Good morning, ladies and gentlemen. Thank you for holding, and welcome to the Analyst Call Q3 Results, AMCD
N. V.
At this moment, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. I would now like to hand over the conference to Mr. Pete van der Schliche. Please go ahead, sir.
Thank you. Welcome, everybody. I'm here as usual with Hans Corimans, and together we will answer your questions on the 1st 9 months and Q3. Despite the COVID-nineteen crisis, we report strong results. For the 1st 9 months, EBITDA growth of 8% and even 11%, if you correct for ForEx.
Q3 was in particularly strong with 11% growth of operating EBITDA and even 17% when we adjust for currencies. All regions contributed to this success. Furthermore, free cash flow is 21% above last year. We are very pleased to see that we are able to continue our business also in these difficult times and that we are even able to grow by margin expansion and cost control, although we are, like everybody else, affected in our top line. This is promising once this crisis goes away as it leaves room for further growth.
Generally, we are encouraged by the positive resonance our business model receives from suppliers and customers, which is evidenced by the projects we are working on and which will hopefully fuel future growth as well. This Q3 was very positive in another sense. We were able to sign an agreement to acquire 70% of the shares of Signet Excipients of India and successfully issued almost 4,400,000 shares to finance this acquisition. Last week, we closed this deal. Signet fits very well in our global pharma strategy and expands our position in India.
As you know, everything is made possible by our excellent staff, who continues to deliver a top performance under difficult circumstances in the various activities in sales, in order handling, in labs, in warehouses and logistics. I want to thank them all. In summary, IMCD is in good shape, and we are positive about our near term prospects. I would like to hand over now to Hans to lead you through our results. Thank you, Chris, Hans Helf.
Good morning, ladies and gentlemen. Before we go to Q and A, I will briefly summarize IMCD's 1st 9 months results. I will start on Page 10 of the presentation with an overview of the key financial figures. As you can see and as PGS mentioned, ForEx adjusted revenue increased 3% compared to the same period last year and more important, gross profit increased 9%. This gross profit increase is a combination of 4% organic growth and 5% as the result of the first time inclusion of acquiring businesses.
In 2019, like Wahworld and DCS and further acquisition growth includes the positive impact of Cifromi, Dazylink, VitaQuali and Cocofibr acquisitions that we signed and closed in the 1st 9 months of 2020. Signet is, as you might understand, not included in these year to date September figures as we closed this transaction on November 4. Gross profit as a percentage of revenue increased 1.1 percent from 22.2 percent to 23.3 percent. This increase is the result of gross margin improvement initiatives, changes in local market circumstances, currency developments and the usual fluctuations in the product mix. ForEx adjusted operating EBITDA increased 11% to €119,000,000 And this increase was a combination of organic growth and first time inclusion of acquisitions.
The conversion margin, calculated as operating EBITDA in percentage of gross profit, was 39.1% in the 1st 9 months of 2020, an improvement of 0.7% compared to the same period last year. Net results before amortization and non recurring items increased €11,000,000 to €131,000,000 an increase of 11%. Free cash flow was €168,000,000 and the cash conversion ratio increased to 87.5%, a substantial improvement compared to the same period of last year. Operating EBITDA growth in 2020 combined with a lower increase in working capital in the 1st 9 months of this year, were the main drivers of this improvement. Year to date cash earnings per share were €2.46 a ForEx adjusted increase of 11% compared to the same period of last year.
And on the last line of this page, you will notice a 9% increase of our full time employees. Most of this increase is the result of the first time inclusion of acquisitions done. On the next slide, Slide 11, you will find gross profit, operating EBITA, EBITA margin and conversion margin per operating segment. EMEA, in the first column, reported 4% ForEx adjusted gross profit growth and 3% operating EBITA growth. Q3 was a strong quarter in EMEA with low double digit operating EBITDA growth.
Further, operating EBITDA in percentage of revenue improved from 9.7% to 9.9%. In the 2nd column, the Americas, where we report 11% ForEx adjusted gross profit growth and 16% operating EBITDA growth. Operating EBITDA margin and conversion margin both improved with 1.4% and 2.1%, respectively. Asia Pacific reported 25% gross profit growth and 29% operating EBITDA growth at constant currencies. Operating EBITDA in percentage of revenue and conversion margin further improved compared to the same period of last year.
Q3 was a strong quarter with double digit EBITDA growth for both the Americas and Asia Pacific. And in the last column, you will find the cost of the holding companies. On Page 11, a summary of IMCD's free cash flow. Free cash flow and cash conversion ratio were both higher than in the same period of last year. And this healthy cash flow was mainly the result of higher operating EBITDA and less investments in working capital.
Working capital days improved during Q3 substantially from 60 days end of June to 55 days end of September. A more or less normalization of stock levels during this quarter was an important driver of the improvement. Then on Page 12, a short update on net debt and leverage. When compared to the end of December last year, net debt decreased substantially to a level of €319,000,000 In the 1st 9 months, we saw healthy operating cash flow, combined with the proceeds of the issuance of €4,400,000 of NIO shares at the price of €91 per share. The net proceeds of the NIO shares were used early November to finance 70% of the acquisition of Signet and for general corporate purposes.
At the
end of September, the reported leverage ratio and the leverage ratio based on the definition used in the loan documentation dropped to 1.2 and 0.9, respectively. Excluding the net proceeds from the new shares and keeping all other factors equal, the pro form a leverage could be calculated at 2.6 times 2.5 times EBITDA. And then last but not least, on Page 15, you will find the outlook for 2020, where you could read that you expect operating EBITDA growth for the full year. There was a short summary of our year to date financials, and Peter and myself are happy to hand over to the operator to answer your questions.
Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. And the first question is coming from Mr. Muklu Gundogan, ABN
AMRO. I hope all is well, and thank you taking the question. So I have 2. The first one is on the gross margin. Can you tell us why this was down sequentially by any basis points?
I know there can be fluctuations between the quarters, but here all three regions showed a similar decline. And I remember you saying at the Q2 results that the gross margin had actually benefited from structural price increases. So I'm surprised to see it come down sequentially. That's the first question. The second question is on order patterns.
Can you talk about what you're seeing in terms of client activity in Life Sciences versus Industrials? I mean, looking at some of the share prices, we see some of the Life Science customers come down, perhaps some destocking. And there's obviously the hope of industrial customers restocking. Are you seeing that in your patents? Thank you.
Mudlop, Hanser, perhaps I should take your first one with respect to margin developments. I think if you look over a longer period of time, then you see changes between quarters every year and during the year and during the regions. And basically, that has to do with changes in the mix, changes in product portfolio, changes in certain products that are more linked to a summer period or winter period and whatever have you there. So it is for me, it is just the usual fluctuations that we see during the year. But we are absolutely happy to report that the overall gross margin percentages are still higher than what we did last year.
And that is part of the result of the things that I just mentioned and part of the things of part of is the result of margin improvement projects that we run internally to optimize margins in segments where we have the feeling that we could do better. Okay. Pete here for your second question. Order patterns. I think generally speaking, if we go back to the start of the COVID crisis, it's clear that in the industrial sector, and then I talk about what we call, coatings and construction, advanced materials, let's say, all kinds of plastics, composites, etcetera, lubricants, synthesis, which is due, let's say, chemicals, intermediates, etcetera.
There, of course, we have seen and still see, let's say, a decrease in what we expected and what we saw last year. And that has to do, of course, with the end markets that we saw going to. In the Q3, I think we could say that we saw a slight improvement, But we have to see how this develops now after the 2nd wave, so to say. In Life Sciences, differences between the segments. Of course, you have effects of COVID also in our Personal Care business and food business, less than much less than in the industrial sector.
And as I reported earlier, a very positive boost, I would say, in the pharma business. All in all, so if you divide it quite a stable, steady Life Science business and an industrial business that has in certain regions, more difficulty. And I say in certain regions because it also differs a bit from country to country or from region to region, depending on very often, depending on the severity of the lockdown locally. So I think that's a summary of what we see.
And the next question is coming from Matthew Yates, Bank of America. Please go ahead.
Hi, good morning, everyone. Forgive me, but I just want to follow-up on that question about near term trading. Normal seasonality would be for a sequentially weaker Q4, but I guess we would have said that was also the case for Q3 and that didn't necessarily happen with this year being unusual. So can you be any more explicit on the order trends through Q4, what you've seen so far in terms of whether customer behavior is any different to what it might have been in prior years? The second question, I'd like to come back on the Signet deal for a moment.
As an independent entity, they were clearly very profitable and growing quite nicely. So can you just talk a little bit more about how IMCD can add value here? In particular, I'm interested about operationally what you can do from embedding your IT system and then whether your customer service model would be different to how Signet's gone to market historically?
Yes. On your first question, I can't elaborate further on, let's say, the forecast. But as we have given that also in the press release, generally, I can say that given the fact that we are all of us in the economy working under difficult circumstances, I'm happy about the performance, the ability to expand margins, to save costs, the stability of our business, the possibility to work under difficult circumstances, as I noted. It will depend, of course, on the severity of the lockdowns overall. But I given the fact that hopefully, there comes an end to this crisis, it gives us reason for optimism.
And hopefully, the Q3 is a bit of an indication of that. Now on SykNet, I think generally speaking, that's why we're also happy with this business is that it fits very well within culturally, but also in terms of the type of business that they're doing with IMCD. And we have said, I think, also when we announced this acquisition that we that it is not reasonable to expect a lot of cost synergies. But of course, we will bring our systems at a certain stage into the company. We have synergies on top line, on the supplier front.
We can together expand also in the region, so not only in India. There's a lot of knowledge. There's a lot of relationships that both of us can further exploit. So I'm very positive about using the strengths of us and theirs to further grow the business. So in our view, it fits perfectly with us.
And can I just squeeze in a follow-up? I think you said that your employees were up 9% year on year, and that's obviously before you even closed Signet. Can you talk a little bit about how the integration process for those people is being managed in clearly what's a very unusual environment?
That's a good question. And of course, it's more difficult because we all most of us work work from home. But depending a little bit on the, let's say, the acquisition. Normally, of course, the smaller ones, we do integrate, and we have an elaborate program to welcome them in the company to make them part of IMCD, to put them on our IT systems. So in that sense, that is successful.
In the particular case of Signet, of course, that's just closed. That's on the 4th November. So it's not in these numbers. But we will, for the time being, will run separately. But the smaller acquisitions that people are with an elaborate program integrated, and IT, of course, is a major factor as well in addition to our internal communication.
These kind of elements to make them feel at home. Perhaps to add to that, I think, companies like Daevlin in China, this year in Switzerland, Cocoa Fiber in the Nordics, the markets are just open and people also commute, visit and meet each other. And these companies are in the meantime in a standard process of integration.
Thanks guys. Take care.
And the next question is coming from Kurean Mulder, ING.
Good morning, everyone. My question is about the organic growth mentioned in the press release by in the comment of Pete, 10% organic growth impacting gross profit. And if I do the math, looking at 9 months 4%, and for me, it's somewhat at the high end. So maybe you can elaborate on that. And then your remark on, let me say, resumption of growth, and you are optimistic when the pandemic is over.
Can you indicate where you will see the improvements? When you say the improvements, is that you expect, let me say, higher revenue, higher growth profit? Or is that you still seem to benefit from the cost savings in 2020 that they will continue? Or is that a combination of many factors?
Yes, Andre, I missed your first one, to be honest. No. My first question,
if you look at the press release, you speak about 9 months organic growth for gross profit of 4%. And Pete made a comment in his press release about 10% organic growth for gross profit. If I do the math, then I do not come to that number. So maybe that's an explanation for it.
I'm looking for the 10%, to be honest. I did say that. At least I can't read my own quotes and I don't see it.
Now you say 5 percent let me say 5% organic growth, including FX, and that means you might see 10%
Our gross profit increased by and that's not you don't mention the word organically.
That's correct. I think it's 5%. So
Yes. So in the 5% increase, there is an organic and the result of acquisitions. So it's a combination of the 2. And the year to date organic growth, profit growth is 4%, as mentioned on Page 2 of the press release. Perhaps that takes the confusion away.
Yes. And that means for me in the Q3, it grows between 5% 6% or maybe 5% to 7% given what we have seen in the first half year.
Yes. And that is there you do the calculation right.
Okay.
I think on your second question, Thierry, I think, of course, we if this crisis would be over, of course, we would be seeing, hopefully, the top line growth coming back. We have, as I said before, in the industrial sector, we have missed our top line addition. So that's an important element. Of course, we save costs also because of this pandemic that probably will not totally changed in a situation where people can travel again, for example, or have exhibitions again. We will have to see that.
But net net, so to say, we expect positive results because we have hope that we will significantly grow our top line there as well.
Yes. And you see also structural changes because of in your cost levels, in
fact, in U. S.
E and E expenses because of, let's say, the opportunities which were offered by the COVID-nineteen.
Yes. I think all of us and all kind of different companies, so I don't think that's ICD specific. But we see, of course, everywhere that as also all airlines see, that we don't travel anymore. So that is a very significant cost reduction. Partly that, of course, as everybody says, tells us something for the future.
On the other hand, of course, you can't expect that we now stop traveling for the rest of our lives in companies. So we'll come back to a certain extent. But certainly, this crisis has helped us also to look at that again and hopefully save and let's say, more prudent in the future also with this cost item.
Okay. Thank you.
And the next question is coming from Mr. Stephen Gowden, Deutsche Bank. Please go ahead.
Hi there. Thank you for taking my question. If I look at the difference between revenue and gross profits, it appears roughly that maybe the combination of pricing mix, maybe some FX and also the internal self help efforts that you've done kind of added around 5 percentage points this quarter. If we have to sort of break that down between those impacts and volume impacts, Is that roughly right? And that seems kind of stable with the last quarter.
Based on what you said in terms of the general margin improvement, particularly in North America, should we therefore expect that kind of gross profit per unit to be relatively sticky going forward? Or would you expect maybe some normalization towards the end of this year and into next? And obviously, we've talked a bit already on the call around Signet. But given the company has given Signet's acquired margins, you're obviously so much higher than IMCDs. Would you say there is scope within the business to and potentially, it's just within pharmaceuticals or within the geographical region where Sigmund is particularly prevalent.
But to essentially replicate those practices or to spawn other similar business units or products that have the potential to have significantly higher margin than group as you expand the core Signet business? That's it. Thank you.
Yes. It's Steve Hans here. I think the first question, is it a bit in line with what Claireen asked? I think you were looking for what was the organic growth level in the margin in Q3, isn't it? Was that exactly the question?
Well, what I'm trying to get
a feel for is just the extent to which the growth in gross profit per unit will be sticky going forward. And obviously, that's a combination of pricing mix, etcetera. Some of it's obviously cost cutting and operational improvements. But should we essentially assume that gross margins are going to continue at these levels going forward? Or should we because of obviously the extreme second cycle, assume maybe something of a normalization?
I think you more or less gave the answer It very much depends on a lot of factors like the mix, like pricing in the market, like availability of products, like currencies and so on and so forth. But I think it's fair to assume that over the years, we have showed to the market that we that gross margins have a tendency to stay at a level around about what is the 20% to 23%. But you always see fluctuations between the quarters and between the regions. And what Pete said before, if certain business lines come back to more normal, that could have a bit of an impact on overall margin percentages, either positive or negative, depending on the margins that we typically generate in these business lines. Yes.
I think adding to what Hans is saying, I fully subscribe to that. I think in addition to that, of course, as we have told before in various quarterly meetings is that we also put a lot of emphasis on increasing the margin in the North America. And I think that I hope that we are able to also increase the same these margins. But I think that you have to be careful to give guidance for whether or not our margins in the future will remain at this level. It's exactly what comes as if we add product lines that have that are significant but have a bit of a lower margin that has an effect on the mix.
I think in the end, we have to look at our productivity and our gross margin and the absolute amount of EBITDA. Absolute amount of EBITDA. On Signet, I think it's always good to have a benchmark. And so in that sense, we carefully look at possibilities also, learning moments for ourselves. It is a specific business in a specific region.
So I don't want to give the impression that we easily are able to transfer that to others as well. But we will look carefully at how we can also learn from the way they do this.
And the next question is coming from Mr. Henk Veerman, Kempen and Co.
Hi. Good morning, everyone. I have two questions remaining. Firstly, on the conversion margin in Americas in Q3 was about 45%. You just commented that it's very difficult to sort of forecast these margins in the future.
But maybe could you comment like that 45%, is that also the result of maybe, yes, for example, less traveling costs or currency and currency effects in there? And is it is that 45%, is that an indication of how the conversion margin in sort of what the medium term will also look like that you can sustainably ramp up that margin from, let's say, 40 percent in 2019 to closer to 45% in the next years? That's my first question.
Yes. Henk, Hans here. I think we start repeating a bit here that it's very difficult to predict the future. For sure, if you say it on travel costs, that has a positive impact on the conversion margin because your cost base is lower. We also see in Q3 in the Americas is a drop in top line compared to last year, but still margin expansion there.
Of course, as we said before, we work hard there to improve the gross margin percentage. And I think the impact of the higher margin percentage plays a bigger role here than the cost savings on travel. And what that will mean going forward, future will tell. Right.
Okay. The second question is on the working capital, quite a stronger result at the end of Q3. Now that you've also that you're very busy with integrating a Cygnet and the working capital as number of days to that 55 days at the end of Q3. I think during this the last conference call when you acquired announced the acquisition of Signet, you mentioned the working capital profile of Signet is a bit higher. Could you maybe give us any idea, any indication of the number of days at Signet, for example, at the end of Q3, just to give us an idea what the exact differences are between the
Yes. Henk, we don't want to go too much into details of working capital base per country. But I think it is a common understanding in the market that typically debt 30 days in India are much longer than what we see in Western Europe. However, if you look at the revenue size of Signater, they do about €150,000,000 of revenues. Overall, it's I don't expect it will move the needle in working capital base substantially if we integrate that.
But for sure, working capital base, especially debt to base, are higher than group average in a country like India.
Okay. Thank you.
And the
next question is coming from Mr. Rajesh Kumar, HSBC.
Just when you look at the performance year to date, are there any one off things from COVID related product which might which we need to consider and we are looking at our forecast next year in terms of they might be not recurring? The second question is, I'm not sure if you touched on this, but do you have any exposure to the vaccine supply chain in any of the businesses? And finally, you have very clearly deployed a lot more capital in the generics that you think you're leading in the market chart. 1 of your competitors had indicated that they wish to consolidate the market as well. How do you think about your competitive positioning when you think of market consolidation in specialty chemical space going forward?
Okay. Javier, here's Pete. Your first question on, let's say, incidents in our one offs in our results. I let's say, I don't want to I don't think that you should take that into account when looking at our results. What we said, we had, of course, pluses and minuses because of COVID generally, stronger pharma business than particularly in the 1st period of the year, maybe COVID related or stock building related.
We don't have a big HEI and I business or household. So we don't benefit a lot from all these, how do you call that, sanitizers, sanitizer businesses some of our competitors have. So generally, I would say, of course, we save costs, as we have said earlier in the call, which in a normal situation, some of that costs will come back. So yes, there are COVID effects. But on the other hand, of course, there are negative COVID effects and positive ones.
And let's see how that will even out when the situation turns to normal again. Your second question on I think, on competition, because it's a bit difficult for me to understand that how we look at, in particular, Blentag in terms of focusing more on specialties. Was that your question, Rajesh?
Yes. I didn't mean any competitor, but yes.
No. Well, okay. But at least
they announced a very big Exactly. Super here. Listen, Benteck is, of course, a very important competitor. I don't want to comment too much on competitors. Let's see how they give this form and shape.
We have always been very confident, and I'm going back now many years in, let's say, the fact that we have focused on specialties, but our total model is focused on specialties. And let's see if you split up your company in 2 segments, how you do that and how that kind of affects your total business. It's very difficult for me to predict. But with regards any competitor and also we take them all series and also Brandtach. And of course, they are in terms of size, they are a very, very important player.
Understood. Thank you very much.
And the next question is coming from Mr. Lauren Pfaffre, Exane BNP.
On Signet, I think when you disclosed the deal, you talked about you announced the deal, you disclosed €39,000,000 of LTM EBITDA as of June. I was wondering if you could provide us with an update of how Signet has been doing in Q3. And also, if there's any seasonality we need to be aware of when we model 2 months of contribution for Q4? And then the other question on Signet, I'll add. Well, I guess, in excipients, they do have exposure to vaccines.
So I was just wondering if they had or you had now any exposure to companies involved in COVID vaccines and if that could be a significant opportunity?
I think on your first question, I think that we should not say more about, let's say, the results of Signater than we did when we acquired the business. We become owners now last week since last week. So I don't want to comment on that. I guess that's on seasonality, I don't see that in particular, although generally speaking, pharma and not and we have to see how that works out with Signet. This is a bit more Q2 for 6 months than the 2nd 6, but I don't know exactly how that is in India in this particular case.
On vaccines, you're over asking me quite frankly. I don't know. It probably depends on all the vaccines. It depends on who makes them and where. So we will see if the products that we deal with play a role in that as well.
But I have a lot more to say about it now.
Okay. Thank you very much.
And the next question is coming from Mr. Daniel Hoffman, Credit Suisse. Please go ahead.
Good morning, guys. My question is focused around vaccine. So maybe I'll just move on to one final question from me. Given maybe we've moved out of the COVID restrictions going through the summer and coming into the start of Q3. I was wondering how you'd seen sort of new contract discussions, if there's been any increase in outsourcing penetration and how you've seen sort of win rates or new engagements through Q3 and looking out across Q4 cuts?
Yes. It's a good question. I alluded to that a little bit in my opening remarks. I think what we see also during COVID times is that we continue to engage very well with suppliers. I guess that's also one of the lessons that you can also do that through video.
And that's, let's say, I'm encouraged by the projects we are working on in terms of outsourcing, expanding with suppliers, in this way, also ensuring that we have future growth. So in that sense, I'm positive about the traction that we have in the market also with suppliers.
Perfect. Thank you.
And the next question is coming from Mr. Chetan Udesi, JPMorgan. Please go ahead.
Yes, hi, good morning.
Just one question from my side. Fields from IMC perspective, this year has been probably a bit more devious than usual in terms of acquisitions. Is that because underlying you see a change in terms of the seller behavior?
Is there more eagerness or mongoliness
to engage in discussions on transactions now in this environment? Or is it just like a bit of coincidence that maybe it is this year has been a bit more busy than usual in terms of acquisitions? And second, sort of associate question is, do you think we are, this point just looking at all the deal flow that you might be considering? Is there a reason to believe that we are at a stage where we see some sort of bigger consolidation in the industry given it's still pretty fragmented?
Yes. I'm not sure if we see because of this more deal activity because of this crisis, Many of these transactions started also pre COVID. Generally, I would say my experience is that people are less willing to sell sorry, I have to sneeze. But Gary, I would say that in situations where your profits are under pressure, that owners are less inclined to sell. So let's see how that develops.
I think we're always active and busy in having a pipeline. On the consolidation question, I find it very difficult to predict. I think we are, of course, fragmented. On the other hand, if you compare the big players now with 5 to 10 years ago, there's a huge difference in terms of bigger companies coming on the scene. Whether or not we will see further consolidations with big acquisitions, I can't predict that.
I don't know. But generally, I would say this trend continues.
Understood. Thank you.
And the last question, there's a follow-up question from Mr. Mutlu Grandevan from ABN AMRO. Please go ahead.
Yes. Thank you for taking another question. So it was actually on a remark that you've made on the repricing and the gross margin of North America or the Americas. So just wondering, can you talk about the impact when you reprice a contract? I mean, do you generally lose customers or a certain amount of volume, and that is more than offset by your higher margin that you make on that?
And then maybe related to this, so clearly, Americas is like in EMEA, for example. How long will it take you to get to a similar level? Or is that even possible given the product mix that you have there?
It is a complicated question because, first of all, of course, we don't have long term contracts with customers. So and we also should always bear in mind that we have to reconcile, let's say, optimal pricing in the market with growth of volume as well for our suppliers. And we can't we are also here, of course, to ensure that there's growth, also volume growth for our suppliers. So it's always a mix. I think what's more important is, I think, the diligence organization of our own processes each order to ensure that we price it at the best possible in the best possible way.
And of course, it depends a bit on the product mix as I often remind you of. So it's I know it's not maybe not too satisfactory to bring so many factors in, but it is a difficult play of outside circumstances, of competition, of our own ability and quality of our people, our systems, etcetera, to ensure the highest possible margin. So a lot in the mix. But that's, of course, where that's why we are sitting here and our people to ensure that we do that in the best possible way. And with I think, But yes, I think I should leave it with that, Simon.
And there is a last question coming in from Mr. Fernand de Boer, Degroof Petercam. Please go ahead, sir. Your line is open now.
Yes. Good morning. Thank you for taking my questions. I actually have 2. One is on the working capital now at 55 days, where you mentioned that the inventories have now been normalized.
So from that, I conclude that, that should be a normal that this should be the normal level. But if the market picks up again, or normalize back after COVID-nineteen, should we then initially expect a cash outflow for working capital or working capital to deteriorate in the short term? That's the first question. And on the other one, if you look at the top line growth, organic growth seems to be flat to slightly positive in the Q3. In the industrial side, has there been any restocking effect yet?
Or is that still
to come?
Daniel, perhaps, Hans, I should answer the working capital. I would love to show a big working capital investment because of substantial top line growth. Because if you look at the 3 most important components, stock, creditors and debtors, then what we typically see in our business is that most of our stock we can finance with our creditor positions, and the working capital investment is often driven by movement in debtor positions as a result of increasing sales values there. So I would love to report a higher working capital number related to a higher work top line growth there. Your second question, I think your conclusion was top line flattish in Q3.
I'm not Yes. The question is about restocking of the industrial sector. And I think the answer is that the Vidalgoi, again, it's a little bit anecdotal because it depends a bit on where which region you talk about. But we don't see a huge change, yes. Okay.
Thank you very much. Thank you.
There are no further questions. Please continue.
Okay. Well, then if there are no further questions, then I think we're done for the day, at least for this item. And I thank everybody again for the interest in the company, and I wish you a very good day.
Ladies and gentlemen, this concludes this IMCD event call. You may now disconnect your line. Thank you. The conference is no longer being recorded. One moment, please.