Good morning, and welcome to the 3rd Quarter Results Analyst Call of KEMDRI and MB. My name is Laura, and I will be your operator for today's call. Please note this call is being recorded. And for the duration of the call,
M.
I will now hand you over to your host, Joobrein Verden to join today's conference. Thank you.
Yes, thank you very much. Good morning, everybody, And welcome to Cambrian's Q3 2022 results teleconference. My name is Juve van Boerde, Cambrian's CEO and with me on the call is Jerun Hammond, our CFO. I will start the meeting with some remarks regarding our Q3 results, after which we will have time for Q and A. We will post a recording of this call and of the Q and A on Cambrian's website as soon as is practicable.
I'd like to draw your attention to the fact that certain statements contained in my remarks and in the answers to your questions constitute forward looking statements. These forward looking statements rely on several assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside the company's control that could cause actual results to differ materially Before reviewing our Q3 2022 results, I would like to reflect A little on the current economic and market environment that we're operating in. In Q3 2022, the overall business Climate has not materially changed from the first half of twenty twenty two. The Russian invasion of the Ukraine has continued To cause widespread uncertainty and volatility affecting all parts of the global economy and especially Europe. Inflation is certainly high affecting the price of raw materials and wages, and we're also facing uncertainty in the supply of energy and of its cost.
And Bay. COVID, including China's response to COVID, is still with us. As the fighting in the Ukraine continues, the economic future looks Uncertain. Is there a positive as well? Most certainly.
Demand for our products in the industrial groups, Both for industrial brakes and industrial actuators and controls remained strong in Q3 and looking at our order book is expected To stay strong as our actuators enabling the transition towards clean energy continue to drive growth. Let's talk about the quarter. We've had a strong Q3. Revenue grew in all our business groups, resulting in a revenue of €132,900,000 an increase of 17% compared to last year. This is a new quarterly revenue record for Cambrian.
Our industrial groups in particular performed well. Industrial brakes grew its revenue by 28%, while Industrial Actuators and Controls achieved a revenue increase of 26% Bay for 14%, excluding 3T's contribution. The Automotive Group grew by 8%. In summary, our growth potential is good. This quarter represents the 8th consecutive quarter of revenue growth in which what has been consistent difficult economic circumstances.
We defended our added value margin well are working diligently with our customers to pass on the increases in raw material prices. This resulted in a stable added value margin. We're also disciplined when it comes to our costs. The combination of sustained revenue growth, a stable added value margin and tightly managed cost considered the increase of profitability. Our normalized EBITDA grew by 20%, M.
B. EBITA by 37% and our net profit before amortization by 53%. I'm proud of our global team who delivered these results despite ongoing difficult market conditions. So what is driving this performance? Some of our stakeholders still view Cambrian as an automotive Tier 2 company with a bit of industrial side business.
The reality is different. An actuator company focused on products that help enable the global push towards electrification and clean energy. Whether it's brakes for wind power, robotics, Automated warehouses or induction heating technology, helping industrial processes move from oil and gas to electrical solutions. In all our business groups and in China, the broad push towards electrification determines our product development and M and A decisions and it has for several years now. It's resulted in a balanced portfolio exposed to the global and accelerating trends towards As a result, we have been able to deliver significant growth in revenue and profit over the past 2 years.
Let me talk in a bit more detail about Q3 and some of its highlights. Our industrial segments continued their strong performance on the back of increased demand for products supporting the transition towards cleaner energy. And
as a
result, activity in almost All Cambrian's industrial market segments remained at a high level. Industrial brakes revenue increased by 28% to €40,100,000 And when measured at constant rates of exchange, the increase was 24%. In IB, we benefit from commercial synergies between former Intorx SpringApply product portfolio combined with the MB. Permanent magnet brakes for Kendrion has always been strong. Industrial actuators and controls reported organic, so Excluding the revenue from 3T, revenue increase of 14% to €32,500,000 Growth was 11% at constant rates of exchange.
IAC was especially successful at sourcing scarce components to make full use of its strong order book. Our growth in China accelerated as the team caught up with the Shanghai lockdown related production backlog of the Q2. Construction of our new factory at the renowned industrial park in Suzhou is almost finished and we expect to start production in the Q1 of 2023. The increased production capacity will allow us to meet current project pipeline demands and capture the many opportunities we have identified. Automotive revenue increased by 8% to €60,300,000 and when measured at constant rates of exchange, Growth was 5%.
The automotive trading environment remains volatile with ongoing semiconductor shortages, Demand swings and supply price increases. With the announced split of the Automotive Group into Automotive E and Automotive Corp, we make a clear strategic operational and organizational distinction within the Automotive Group. In the new setup, we will further increase our focus on innovation and products such as AVA sound systems and active suspension, while at the same time improving the efficiency and cash generation from our current combustion engine products. We're on track to implement the new setup by the start of 2023. Let me review our profitability in a bit more detail.
We're pleased with our added value margin despite the ongoing inflation. As we successfully passed on price increases of raw materials to our customers, the added value margin came in at 47.3%, 0.7% below the margin of the same period in 2021. Please note Ambei. The price increases are passed on without margin, resulting in downward pressure on the added value percentage even if the increases are fully passed on. Our normalized EBITDA, the operating result Before depreciation and amortization increased by 20 percent to €40,900,000 As mentioned, top line growth, stable added value margins and cost discipline resulted in good operational leverage in the Industrial Business Groups that more than offset weaker profitability in automotive.
At €6,000,000 depreciation charges We're in line with the same period in 2021, leading to an EBITA increase of 37% to €8,900,000 with the EBITA over revenue ratio increasing to 6.7% compared to 5.7% year ago. We're on track to realize €4,000,000 in annual cost savings in the automotive organization from Q1 2023 as announced during our recent Capital Markets Day. Together with the €4,000,000 cost savings related to the closure Of the Austrian production facility that will be fully effective in Q4 2022, these savings will contribute to a significantly lower cost base in automotive. In the 3rd quarter, €1,600,000 Restructuring charges have been normalized from the operating results. We expect total one of restructuring costs For the core E split will come to €5,000,000 Normalized net profit for the 3rd quarter Before amortization of intangibles arising from acquisitions increased to €6,100,000 50 3% higher than in Q3 2021 when it was €4,000,000 Imported net profit came in at €4,000,000 Total net debt increased to €154,100,000 at the end of Q3 and May 2022 compared to €145,600,000 at the end of Q2 2022.
Quarterly free cash flow was affected by capital investments of €14,300,000 of which €6,600,000 was related to the construction of the new production facility in China. Quarterly free cash flow included EUR 1,600,000 of payments of restructuring charges. We maintain a strong focus on investments, working capital and the level of net debt and especially on reducing inventory. Despite increased activity levels, we were able to reduce inventory from €94,600,000 at the end of Q2 2022 to €92,000,000 at the end of Q3. Leverage ratio based on the definitions in our main credit facilities remained unchanged at 2.6, well below the financial covenant of 3.25.
Cambrian's solvency ratio remains strong, 43.3% at the end of Q3 2022. In Q4, we expect to be able to reduce our net debt despite investments continuing to exceed depreciation as we finalize M. Bay. Before we go to Q and A, let's talk about our outlook. For the remainder of the year and into 2023, we expect the economic environment to stay volatile.
Therefore, we remain focused on managing our cash position and cash flow while protecting our added value margin. Our longer term outlook remains favorable as our products help enable the global transition to cleaner forms of energy. We are confident that this accelerating trend will offer significant organic growth opportunities across all our business groups MBI and expect to achieve our strategic medium term targets by 2025. I now open the line for your questions.
A. Two questions, please.
First of all, on your restructuring charge, the €5,000,000 what did you do with the restructuring charges? And what yes, can you elaborate Beyen. What cost savings have you implemented? And also, can we expect the rest of the EUR 5,000,000 To kick in, in the second half or still in Q4? Or will it be more towards the start of 'twenty three?
And then secondly, On cost inflation, what do you think? Have we seen the most now of raw materials and higher energy costs and maybe also labor? Or do you still envisage more Bay. Cost inflation and what are you going to do about that?
Yes, Frank, thank you. I'll hand the first question over to Jeroen, and I'll talk a bit about the inflation. Yes. So the restructuring cost
the restructuring charges in Q3, the €1,600,000 Primarily relates to severance costs for a number of CEE that have left We do expect the remainder of the restructuring charges up to €5,000,000 MB. In total, to be effective in Q4. And also that will be primarily driven by headcount.
And to come back on that, those are mainly
indirect Yes. People in the core automotive related, is that
Primarily, yes. Mbay. That's a fair statement. And then these savings will kick in, in Q1 2023. Bay.
Yes. Then on the inflation, Frank, of course, the honest answer is that we don't know. But what we see is that it Seems to be stabilizing a little bit. At least the growth in the inflation seems to be tapering off somewhat. Of course, on the raw material side, we've already seen a bit of volatility where sometimes even steel and copper prices have come down.
So although it's still with us, it could well be that moving forward, this is now I mean, it's still there, but It's at least not increasing anymore. But all the same, whether it's up or whether it's down, what we, of course, do diligently is working with our customers to reflect that inflation in our raw material prices in the sales price. Now as I made I reminded everybody in my remarks, we basically pass on the cost without margin, as you can well imagine. So that means that percentage wise, you would still see a bit of contraction in the EBIT value margin. But in absolute terms, We are aspiring to pass on every dollar of inflationary pressure on our raw materials into the end price.
And then looking at pricing, it was has been 6%. I think
it was also 6% in Q2. Is that a fair assumption also for the coming months? Or will that Also taper off because of lower inflation. Is it
Well, I mean, it's related. So if we're staying roughly at this level, Then I would expect that this because it's still with us, as you know. I mean, we just I think the quarterly inflation numbers also for the Netherlands, it's just or the monthly has just been released. So then you can if it stays at that level, you can Expect that in the revenue as well. Clearly, if it comes down, then that effect would also be a bit lower.
Okay. Thank you very
much. Thank you. We'll move on to our next question from Axel Tass of Berenberg.
Mbay.
I have 2. The first one is, If I understood correctly, you do not see any signs of an easing in the some shortages that we have seen over the last couple of months, right?
Yes, that's correct. Now a bit more granularity there. I would say that when you look At the semiconductors at sort of the more advanced nodes, so the semiconductors that during the COVID times Pretty much taken up by gaming devices, laptops, televisions and all these types of Consumer Electronic Entertainment Devices, that is the availability there is definitely better. But there are, of course, many more and BAE. Semiconductors and just those that are present in cars.
And these are the more, I would say, normally, we would say commoditized, but some of these are still pretty scarce. As you can well imagine that if you miss 1 or 2 of these in your car, then effectively you can't produce the entire car. So example, things like in the fuel pump controller, there's quite a bit of semiconductors. If you miss dose, it's going to be hard to deliver the car. So in some areas, you see easing, but the overall picture is hasn't really changed yet.
Expectation my expectation and everybody's expectation is that will change over the next couple of quarters, but we said that before. Bay. So hopefully, and your question is today. Today, that shortage is still very much influencing the supply chain of the automotive industry. Ambei.
Okay. Okay. That was clear. And then the second question I
have and maybe a third one afterwards, but the second one was more related to M and A. Are you still looking on potential targets? And if so, can you please maybe provide a bit more information on these?
Yes. So I mean, we're always looking M and A is always part of our strategic arsenal, if you like. We're always MB. Looking around for ways to strengthen the company. And we have basically, the first Key question we always ask is, I think we have a fairly clear strategy.
The first question always is, does this, If we were to acquire this specific company, would it help us reaching our medium and long term strategic goals? Now looking back, I think both in terms of InterContin 3T, you can see that, that question was answered with a resounding yes. Then on top of that, you get, of course, all the other questions around valuation, quality of management, culture, etcetera, etcetera. That's the first question. That's always we're always basically sniffing around, if you like.
That hasn't changed, and I don't expect that to change. Now in terms of reviewing what potentially could happen, that's impossible. I would like to say M and A is by definition opportunistic. Sometimes you see an opportunity and then you have to act fast, which we typically do. But at this point in time, there is nothing to report
Okay. Okay. Great. And last question for me is about the stats. We have seen basically That the amount of increase you have has been declining compared to Q2.
Should we expect some more cost kicking on that front going forward? And does it only impact the Automotive division? Actually, the follow-up question on that is, can you take basically Bay employees from the Automotive division and basically choose them for the IHG division?
Yes. So indeed, you have seen a bit of reduction. One of the reasons, underlying reasons there is the closure As announced of the IBISWALT location and another is, yes, let's say, more Regular fluctuations in direct labor. So direct labor, yes, fluctuates with production levels. So that is actually that is more like a normal fluctuation through the season.
The real the structural item here is the closure of Iosvalves. And indeed, in the coming quarters, we do expect it to decrease further As we are implementing the cost measures that we have announced related to the split of core and E, There are limited possibilities to use people from automotive In the other organizations, obviously, where possible, when, for example, IB needs an engineer that is not needed in MBE. Obviously, we make use of that possibility. So, it happens occasionally, but that is not the majority Bey? Of the hires in industrial order releases in automotive.
And then and maybe to drill down a bit more on that and where it does happen is actually in the direct on the direct side. So in on the production facility, for instance, in Villingen, we have 2 factories in one building. 1 is automotive. The other one is from industrial brakes. So there, we use the flexibility that we have between the 2 production sites on the direct side as much Ambei.
Okay. And in terms of costs,
salary increases have not basically changed from what you said That's wrong, right?
No. And there, what we do specifically in Germany but in most other jurisdictions as well, Bay. We effectively follow what the agreement is between the unions and the employer organizations. So until that is clear, we can't be precise on what we're going to propose, but That is what we typically do, and I expect that will happen as well in 2023. Okay.
Thank you very much.
We'll now take our next question from Chris Orestel of ING Bank. Your line is open. Please go ahead.
M. Yes. Thanks, operator. Good morning, gentlemen. Yes, I've got a question about the new Chinese facility.
You expect it to start producing in the Q1 of next year. Could you give us any guidance on, let's say, the Expected revenue from that, and we only get you have the customers lined up, so you can be as conservative as you want We get some feel for what kind of revenues we can expect, and I guess that will then ramp up Ambei. And for 2023, so some guidance would be helpful. That's the first question.
Okay. So initially, what will happen is we have 2 factories, 1 is to join and one in Shanghai. So the first step will be to move those production facilities and, of course, the associated revenue into that new larger building. It's not that we are basically now waiting to implement additional projects until the factory is ready. So we're clearly we're currently accommodating both existing and future customers in those two buildings.
So as a first step, and we expect that, as you mentioned, to happen in Q1, is we are going to move first the Suzhou factory and then the Shanghai factory into the new facility. And then we will have ample capacity for further growth, some of which is in the pipeline that opened in the course of '23 and 'twenty four are going to start up in line with the plans that we have, so the start of production planning, etcetera, etcetera. This is true for automotive, for brakes and for IAC. And of course, we will also continue to work very hard commercially to Adding new projects to that pipeline. So don't expect a step change in Chinese revenue in Q1.
Initially, it's just a transition Of the current revenue into that building, but it will basically accommodate the growth already foreseen and of course, underlying also Our own medium- and long term plans for revenue growth. So that factory will accommodate that growth.
I appreciate the answer, but I'm more looking for the financial impact because it sounds to me that there will be an incremental negative impact on the cost of these changes. It is probably challenging to move these production facilities.
No, no, no. I would expect that to take. So and this is not the first time we've done this, for instance, in IBIS WALK as well. So clearly, it's quite an operation, But we know how to do so. There is definitely I mean, definitely, unless there's a big mishap or some sort of problem with transportation, We do not expect this to negatively affect our top line in any way.
There is, of course, we will need to create some buffer stocks. So you may see a temporary increase in our working capital while we move the line and set it up. Clearly, we have to keep delivering our customers, which we will. But then hopefully, after a few weeks, that's stabilizing. And then it's business as usual.
Okay. And yes, I'm still going to ask you, I mean, all things equal, what kind of Absolute revenue on the low end of your expectations can we expect next year from the new set up in China? Because I mean the stock market is pricing in a recession, so nobody knows what the production demand is, but it seems to me tangible at least at some conference I think Bay. That's right. The new facility because you have machines, you have new clients.
So what is, let's say, the low end of the additional revenue we can expect next year?
Beyen. If you're asking me to guide specifically for China revenue, we talk about in China that we are roughly at around 10% of group revenue. And that has been growing, as you know, over the past years since 2016 from around 3%, right? So there is a good growth That we have have fluctuated over the past years. We've moved from one facility in Suzhou to another.
That was twice as big. That's now We're now moving into an even larger facility that, of course, over the next couple of years, we will also try to fill. And that facility supports €100,000,000 and €110,000,000 of Chinese revenue. So effectively, this move is an indication of our confidence in sustained growth in China. So without having to be being drawn into just giving you An actual number, we will, of course, keep you and your colleagues informed in terms of the percentage of revenue that we generate from China.
But this facility without the facility, we would not be able to accommodate the growth that we have that we see in our pipeline of product projects and products that we've won. Yes, I'm hoping I'm helping you a bit, but
Yes, not okay. Yes, yes. It does on the long term, it's not on the MB. Okay. Yes, on the CapEx, I think you also mentioned it will be also high in the And what is roughly, let's say, the budget for next year?
So yes, for this year, we do expect Around €40,000,000 indeed driven by the finalization of the building in China. The budget for next year has not been finalized yet, but guided before for next year, I expected the investments To drop down to a more normal level, slightly above the depreciation.
Okay. Yes. Thank you. Yes. And there is no, let's say, refinancing required for next year.
You just No, did it.
Yes. I think we timed it well, looking backwards. We did it in the beginning of the year. So for the coming years, we should be okay.
Yes. And also on the, let's say, the expected interest?
You mean the increasing interest? So of the roughly €155,000,000 debt that we currently have, Around €90,000,000 of that €90,000,000 is based on fixed rated, either swaps or fixed rated loans. The remainder is floating. So yes, there we will see we do and will see somewhat increasing interest charge.
Okay. Yes, that's helpful. And do you expect or already see, let's say, any one off items Investing the OpEx, the cost of goods sold, the cash flow in the 4th quarter, anything a bit out of the ordinary apart, of course, from the one off cost you were already Bay.
No, there are 2 things that so first of all, of course, the core LE Where we guided to €5,000,000 of €1,600,000 has been done. In addition, we are still in the process Selling the building in Austria that might materialize this year or in beginning of next year, that will be a couple of million cash in And hopefully a small profit. Those are, yes, the I think the only Atypical things that we currently are aware of.
Okay, perfect. Yes, thanks a lot.
Thank you. We'll now take our last question, current call, coming from Johan van den Hoven of Edison Group. Your line is open. Please go ahead.
A. Yes, good morning, gentlemen. Johan van Holcken, Handelsbanken. First question, I will do them 1 by 1. You expect for Q4 lower net debt.
Can you please explain a bit more and give a bit of indication where we might MB. And also, most important for that, the level of inventory by the end of the year.
Bay. Yes. So yes, we do expect, as I also announced at the half year numbers, that free cash flow in the second half year Ambei. Would be positive or we target positive free cash flow in the second half year. Q3 was negative €9,000,000 Bay.
Driven by the high CapEx that was already committed. So in Q4, the reduction will be driven by lower working capital, partially by structural actions that we set out, especially related to inventory. We saw the first dividends of that in Q3 with dividends with inventory coming down despite a much higher activity level, But also in Q4, as traditionally, revenue in December is particularly low, That also leads automatically to low accounts receivables, lower inventory levels. So that will drive in Q4 The lower net debt level. And yes, for the remainder, I repeat what I said at the half year.
So for the second half year, we will have we do expect positive free cash flow. So that means for Q4, at least €9,000,000 Ambei.
Okay. Thank you, Rune. That's clear. Another question about industrial, which is still performing very well. May.
Are there any end markets which especially stand out in this performance?
Yes. I would say the end markets That standout are the ones that are related to electrification. Now as you know, IB, Which is around €40,000,000 is about 30% of group revenue is basically 100% exposed to electrification Because almost all these brakes are integrated together with an electromotor, so that clearly stands out. And you've seen the results not just in this quarter, but We've experienced very good growth there over the past couple of years. Then in IAC, it's a little bit more mixed because As you know, there are around 30 different segments that we are active in.
But there too, we have Some segments like we are also creating an IAC some products for automated guided vehicles. We have a new development around induction heating, which effectively means that all sorts of heating processes Beyen. Traditionally using oil and gas are being replaced by inductors. That's also rectified. We're making certain actuators for switchgear For high and lower voltage transmission lines, so as new infrastructure in related to electrification It's being put in around the world.
That is a very good business, very good growth business. And finally, we also create certain safety devices that are used for cooling nuclear power stations. And there too, we see on the back of this energy transition, we see significant opportunities Both now and also going forward. So all in all, 100% of IB is exposed to this. And we our own estimate, Around 50% of IAC is directly or indirectly linked to electrification or other forms of clean energy.
Bey.
Okay. Thank you. It's clear. And on and within if you look at within Automotive, can you please I explained a bit more the difference in passenger cars and commercial vehicles. I think we are speaking about commercial vehicles, but they are Doing relatively well.
Do you
mind, Chris?
Yes. I mean, it's interesting, but you're right. We are we used to talk a lot more about that Because all the news flow and everything that's happening is dominated by passenger cars. But at the same time, we still have A significant amount of our automotive business in commercial vehicles. The characteristics there are, as they were they always were, it's much more stable.
There is not as much growth as traditionally was and today is available in passenger cars, specifically when you look at electrification. But innovation speed is low. It's mostly diesel related. And of course, also there, there is a big push Certainly, for the last mile, to create more electrified forms of transportation. But for the long haul trucks, It may occur at some point, but today, that's still a very long term dream.
So that's a stable business for us. That is clearly part of our core business that we expect to be servicing for many years to come.
Okay. Thank you. And then my last question is, well, certainly for Joep,
if I'm correct, your second term as CEO Mbay. Until December 2023. And I'm just a bit curious what your plans are regarding a possible future. Beyen. Yes, thank you very much.
You're right. So a year from now is the end of my second term. Well, as you know and everybody knows, I'm not the one deciding if there is a 3rd term, but I am available for that. So it's up to the shareholders to decide if the availability is accepted or not, then I am definitely available.
Well, thank you, Mr. Leo.
Thank you for your answers. Thank you.
Thank you. We'll now take our last question from Martin Bergik of BIDR.
MBA. It's Martin Jacob from DADA.
A couple of questions from Marstrach.
At this moment, you're only able to pass on the higher cost to your customers. So without additional Profit, gross profit for you. When do you think you will be able to do so?
You mean plus non Raw material prices including margins? Exactly. Yes, that is it would be great to do that, but We don't expect that from our suppliers, and I'm not sure our customers would see a move like that. So in the end, I think in a high inflationary environment, and of course, as you will appreciate, we've had a very low inflationary environment for a long, long time, I think the passing on the cost is I mean, as we talk about defending the gross margin, that's what we do In initial terms and everything around related to effectively increasing your value added margin has to do with With more with your product road map and innovation.
Yes. So maybe to add a bit on that. So part of the price increases that is driven by raw materials, so raw steel and copper. So the assumption is also I mean, that fluctuates quite heavily. And you also see in new contracts, for example, that Even more will be built in that you have some sort of a reference price.
And if the price goes up, then also the sales price goes up, but down. Bey. Of course, the same way. So there, we do not expect any margin, but obviously for new Projects where you do expect increased wage cost, which will be there, yes, basically forever. I don't think that after 2024, the employees will say, yes, I will accept the 4% wage decrease there.
Obviously, for new projects, we will build in a higher price and also a margin on that.
At your Capital Markets Day, you have provided some insights in revenue and revenue development Ambei. Could you give some insight what happened
in the Q3 concerning these 2 units within automotive?
Well, the insight was a long term insight. As you know, one of the things that we always do when we announce year end Results is we give a bit more granularity on them, specifically on the order book and the pipeline. And we're going to do that again when we meet in February for Q4 and full year 2022 results. I mean, automotive is, as you say, it's pretty as you know, it's pretty volatile. So between now And the Capital Markets Day, not much has changed.
So basically, if you look at the percentages that we then mentioned of what is core and what is e, That's still valid.
Okay. And then lastly, in press release, you stated that industrial Ambei. Offset the weak performance of Alto.
Recur performance.
Recur performance of Alto. But again, I was Seeing how I should interpret that, is that do you imply that automotive has a lower result compared to last year?
Yes, definitely, yes.
Is it still in the plus?
So I'm going to refer you again to the full year results, Maarten. But in the automotive world, as you know, the volatility, Which, of course, also influences, for instance, your direct costs, plus the pressure on the value added margin where there is always a bit of a delay Between incurring the costs of the raw materials and then passing them on to your customers, Which will temporarily and that will reverse at some point with some pressure there as well. It's certainly Very tough in the automotive industry. I also refer you to other Tier 1 and Tier 2s that are more pure play companies where you can really see What's going on in that business? And we are no exception.
So it's under pressure. It's compared to last year, it's certainly lower as it is in the entire industry. We talked about the response to that in terms of taking cost out On core and for instance, by closing our Austria facility, the split in core and E gives us a lot more Focus on innovation where we need to innovate and at the same time focusing on cash and cash flow where we think that is The more important API. And therefore, going forward, I expect that in Automotive, We will again we will improve the overall performance if you put the 2 together MBE in 2023 compared to 2022. But it's been a tough environment, a difficult year in that part of
our business. Thank
you.
Thank you. There are no further questions to you. Sir, I'm handing it back over to you for any closing remarks. Thank you.
All right. And I'd like to thank you very much for all your questions. And if you have any follow on, you know where to find us. Thank you.
Thank you. Ladies and gentlemen, this concludes today's call. For your participation, stay safe. You may now disconnect.