million. There might be few million difference there. But account set is a EUR64 million, EUR16 million a quarter.

Sven Weier

Okay. Because that's what I have picked from the slide was EUR56 million, so the EUR64 million makes more sense, yes. Thank you for that.

Marcus Ketter

All right. Thanks.

Operator

The next question is coming from the line of Daniel Gleim. Please go ahead.

Daniel Gleim

Yes. Thank you very much for taking my questions. I also have three of them and I will take them one by one. The first one is on 2020. Do you already expect a net positive impact from the new structure? The thinking behind the question is there's another organizational change ahead of us and the last time there were big headwinds from cost doubling when responsibilities change within the organization from one person to another. So do you think that this time you can adjust so quickly that we are already net positive benefits of costs in 2020? That's question number one.

Stefan Klebert

Okay. I try to give you an answer for that. If we now talk to our employees and to the work councils and to our managers, there is extreme difference between the change we are making now and the change when it was done three years ago to OneGEA. When the change to OneGEA was considered to be done, there was a very huge discussion, obviously, going on in the organization if that is the right way or not. And there was a lot of resistance about this organization. Many people, many managers left the company because they felt that it's going in the wrong direction.

And I clearly can say that we have a completely different situation nowadays. We have a full alignment and common understanding with the work council. They want to have that change very quickly. So also our managers, like I also reported sometimes already good experienced GEA managers who left the companies two and three years ago are coming back because they still love the company and they feel that we are now going in the right direction. Now this is a completely different environment in which we do the change now compared to the last change three years ago and therefore, we are very optimistic that it makes a big difference.

And you simply have to be aware that at the moment, there is only a very, very limited responsibility for a lot of costs and a lot of things which are going on in the organization. So that also might be the reason why the company here employed many, many people during the last two or three years. Nobody got the pain. That means the cost of these people. And if you ask certain line managers, they always have good ideas what they could do with additional staff. And the question is always, if it turns into profitability. If you are not responsible at the end for also making the company more profitable by bringing more people in, then it is a wrong thing.

So let's say, to summarize it and to say it in a nutshell, it is a completely different issue and the change we are ahead of is, I would say, 99% of our people here including work council and managers, they are looking forward very much to this change.

Daniel Gleim

So the potential is great and the change would be more quicker than the last time. But do you think that already in 2020, you will have net benefits from the change?

Stefan Klebert

I mean, of course, we are a huge corporation. We are very, very fragmented organization. It's not so easy to say that we can do it within some weeks. And you know that we are already working since many months now in this new organization. That was one of my first announcement when I took over the role as CEO and since that time, we are working out the organization. And we are very optimistic that it makes a big difference when people are again responsible, when people and managers are looking at their cost structure and they are taking over the responsibilities. It's hard to judge, but we are very optimistic that we already see in 2020 an impact even if, of course, it will not be the full impact which we can see in 2020.

Daniel Gleim

Very clear. The second question is on 2019. You reiterated the guidance on all metrics. We have seen higher negative one-offs in the first half. Could you provide a little bit of color what went better than initially budgeted to offset these incremental headwinds?

Marcus Ketter

So the main reason what went better, actually, is the improvement in service. You can see this year in our bridge, we are saying, we have a volume of EUR13 million more in service there. So this is really what helped us in the second quarter. And then, of course, we had here also EUR8 million in positive FX effect there.

Daniel Gleim

Thank you. And the last question would be on the milk price development. We have seen a little bit of a step down. Since my understanding is that lower demand from China also explains the weakness you are seeing in North America, could you provide a little bit of color around where you see the North American market heading in terms of dairy farming? And what you think in general about likely lower milk price environment for the coming months in terms of impact on order intake and sales on the dairy farming? That's question number three.

Stefan Klebert

Yes. Milk prices in the U.S. are on a quite low level. But we would say that we see a very, very slight increase or destabilization of the price level and the milk price always is a very important driver for investments in farm technology. So let's say, we have to see how it will develop. But this might add something, which I don't expect that it is turning around, let's say, at the end for the rest of the year significantly to say it in that way, maybe.

Daniel Gleim

If you look at the July numbers, how did it go in terms of dairy farming order intake?

Stefan Klebert

Not that we see any improvement there. The good July is, as I said, mainly coming from solutions. And you know, if you look at the Q2 numbers, you can see that solutions was the main reason for the very bad Q2, but solutions now booked of this project, which we originally would have expected to be booked in the Q2 now in July. But farm technology, especially in the U.S., is an issue at the moment, yes.

Daniel Gleim

Apologies to belabor the point. But how much of the strong service growth is driven by dairy farming? Is that something you could help us with?

Stefan Klebert

I don't have any numbers here right now. But I wouldn't say that this has such a big impact simply because of the overall size for the whole company in our group.

Daniel Gleim

Very clear. Thank you very much.

Operator

The next question is coming from the line of Sebastian Growe. Please go ahead.

Sebastian Growe

Yes. Good afternoon gentlemen. Thanks for taking my questions. Also three areas. The first one would be around order intake and related to that, also working capital. I think, since you took over, Mr. Klebert, you always stressed that you would definitely strive for having better incentive schemes for the salespeople on the ground. Can you just give a sense of how eventually working capital terms we should expect for these recently closed orders for the H1 period in total? And related to the working capital aspect that's eventually more than, I guess, [indiscernible], can you also give us a bit of more insight into the exact working capital measures that you have on mind to improve working capital beyond really incentivizing the sales staff?

Stefan Klebert

So let me start with the first question about the incentive of the sales people. We started beginning of the year in the first quarter to change that to at least an incentive for gross margin. And meanwhile, it is rolled out almost everywhere. So that nowadays, I would say, we can say that almost every salesman now is incentivized at least at the gross margin which is, I would say, a first step in the right direction. More to come when we flip over to the new organization and we will also definitely work on a new incentive system not only for the salesman when we are in the new organization.

But first is now to change the organization, put the managers in place. And we also, by the way, have just yesterday signed a contract from a new HR manager who will join us in, hopefully, short time. I cannot disclose the name. But it is somebody from a very respected company on a very high level. So all of this will make a difference in GEA the in the future.

Marcus Ketter

And Sebastian, to your question with regard to the flavor of how the net working capital project will work, I think first decisive change is going to be the new structure because you are bringing back accountability to the managers that they are really responsible and accountable for their net working capital. I think this is utmost important and that will drive a change.

Then secondly, of course, we will focus on three main areas of the net working capital. One is accounts receivable. We are going to also just as a flavor, we will implement the tool we will implement throughout the group, a certain tool to better track the accounts receivable and also to measure how the days sales outstanding are on a legal entity basis. As I said, the new organization will bring accountability back.

Then, of course, secondly, the inventories and also the sites and production sites, they will be responsible for the inventory. And that's also going to be a very important KPI.

And third one, of course, is accounts payable. We are looking at our contracts with the suppliers, how many days do we have? And of course, then in business area of solutions, how are the advances? We are really focusing on getting the advances in. And then we are going to make goals with each of the division. The division is going to make goals with each business unit. And so it will all cascade down to the legal entity level and with the new structure, as I said, we are going to see accountability for net working capital again.

Sebastian Growe

Okay. Fair enough. Can you just comment on the recent bigger order stroke at specialty solutions and then what the payment terms are like? So have you noticed any difference to what you were used to see in the past, eventually?

Stefan Klebert

I mean, we don't want to start to disclose payment terms for single orders, I would say. And there is nothing to hide at that stage to also said it very clearly. But of course, we see that there is always a big discussion and big pressure. I mean, if I remember, times five or 10 years ago in different industries I have worked for, it was always very easy and kind of standard to get 30% down payment for larger projects. This is not the case anymore.

So we clearly have to try and argue very, very hard to get the right down payments and also payment periods. Customers are always trying to make that longer. So this is a fight at the moment, clearly. And I don't expect that this will come back to the good old times five or 10 years ago. But we are, of course, always trying to do our best.

Sebastian Growe

Thank you. If I may move on then to the staffing levels. So I have realized that you had total employee base up around 250 people year-to-date. I think, 170 sequentially, so compared to the end of March. How can I square it up with the overall trend to get the cost base under control? And can you give us also a sense in which areas you particularly might have added those employees? I would assume it's in services, but just to get some more color would be helpful.

Stefan Klebert

I mean, this is also a thing which is not so easy to answer. Of course, we added people in service. And during the last 12 months, to my knowledge, it was more than 100 people. But we also added during the last two years other people in engineering and excellence functions and we will have a very close look at all of that when we flip over to the new organization because, as I said, when we have back clear responsibility and managers who clearly get the pain and gain of what they do, we expect that we will increase efficiency also in terms of labor efficiency.

Sebastian Growe

Okay. If I may, just one question to the service discussion there. Is it fair to say that so far, you have mostly reaped the benefits from having had the cost burden ahead, so to speak and now you are getting into better utilization levels and in field service, et cetera? Or asked differently as a necessity, if you were to grow service further at around 5% or what the run rate might be going forward, that you would also see then a step-up in fixed costs, i.e. adding more staff to the ground?

Stefan Klebert

I mean, I can tell you all what you know, what we already disclosed that with the new organization we will also have a focus on service which, I would say, was never in the same level before at GEA, because you know that in each division, we will have a chief service officer, which is completely new for GEA and we will also have a completely separate P&L for the service business and service activities. And GEA is more used to report new equipment and service together for the certain businesses which we have. But it will be a new world because we will clearly always separate the P&L from new equipment and the P&L of service. And I think that also will make a big difference in the future and will help us to drive the business further.

Sebastian Growe

Makes sense. And then really the last question and maybe one for the CFO again. On the earnings side and on the bridge, on the currencies. I was having difficulties really to reconcile EUR7 million positive tailwind from currencies in the quarter, but an EUR8 million EBITDA impact. Can you just help me understand that?

Marcus Ketter

Sure, I can do that. So we have actually here a EUR1 million from a translation effect. This is on the EBITDA level and it's EUR7 million coming from currency gains and losses from transaction. So this is why you only see EUR7 million on the revenue side, which is a translation effect. But that totals out on EBITDA level just to EUR1 million. And then what you don't see actually in the backup is the transaction effect, which is an additional EUR7 million. So that totals the EUR8 million.

Sebastian Growe

Okay. That's very helpful Thank you.

Operator

The next question is coming from the line of Frederik Bitter. Please go ahead.

Frederik Bitter

Good afternoon gentlemen. Thank you very much for that. It's a long call already, but I try to keep my question short, at least. Just coming back on July order intake, I mean, obviously you didn't want to comment on a monthly basis, however you still did and now obviously you opened that question box. So the EUR60 million basically there have been late from Q2. If I take them out in July, how much is the growth still on an underlying basis, July this year compared to July last year?

Marcus Ketter

Yes. Obviously, we opened the box of Pandora. But I mean, my comment would be mainly, this example shows how difficult it is for a machine building company like GEA with a nature of a business where we are not selling components only, where we are selling big, huge, large projects that it is very, very difficult to judge the performance of a company on a quarterly basis. And a small month in a year, we have closed as better, I would say, our reliability is. So it's very difficult to make these kind of calculations. So I would say, for me, the most important message is that after seven months now, we are more or less on the same level than the year before and this makes me happy and confident.

Frederik Bitter

Okay. You could just cut it short and just give us a number for July last year and then we do the math ourselves. It will be so easy.

Marcus Ketter

Okay. Last year's order intake was EUR362 million.

Frederik Bitter

That is July, right?

Marcus Ketter

Sorry, July. That was Q3 here. So we only can give you a number for last year, yes. Okay. Here it is, sorry. So it's last year, July, EUR360 million, EUR361 million, actually. And that was EUR362 million. That was the right number. That was actually here, July, EUR362 million. That's the correct number adjustment. I just looked at the graph. But yes, EUR362 million.

Frederik Bitter

Okay. Thank you.

Stefan Klebert

Now we can leave you with some mathematics calculations and games tonight.

Frederik Bitter

Yes. In the afternoon, yes. I am saved. And the second question I had actually was, if you compare 2019 in terms of the employee base and the personnel cost base, more importantly, to compare to 2018, keeping in mind that you basically rehired the mid-level management that all your previous predecessors have taken out, what kind of change is that actually in the personnel cost base? How much cost did you add by rehiring the mid-level and also the sub-level below that?

Stefan Klebert

I have to say, I don't understand the question because I am not aware that we hire or extend the mid-level management. Maybe you can make it more specific?

Frederik Bitter

Yes. Of course. I mean, obviously, you have been rehiring divisional team heads. You have been rehiring the regional heads and you were still talking about hiring people on the level below. So obviously, this is a management level below yourself and Mr. Ketter that has been taken out, to a large extent, at least by your predecessor, by former GEA management. And I am just wondering what kind of total cost base you are adding basically via rehiring those people.

Stefan Klebert

I now understand what you mean but this might be misleading. So of course, yes, you might say or see that nowadays, we have one BA equipment, one BA solutions and in the future, we have five divisions. But we also calculated carefully the number of L1, L2, L3 positions. And you have to know that, of course, the BA solutions or equipment are both quite big animals where you find a lot of substructures. And to make a long story short, so we will have, at the end, not more managers than nowadays. That's also a clear must when we go to the new organization and that's clear that we don't want to increase costs by putting additional management levels.

Frederik Bitter

Okay. Thanks for confirming. So basically on the net level, there's no really net impact to be seen, right. And then the last one is a quick one. I mean, obviously in terms of the increase in inventories you saw in Q2, we are talking about relocation of production. I was just wondering if you could provide some more background on that kind of topic, if you could?

Stefan Klebert

Yes. We have a production site in France actually, which was relocated. And therefore, we have actually some more inventory for that, which we here mentioned also in the chart. However, I would say this is not the underlying problem really for our elevated net working capital. This is the reason actually here if we are for looking at the year-over-year comparison which there was none in the last year's quarter. But overall, we see actually that inventories levels have increased the days inventory outstanding numbers have also increased and that we definitely have to get more efficient.

Frederik Bitter

Sure. Thank you very much to both of you.

Operator

The next question is coming from the line of Wasi Rizvi. Please go ahead.

Wasi Rizvi

Hi. Yes. Thanks for taking my questions. I will keep it to two. The first one is for Marcus. You have had some time in the job now and been through a quarterly reporting process. I would be interested to hear your thoughts on the information systems and processes in place and what can be done to improve them as this is the topic that's come up in the past a few times? And then whether it's kind of a lengthy job with some meaningful cost attached? And then the second question was on asbestos litigation. I understand you can't comment on any ongoing appeals. But have you seen an uptick in the claims following the announcement of the award, as in claims from other parties as well now that they have seen that there's been one award against you?

Marcus Ketter

Okay. First, the question with regards to transparency, number of ERP systems. I can tell you that we have actually quite a lot of numbers. We can do quite a lot of analysis. I think what has been in the past is there's a mismatch between the complexity of the current OneGEA organization and actually the system capabilities. We are seeing to really match this complexity because we have quite a number of different ERP systems here. So with the new structure actually, when we go back to a legal entity management and then consolidating upwards these legal entities, I think we are going to have with the current ERP setup, we are going to have quite a good view and also accountability, as I mentioned before.

Now nevertheless, we still want to implement going forward one template or one ERP system for the group. And we are diligently working actually on this to give you more view on this on the Capital Markets Day. But there will be, of course, a big number attached to it. That's definitely the case. We are looking at this. And I think it's going to be necessary to bring up the company also from an ERP aspect to a state-of-the-art level here. We will comment actually on the cost also on the Capital Markets Day.

Now with the asbestos case. So far, we have seen none, no uptick. There's none who followed that. That is a very specific case actually which we had there. It's a system actually where you had to dismantle the brakes and then the claim was that this actually resulted into the illness of the service technician. So it's very specific what we are looking at here. And there has been no uptick.

Wasi Rizvi

Thank you. That's helpful.

Operator

Thank you. That was the last question. I would like to hand over to Stefan Klebert for final remarks. Please go ahead, sir.

Stefan Klebert

Thank you very much. I would like to thank everybody for listening and for your very good questions. I would like to summarize the situation. So I would say, most important, GEA is confirming the guidance for the full year 2019. I would explicitly stress that for two reasons.

First of all, I know that you saw many profit warnings in GEA in the past. And second, you see also a environment where a lot of companies are coming out this profit warning. So we are very proud that we turn now to become a more reliable company and that you can trust on what we tell you.

Second, our organizational changes are on track and we are very close to make this change happen. We have a very good mood and spirit in the company that everybody wants to go to this new organization which, I would say, is also something which is special because in many companies, if you change the organization you have a lot of resistance. This is not the case here in GEA now with this change we intend to do.

Third, the restructuring of solution is also on track. We will see already this year some impact. So some of the savings will kick in already this year. Starting next year, the majority of the profitability will kick in. And so we also think we can get the turnaround here, together with improving market in dairy which is also shown now in the order intake in July is, I would say, all-in-all a very good situation for GEA at the moment. And we are also very happy that we got the rush numbers for order intake in July today. I can promise that this is something we will not repeat to give you monthly numbers. But I think it was helpful today and also good to give you a full-fledged picture of where we are.

So thank you very much for listening and I wish you a good day. And hopefully, looking forward to the majority of you at our Capital Markets Day personally at the end of September in London. Goodbye.