Earnings Call: H1 2021

Sep 10, 2021

Good afternoon or good morning to everyone, and welcome to LN's First Half Year Financial Results 2021 Conference Call. Today's call will be recorded, and so will be an opportunity for Christian at the end of the conference call. With me on the call are Andre Candulli, LN's Managing Director and Enrico Romagnoli, LN's Chief Financial Officer and Investor Relations. Before we begin, please note that there is a remarks management makes on the conference call about future expectations, plans and prospects and forward looking statements. Certain statements in this call, Including those addressing the company beliefs, plans, objectives, estimates or expectation of possible future results events, our forward looking statements. Forward looking statements involve known or unknown risks, including general economic and business condition and condition in the industry we operate and may be affected No forward looking statements can be guaranteed, and actual future results, performance or achievements may vary materially from those expressed or implied by such forward looking statements. Year. The company undertakes no obligation about the contents nor to update the forward looking statements to reflect events or circumstances that may arise after the date hereof. But at this time, I want to turn the call to Andrea Candioli. Please go enter, Andrea. Thank you, Bianca. Thank you very much. Good afternoon, everybody, And thank you for attending this conference call. With Enrico Romagnoli, we will discuss and comments the financial results of the Elen Group in the 1st 6 months of 2021. Call. As we disclosed last Friday with our press release after the Board of Directors meeting, our financial results We're very strong. Constant growth and good profitability have been Elen's business card over the last years. Year. We have always shared with you our ambition to continue the run along our growth path for several years year. Based on the growth expectation of our markets and on our efforts and investments aimed at setting up an organization capable of seizing the market opportunities and to create new opportunities through the continuous innovation of our product range. When presenting the EUR 273,000,000 of euro in sales, The EBIT margin over 11% and net profit over DKK20 1,000,000 for the 6 months. We are therefore very pleased not only for the record results itself, but also For how these results represent the materialization of our plans. They are based of the areas and the functions that were deeply strengthened in the last years. Grounds for the 2021 performance Don't rest in one single product or one single customer or one single market, but are widespread in the capabilities year to continuously generate business opportunities. At the same time, our market penetration is Becoming wider and more solid, our brands in the medical business, DECA, Quanta, Asclepion, ASSA and Renaissance Are not anymore and not only seen as the brands of a smart, innovative organization challenging the market leaders, But our stable and reliable reference for our customers and benchmark for our competitors in several application segments. In the Industrial Business as well, Catlight and Penta I acknowledge today of an interesting market recognition in Europe and in China, respectively. In China, Our presence in the sheet metal capping business is now roughly 15 years long and the brand Penta is recognized as one of the leader with its hybrid euro Chinese technology offer. Only in the very last year, Skylight was able to gain in Italy and Europe the position and size that are making it An actual player on a market dominated by giants, where 5 years ago our presence was negligible. When looking at the details of the financial results, comparison with the 1st semester of 2020 are not very meaningful this time. The 1st months of last year were severely impacted by the pandemic. Our business on the industrial market in China was halted from the mid of January to late March in Guangzhou and to April in Wuhan. In Italy, we had to stop industrial business operation in March and worldwide medical aid assistance demand abruptly dropped at the end of March. It's more worthy To compare the current results with the first half of twenty nineteen, reporting the average growth from the last semester run by the group in a pre pandemic condition, let's say, in a normal environment. Average 2019, 2021 growth for the 1st 6 months was 20.9% on a consolidated basis year. And 20.4% and 29.1%, respectively, for the Medical and the Industrial sectors. These numbers are telling us that over the last 2 years, despite the revenue slump of the acute pandemic phase, Our growth was stable, strong and well above the expected growth in our reference markets. Success in the medical business was driven in 1st place by aesthetics, where our solutions for hair removal, body contouring, tattoo removal and rejuvenation led to solid performance. Performances were strong for our publicly reporting Tier 2. We don't feel that we gained market share in certain application segments, Especially in hair removal. The negative effect of COVID was deeper and longer lasting in our surgical application, which are registering A slower recovery, especially in the systems sales. Growth in the industrial business was twice as fast As in the medical, by the way, getting close to balancing the ways of our 2 sectors in terms of revenues. Year. This was mainly due to the traction of the sheet metal cutting business in China and in Italy as well. The market size is continuing to enlarge the effect of the improvements in the technology, Thus, in the productivity and the effectiveness of our systems in their traditional application fields And in more applications that are being opened and made affordable or simply doable by the improved performances of our systems. Year. Large structural investments have been performed and are being carried on in order to adapt our production capacity in China and in Italy To the expanded market size, we are talking about fairly large investment, which to date is totaling up €30,000,000 of spent in new plants, About $70,500,000 in China and $12,500,000 in Prato forecast like PayPay. Year. As our results are testifying, the transition phase to the most acute phase of the pandemic is reserving us to sustain demand levels in all outlook on almost all of our businesses. Is it a rebound? Is it driven by the optimism tied to the expensive policies that several countries outlined from last spring and are promising to sustain over the next year, it's very hard to tell. What we see is a very strong demand for our products, stronger than we had modeled. Year. We shared with you how we were expecting strong growth, and we were expecting the pandemic to be a parenthesis after which growth would have showed up again. In fact, the current sales and order bookings volume put us ahead of where we had plan to be today prior in our planning made prior to the beginning of the pandemic. But the pandemic is still there with the unpredictability of its effects, not only in terms of the spreading and mortality of the infection, Experience is the strain in the supply chain, suffering of the shortage of certain materials range from electronic components to metals like aluminum and copper. The real effects on us are uncertainty in the delivery terms Of certain supply, price increases of several components and increase in our stock In order to cover the longer supply lead times, a few words on our cash position, which is becoming stronger as an effect of the increased profitability, which is covering the financial needs given by growth investments. It's noteworthy to remember that after the suspension of 2020, Helene is back paying a dividend to its shareholder in May 2021. Finally, at the beginning of the summer, we performed our 2nd, 1 to 4 share split. The first one took place 5 years ago in 2016. Year. The goal is to keep our share price in the apparently more attractive range from €10,000,000 to €40,000,000 year. Moreover, during the last weeks, for the first time, our market cap exceeded €1,000,000,000 a remarkable milestone and we hope a further Investor Attraction Enabler, consistently shifting the company towards the mid cap area. Year. At this point, I'm done with my general introduction. Please, Rippo, go ahead with your part of the presentation. Thank you. Thank you, Andrea. As usual, I'm going to give you some details on our last financials. And in the first half of twenty twenty one, in continuity with the end of 2020, The growth progression of the group continued after the parenthesis due to the effect of COVID. As you can see in this slide, we We did a comparison not only with the 2020, but as already said by Andrea, with the 2021 2019. Year. And the in H1, the turnover increased of 68% and reached the EUR 274,000,000 of euro. The gross margin stood at €99,900,000 an increase of 66.9 percent compared to the first half of last year, thanks to the significant increase in turnover. The gross margin percentage slightly decreased, But it has actually improved both in the medical and industrial sectors, and the overall decrease is given by the increase in the weight of industrial service, which structurally have a lower margin compared to the medical. Year. On June, the gross margin of medical was 44% when the industrial was 27%. Year. Operating cost amounted to €20,800,000 an increase compared to June 2020, but with a sharp decrease In the impact on turnover, which went from 9.9% on June 2020 to 7.6% on June 2021. Quarter. In this cost aggregate, we benefit from the lower commercial expenses, and we had significant savings for international travel and trade fair and Congress activities, which particularly in the medical sector represent a significant cost. The only trade fairs we were able to attend in this period were held in China for metallizer cutting sector in Japan for beauty treatment sector equipment in Italy and Europe and in Dubai for specialized congress of various medical disciplines. The coming months' participation to important and numerous events is expected, but it will still take a long time before returning to the pre COVID intensity of these activities. Staff costs equal to €40,000,000 20 to 14.6% on June 2021 and lower than 2019 too. On June 2020, we had more than eighteen hundred staff. EBITDA was €39,100,000 almost 3x that 2020 and doubled in 2019. And the consolidated sales increased at 14.3% compared to the 8.9% of last year. Amortization and other approvals showed a market increase growing from year. EUR 5,200,000 on June 2020, EUR 8,300,000 on June 2021. Quarter. While the incidence on turnover remains substantially unchanged at 3%. The main increase was warranty provision to take into consideration the increase in sales volume and some extension of warranty period. In H1 2021, the total amount of fixed costs, operating costs, staff costs and depreciation saw an increase of almost 36%, year. The impact on sales reduced from 31% to 25%. Thanks To the increasing gross margin and to the reduction of impact on fixed cost, operating result marks a positive balance near to the 30 €1,000,000 with a strong increase compared to the €9,300,000 for the first half twenty twenty year. With an incidence on turnover increasing to 11.3% from 5.7% in the same period over last year and over 2019 when it was 8.9%. Pre tax was €33,000,000 with a positive effect of ForEx, Smerly due to the U. S. Dollar, which appreciated against the euro in the period. Net income was of €22,400,000 compared to the €6,400,000 of H1 last year. The net financial position had an increase of approximately EUR 50,000,000 in the period from EUR 64 point €2,000,000 on December 2020 to €78,800,000 of June 2021. In accordance with the European Security and Market Authority requirement and adopted by Consob The main long term debt is towards the former minority shareholders of Pentelaza and Wenjal for €40,000,000, approximately €5,000,000 to be paid in accordance with an earn out clause included in 2026 contract In case of an IPO of Penta, Resarugio, Puenjo within 5 years from the date of purchase. In accordance with this new requirement, we restate also the planned financial position at the end of February. In the 1st 6 months, CapEx were BRL 11,000,000 when for the whole year 2020 were EUR 13,000,000. The main investment was a new building of Catalai Bente and Prato for EUR 5,000,000 of euro purchase with Alizim. The cash generated by operating activity covered The news arising from the increased working capital and physiological in this phase of rapid growth, results. Those resulting from fixed investment and the payment of dividends to which Elen and the subsidiaries return after a 1 year suspension. The graph shows a positive cash flow for the items of other current payables and receivable year. Determined by the increase in advance received from customer, a practice that takes on a significant volume in China and by that of tax payables as a result of our income and higher cost for direct taxes allocated in the period. The capital increase collected by the company due to the exercise of stock option assigned to the employees amounting to EUR 4,000,000 of in the half year and also contributed to the improvement of the net financial position. Since the comparison with last year is not very significant, we also reported for the sales and the turnover comparison with 2019. And in 2021, the medical sector was accounted for approximately 54% of the group quarters, and the target for medical sector 2019, 2021 was 14%. Quarter. The jump in sales of aesthetics segment has a very significant value with the best growth rate since 2019 in medical sector. It is based on a solid growth, in particular, in hair removal and body contour application, thanks to an offer of innovative system that are able The lockdown restrictions have more have had more deleterious effect on the surgical segment than on the other one year. We hope to be able to recover in the coming quarters. Excellent is the recovery in physiotherapy, where ASSA is back on the path year. The turnover of after sales service was also good. It includes the technical assistance service and the sales for spare parts and consumables. The recovery could have been more important if external production difficulties have not limited us in the 1st month of the year in sales of optical fibers for urology. The critical issues has been resolved, And already in the Q2, the volume of product and turnover was largely satisfactory. Quarter. Industrial. The industrial sector has a CAGR of 29%, higher than the medical sector, year. With an exceptional performance recorded by the cutting sector, which is working at a very high rates, plus 35%. These are the production and sales volume for which production capacity has been prepared with important investment year. Now used in an increasing manner with a beneficial effect also on the income statement, thanks to the operating leverage. Year. The trend was also very positive for the other main segments, such as marking and laser sources in rapid recovery from the last year. Excuse me. For what's concerned, the breakdown by area. The growth is significant Andrea, please go ahead for the guidance. Year. As we said in the press release, we are updating and improving our 2021 guidance. Year. The projected 2021 sales, of course, counting, there won't be any material disturb By the development of the pandemic and by the supply chain strength and shortages I mentioned before, I mean, the projected sales should exceed €550,000,000 driven by a further increase in revenues. EBIT in the second half should beat the results of the first half of the year. We are done at this point with our presentation. And so the Yes, okay. And please, before asking your question, please introduce yourself. And if someone needs to ask a question, please book your question on the chat of Via Casini. I will be pleased to follow the order. We have one question, Andrea, from Francois Robillard. Please go ahead, Francois. Hi, everyone. Thank you for taking my question. The first one is on the breakdown of the 2nd half growth that you see between your Medical and Surgical segment, can you give us a bit of color on what kind of growth rates you are expecting. I see that some of your U. S.-listed medical laser peers Expect a top line growth of approximately 20% in the second half compared to the second half of twenty twenty, which was rather strong. Do you expect the same for your division? And for your industrial segment, the EUR 67 €1,000,000 of sales seen in the Q2, is that your new baseline Speed, I mean, can we expect a similar amount in the coming quarters as well? Can you just please comment on that? And then on your new guidance for the full year 2021 EBIT, can you give us Some more details on these expectations. I saw that you booked a provision of €2,800,000 in the first half. Is that reflected? How do you reflect this in your new guidance? And is it reasonable to expect an EBIT margin of 12%? And last question, going into 2022, do you have any visibility for growth for next year? And can you to share with us your expectations. Thank you very much. Thank you, Francois. I mean, technically, I cannot answer to any of your questions because We have our guidance and the guidance is what we gave. And so more than EUR 550,000,000 and improved EBIT in the second half. Trying to give you some color if you wanted, but What I can tell you is that we are experiencing sustained demand in medical and industrial. And therefore, we expect strong growth in both areas. In this moment, I can tell you that we are expecting a Relative, not absolute. Slow down in the Chinese market for industrial label application. But we are nevertheless expecting an overall growth, which should enable to reach the consolidated target we made. Yes, you are right. The first half In the first half EBIT, we had some extraordinary accruals, And for this reason, we could expect an improvement of the EBIT not only as an effect of the increased revenues, but also as an effect of the missing accrual that we should So we shouldn't have, again, the accruals as we had in the industry itself. What we expect to be a little bit more expansion and therefore, to be a little bit more To cause a cost to EBIT is that we are slowly Going back to Congress and firm activity. This week, at the end of this week, The Congress, the anti aging Congress will take place in Monte Carlo, conference call in Morocco. And for the first time, we will be able to gather our distributor in a distributor event, something which had not taken place for the last 2 years. So we are attending in person this event, which will It is in the category of events, which we hold abroad and which are quite extensive, Which have been missing from our activities and from our P and L in the last 18 months. So slowly, they are slowing up again. Nevertheless, we can confirm that we expect EBIT to Higher in 2,000 in the second half than in the first half. And since we were above 11%. Yes, we hope to be able to get closer to 12%, but We don't give any guidance, any detailed guidance on that number. And on 2022, any first expectations you may share with us? On 2022, I mean, in my presentation, I somehow mentioned how, at this point, we find Sales well ahead in the growth path that we have. If I look at what we have now in orders, I believe that I can tell you that we have a very solid position, a very solid position and that Some of our backlog will probably slow into 2022 because we asked Customers to plan deliveries in order to be able to set up the appropriate production capacity and to be able to meet Very clear. So currently, what we see is a strong second half of 2021 with a good momentum into 2022. But I'm not telling you anything new. Our market is a market in which orders are not placed With the financial collateral, we have seen back in 2020 how quickly Our huge backlog was basically canceled by our customers. Therefore, It is even though we are extremely confident, it's not on an order books That we piled up today that we can count for 2022. What we can count for, for 2022 year. It's the strength of the market, the good conditions of the market and the good positioning that we still have and that we have today. For this reason, all I can tell you about 2022 is that we are Very optimistic about what can be done in 2022 based on the current information, but We are not committing and we are not promising anything today. As usual, we try to be very prudent considering the nature of our markets and of our demands. Presentation. Well, Andrea, we have a question from Andrea Bonfa of Banca Cross. Okay. Thank you very much, and good morning to everybody. My I got essentially, for the time being, two questions. One is related to the industrial performance in the second quarter. It seems that Italy and Europe performed extremely well And almost accelerating from Q1. So is that again a trend that you are I mean, what's your view on this specific geographical performance, if you can comment on that? Secondly, if you want this provocative question, that you mentioned that you are returning to spending in conferences and likely marketing. But I mean, you are growing at 70% year on year of If you look at H1 2019, the question is, do you need this kind of expenses because I mean you are performing so well without them. Maybe they are not so necessary. I mean, again, I understand it's a provocative question. And of course, you need to have some kind of marketing activities, but expenses. Thank you very much. Thank you for your questions, Andrea. Starting from Italy and the industrial, we're doing very well. I believe that our facility in Italy has a very, very good strategy and has a very, very good positioning. And the extraordinary results of Q2 2021 just demonstrate how strongly we were able To attack the markets, how we are gaining shares visavis our stronger and larger competitors. And the trend is currently Still extremely positive. As I mentioned also in the first answer I gave, We are expecting a better performance of the Italian activities than the Chinese activities. Of course, relatively speaking, in this second half of twenty twenty one. We have been extremely aggressive. We have products which are highly performing. We offer them at a price, Which, of course, is not extremely lucrative for us, but it has a good industrial profit, which is allowing us to make good profits on one side, but also to rapidly increase our share, to rapidly increase our position in the market and to have more visibility on the market. And this is a crew in a virtual process, which is making all the Cap Life Penta Yes. Your question is a good question and it's a very good question about marketing expense, and we are Always thinking about this because, of course, year. In this month, we are experiencing this very positive situation in which we have a large quantity of orders, But we are not spending the amounts of money we were spending before in order to generate those orders. So I mean, logic would say, well, you have all these orders, why are you spending money? Why do you continue spending money? I believe that there was an overshoot in expenditure, which ended with the pandemic. So in 2018. We were spending I mean, the marginal benefit of the money spent in marketing was getting quite Now there has been an overshoot due to the pandemic in which we couldn't do and international marketing activity. I believe that since we are in a competitive market, Since marketing and marketing activity in presence is part of the marketing mix, I believe all the companies will go back to some financials. Marketing in presence. I want the company to start attending the main congresses. Probably, there will be less attendance to the secondary bonuses. There will be less travel. By the way, in this case, unfortunately, we are not spending any money because conference. This congresses is one of the various activities for which a ticket was given When the first congresses were canceled, so if we don't attend If we didn't attend this time, we would lose the down payment we made at this point 2 years ago. So we are not Creating an additional expense by participating to this Congress because if we wouldn't participate, we wouldn't have lost Everything, down payments to hotels, down payments to the fair organization. But from what I believe expenditure. And I believe that finally, we will remain lower in expense than we were at the end of 2019. Thank you very much, Andrea. Andrea, we have one more question from Andrea Arandoni from Intermountain. Go ahead, Andrea. Thank you, Bianca, and good afternoon to all of you. I have a Couple of questions, if I may. The first one is about your aesthetic business. You already commented on top performing applications. I wonder if you can provide additional comments on geographical trends And more in general, what is your perception about business performances of your customers in this segment? The second question is about your production capacity and more in general about your future CapEx plans, if you can provide us an update. Thank you. You meant customers or competitors? Financial. I meant customers in order to understand if the business is going very well For them and they acquire new applications, new machinery, if the customers So for instance, we talked about the people going back to gyms, and they ask for new equipment for this restart. And I wonder if this similar something similar in aesthetic centers or What you see in terms of business trends for your customers? Yes, yes. I believe that you made a good point. Our customers in this moment are working at full rhythm. They are facing a very strong demand and this is what I've been willing to spend money in aesthetic treatments. This has been a psychological effect after the lockdowns. This has been also a disposable income effect year. Due to the fact that not many leisure expenditures have been allowed, bottom line, Demand has increased and we were in the position to be able to fulfill A high and growing level of demand. The areas geographic areas In which we have been particularly successful are at 1st place in the United States. In the United States, we are encountering great Success in Aesthetic with 2 distribution channels. 1 is the distributor for Aesthetic application for DECA, the brand DECA and for the brand QUANTO, which is Catissa and the other one is our long term partner Cynosure, which is selling our hair removal laser in the U. S. And also worldwide. Also we have been extremely happy for the success of our professional Aesthetics market in Italy and in Japan. It's not medical aesthetic. It is a spa and salon aesthetic and it has been extremely successful both in Italy, In Japan and also in Germany. For what concern production capacity, You're right. We have been investing in production capacity from years, but the volume growth Has been constant in years. Therefore, we have to continue to invest in the further increase of our production For what concerns industrial laser applications, We are building new facilities in 2021 in the city of Limi and in the city of Benjou, Which will bring to 5 the available facilities. During the month of the year of 2022, we might enlarge also our facility in Wuhan. It's not currently, we do not own a facility in Wuhan. We are on our rent. But also based on the opportunity to receive a significant and support by the local authorities, we might be considering the further expansion of the Buhan's production capacity too. For what concerns medical business production capacity, We just ended a round of enlargements of the companies in Germany, in Punta System, in And we have enough room to expand capacity without Large Infrastructure Investment. Nevertheless, should the trend continue year. To be strong as we have experienced in the last months, we will need to redesign Certain products online and not only by expanding our capacity, but also by allowing our partners to expand their capacity with us. Please keep in mind that we do not bear The full production cycle for each of our products, but for several products, we have 3rd parties which perform a part of the production cycle. And so we will have to reinforce the network of third parties, which are performing some of the manufacturing job for us. I don't see this as a significant problem. We have done this in the past And the growth of Elen has also been the growth of our partners over the last years. Quarter. Thank you. Very, very useful. Andrea, we haven't received any other question. Then I want to ask to investors if there are more questions. Some more questions? Yes, Bianca. If I may, I will I got a follow-up question, Okay. Regarding the gross margin level, I mean, H1 'twenty one, C and I's recovery from Actually the second half of twenty twenty where the medical had some problems, but you are still below the level of H1 2019. Is that a reflection of the current inflationistic environment? Or what are the reason why, Let's say your gross margin cannot return to H1 or 2019 levels. Thank you. It's an issue of mix, I mean, also within each of the sector. Let's say, within the industrial sector. The weight of China and the weight of sheet metal has become larger and larger. And therefore, we know that in order to grow in this market, we have to run at lower margins. And so In this segment, we are growing, but the margin are we remain stable in general, but as The higher weight of the lower margin sales. This is somehow something we have to stand because it is very difficult to increase market margins in the very competitive markets that we are working on. Moreover, it was a strategic decision to have low margins in order to gain market year and to become an entity with a decent revenue. Don't forget that in the sheet metal casting, The large competitors are competitors of the size of EUR 1,000,000 by STRONIC, EUR 2,000,000 EUR 2,000,000 in change France, EUR 2,000,000 only in our excuse me, EUR 1,000,000 only in our segment, hence later. So we need year to increase dementia in order to be able to continue to be competitive against those giants. What concerns medical, it's an issue of mix. And of course, We also have to consider that the large increase in revenue is due also It increased in the hair removal market, which is the most standardized of the markets, high volumes, but we need to sacrifice some of our margins. If you go back in 2019, There was more room for newly issued newly released products, which were bearing higher margins. Today, the prevalence of her removal and of certain customers in which we make volumes Not very high margins like the Sander should customer, as was mentioned before, allows us To have a larger business allowed us to have higher gross margin in terms of Europe, But does not allow us to expand the margin on sales in terms of percentage. I don't see under this point of view great changes going forward this year because structure. Structurally, we will have more or less the same kind of revenues, the same kind of revenue. What It's going to improve. It is improving at the current date. The U. S. Dollar exchange rate is Quite large volumes of sales we have to remain steady. And then last but not least, we are not yet experience. We are experiencing a real effect from the cost increases that we had. Year. And therefore, today, we are maintaining more or less the same prices and the same margins because even though we see cost increase in several components. Those are not material in the total effect of our, let's say, yields of materials. There is a question mark here on how the Raw material cost increase on the midterm will impact. The good news here is that They will impact on our cost as much as they will impact on the cost of our competitors. Therefore, if we will be forced Thank you very much. Just two small follow ups. But if let's suppose that Italy In Europe, in industrial, we outperform China and then urology in medical will resume its growth. Will normally gross margin improve? Yes. Okay. Thank you very much. Yes. You made 2 assumptions. Based on these two assumptions, Andrea, we have one more question from Francois Bouillard from Intermountain. Go ahead, Francois. Yes. Thank you for having me again. Just a quick one on Slide 7 on the working capital components. I mean, The trade working capital has been has had a negative impact on your cash flow in this first half, but you have Some positive effects from other receivables and payables. Can we expect these positive effects seen in the first half to reverse in the second half? And same question for the trade working capital components. Thank you. The first the answer to the first question is this effect should reverse. No, I don't believe so. I don't believe so. Even though, I mean, this the change in other receivables and payables Our short term table is mainly made by 2 components. 1 is down payments from customers And 2 is short term liabilities for income taxes. So since I am telling you that Income will increase or we hope that income will increase in the second half. The short term liability for taxes shouldn't be decreasing. What concerns down payment for customers? This depends on the balance on the total backlog. Physically, a higher backlog means a higher payable versus customers for down payments. And so if the trends continue to increase and if we continue to maintain customers for down payment. We will have those down payments converted into sales. So we will have more revenues. But also it could mean a slowdown in order bookings And this could happen, but at the same time, we should also see a decrease In networking capital or at least in the inventory components of networking capital because typically Thank you very much. Andrea, we have one more question from Katerina Raps from Berenberg. Go ahead, Katarina. Perfect. Thank you very much, Bianca. Hi, Andrea. Hi, Enrico. I hope you're doing fine. It would be helpful for me to have a better understanding on the current market environment that you see in China. First of all, it would be great to have a bit more context to what has been the growth contribution in H1 from China and how does also the current market environment develop? So it's helpful that you already elaborated a bit on Yes, potential capacity expansion going into next year and also degree of competition or market share gains versus peers, but it would be very call. If you need to have a bit more detail on China. Yes. The situation is that they were a very good contributor to Our results in the first half, a repo, you can show the geographic increase of sales. By Ara, you see the column With EUR 81,300,000 in the rest of the world, this is mainly China and it's mainly our Chinese business. And you see they had a strong growth. Of course, not as fast as we had initially, plus 44%. But considering the size of the company, an average growth of 24% over 2 years is an outstanding and Outstanding Results. What we have experienced in the very last months Of this 2021, during the summer, Is that the rhythm of order bookings has a little bit slowed down over the 1st months of the summer, which is something which has always taken place with the exception of last year. Year. Typically, with the summer, there is a slowdown in order bookings. This had not taken place in 2020. But there were obvious reasons for this not happening in 2020 because in 2020, we were getting out financials. So we had a progressive increase of order booking from the spring to the summer and to the fall. So the outlook that we have and that we see from our competitors Today, yes, I'm talking September 13, is that we are getting into a full season, which is scheduled to be A good one. After this small slowdown, we expect to progressively increase sales towards the end of the year, and we count on a good 2020 22. In general, We are running at high speed, at very high speed. The whole economy in these months of summer, the whole demand A few months to see if this slowdown effect That from what we can see at the beginning of September is already over. We'll continue at the time or if as we count on The run of the Chinese economy for our segment will continue very strong over the next months. Great. Thank you very much. Some other questions? Team to investigate. Please do not hesitate to contact Enrico Romagnoli. He will be happy to answer your question. Thank you for attending this conference, and we hope to have you all at the next occasion. Good afternoon to everybody.