Earnings Call: Q4 2020

Feb 10, 2021

Ladies and gentlemen, welcome to the Eiffel Smith Annual Reports 2020. Today, I am pleased to present CEO, Thomas Schultz and Group CFO, Rowan M. Anderson. For the first half of the call, all participants will be in listen only mode. And afterwards there will be a question and answer session. As a reminder, this call is being recorded. Speakers, please begin. At first to the quarter 4. Quarter 4 was in order intake revenue and EBITDA, an improvement to the quarter 3, 2020. We had a significant reduction over the whole year actually in net working capital and with that in the net debt too. If we compare 2020 with 2019, revenue and EBITDA was definitely impacted by the pandemic the situation. But the order intake were more or less in line with 2019. The whole year 2020 delivered a very strong cash flow. If we now look into the markets, we see short term recovery in mining coming. That is related and correlated with the pandemic situation. If we look into Cement, there we only see the midterm or no short to midterm recovery for cement as we said it in quarter 3. And we see in the first half of the year a continued pandemic impact. The guidance for 2021 based on that is DKK 15.5 billion to DKK 17 billion, EBITDA 5% to 6%, and we propose a dividend of NOK 2 per share. The key events in the year 2020, of course, is the pandemic. And I have to say that our organization, based on the locations where we are and the business where we are in handle that very professional. If you look into our customer group, to mention here are 4 large orders, 3 in Mining and 2 in Cement, which combined gave a DKK 3,200,000,000 in the year. And we had more than 100% growth in remote digital services. We did quite a lot of investments in digital sustainability and in R and D, actually more than in the years before. And if we look into that, we are proud to say that we have several more partnerships with our customers, like Wiisim and Tietam and others. And we launched what we call Mission 0 Flagship Innovations. That means equipment or processes or services, which makes a real step in the right direction for sustainability. And we talked about it. For example, the clay calciner system. And we committed here in January to the science based targets in sustainability. The year was active on acquisitions and divestments, too. We acquired the Millor Group and KnowledgeScape within the mining industry. And we sold based on the cement reshaping, the fabric filter technology, as well as pneumatic conveying systems, what we run under the name of Muller. And we have ongoing negotiation with Thyssenkrupp about their mining business. If we then look into the business improvement program that was completed already in after the Q3 with a run rate of DKK150 1,000,000 EBITDA annually. But the reshaping in cement, as it was in the Q4, will go on into 2021. If we then look into the markets, at first, the mining market. Revenue was down 13 percent versus 2019. And you see there's a 5% FX effect in it. We had a 63% service, which is a 2% increase in service share versus 'nineteen. The EBITA margin for Mining was 8.4, coming down from a 9.6. What we clearly see is, especially with the 2nd corona wave in starting in October around the world, that we have a strong correlation between our Mining business and the pandemic. We have very good fundamentals in the Mining industry. High production rates, good commodity prices and a huge willingness to invest. But based on the pandemic and the uncertainty, very much not focused on investments and activities on their side. We have very limited travel possibilities into the different sites and with that, of course, with the services. We had in April, May quite a lot of shutdowns. But when we look over the whole year, we are actually on a fairly high production rate around the 100%. Currently close to 100%, 97% of the mine sites are in operation. What we can see, too, is that our reorganization in 2018 with 2 industries and a regional structure with a strong common supply chain actually served us well and enabled us to deliver to customers and to work with customers what we had before in the divisional structure, not the same possibility. If we then look into the order intake, on the left Side, you see the quarter 4 order intake. That increased versus 19 by 8% despite the fact that we have had a 10% FX the results. If you look into the details, we are 15% down in service and 5% up in capital. If we then look to the right side over the whole year. The whole mining order intake for 2020 in a year of pandemic increased by 6%. It came from DKK12.1 billion to DKK12.8 billion. When you then look quarter on quarter, you see that we Yeah. Kind of a seasonality with a little bit of lower activity on order intake at the end of the year was getting repeated. But when we see the organic growth, which was 13% in 2020, and looking that forward, it is a clear reflection of a positive market where we operate in and only subdued over the pandemic. Important to say is that our service share in the year 2020 with the lack of assess of sites dropped from 62% to 54%. Out of that into Cement. And that's a complete different picture. If you look into the Cement revenue, we are down 30%. And we increased actually the service share out of the capital downturn, which was quite significant from 40% to 55%. But still, our EBITA margin in Cement, despite all the efforts with the business improvement program and reshaping, was -2 percent EBITA, coming from a 5.7% in 2019. Here, the same as with mining, a strong correlation between the pandemic and the business activities. The customers in the Cement, more or less all over the world, defer all possible investments. They produce, But most of them not on full capacity. We have regional differences, but the utilization rate on the kiln lines is one of the lowest ever measured. We see that the lack of possibility to visit the sites, the lack of drive for investment is hitting all the lines in Cement. And we see that Cement in that market really has a structural change, what I will come a little bit later to. If we then look into the order intake, we had actually an order intake of 30 increase of 34% in the quarter 4. And it was a minus 28% on service and a +176 percent in capital. That is based on a large order what we got in Africa in the Q4, which was the first real large order since beginning of 'nineteen. If you look to the right side, the order intake in Cement decreased by 24% in 2020 versus 2019. When you look into the different quarters here, we had an improvement in business slight improvement in business activities. But if you calculate, of course, the large order in the Q4 out, then you see that the capital part is fairly much under pressure there. The service share over the whole year was more or less in line with that what we had in the year before. If we then look into the financial performance, and then I give to Roland. Thank you, Thomas. So wrapping up the whole year for the group, as Thomas went over, order intake is down by 5%, but organically Largely flat. Our revenue drops by 20% and that with a 4 the currency headwind that's an organic decline of 16%. Our gross margins remain flat in percentage terms and we are reducing our SG and As by over $100,000,000 And we end up with an EBITDA of DKK771 1,000,000 and that equals an EBITDA margin of 4.7%. If we adjust for the cement reshaping costs we had and the business improvements over the year, the adjusted EBITA margin would be 5.9%. If we just finalize the 2020 P and L here, we have had the financial costs and also tax payments of €155,000,000 and we end with a profit and loss for the group of €205,000,000 Our return on capital employed is then 5.1%. If we look at the revenue for 4th quarter, it is down 24% organically. And as we see here, it's most hardly hit in capital, especially Cement is hardly hit less by currency, But a lot by a lower backlog coming into the year and also by, of course, the pandemic and the obstructions we have had in terms of converting the backlog during the year. Mining less so also hit by the pandemic, but With a good healthy backlog coming into the year, but also on capital relatively largely hit. If we look at the service business revenue for mining in Q4, it's largely unchanged, only hit by a few percentage point compared to the same quarter in 2019. If we then look at the right hand side, Q4 revenue, our revenue is slightly up. There's a little bit of seasonality in this, not a lot, but we push through more revenue both on capital And also in the service business, so that is one point. And if we compare to the same quarter last year, We have a significantly higher service share of revenues than we had in Q4 'nineteen, which is supportive of a better gross margin. Now just a reflection here on seasonality. If you look at the 4 quarters for 2019, not that we should dwell on the numbers, but the seasonality here in 2019 is actually reflective of a normal seasonality of our revenue pattern and this becomes important when we later on talks about guidance. And in a normal year for us, the lowest quarter is Q1 and our best seasonal quarter will be Q4. And then comes Q2 and Q3. And that also means that expectedly first half of the year would be lower than second half of the year. If you move on to the next slide here, we improved the gross margin in Q4. The margin is significantly supported by an improved service share of total revenues, but also impact from our business improvement activities is kicking in this quarter. If we look at our total SG and A costs, they are down 8% year on year to $685,000,000 Our SG and A ratio was up to 16.2%. That is largely driven by the decline in revenue. And if we then look at our SG G and A cost development from Q3 into Q4. They are up a notch and that's primarily driven a little bit by currency headwinds. And then we have had cement reshaping costs and we have had some digital spend costs and also cost to ongoing M and A activities as you have seen externally. And if we then look at our EBITDA development, EBITDA in nominal terms is down significantly compared to last or the same quarter last year. But it has also in nominal terms improved over the course of 2020 since the low point in Q2. There's a little bit of seasonality effect in that as we mentioned and also a healthy service capital split in Q4. And again, if we adjust for the cement reshaping costs here, adjusted EBITDA run rate would be 6.0%. On the right hand side, explaining the bridge from Q4 last year to Q4 this year, predominantly driven down by the decrease in revenue, but the business improvement program is now kicking in full run rate for the Q4 there in 2020. And it's included in the improvements in the gross margin And also in the decreases in our SG and A cost bucket. The gross margin is obviously also supported by a few other initiatives And the healthy service mix. And then we have less business improvement costs in Q4 'twenty Than we had in Q4 'nineteen, where as you recall, we started up the business program initially. We continued the good traction of reducing our net working capital in Q4. The net working capital ratio is now close to 10%. It's 10.7% in percent of last 12 months revenue. I think if we're wrapping up the year here, we have done tremendously well in focusing and centralizing our steering of inventories, admittedly also driven down by currency and lower activities, but the footprint optimization and a lot of initiatives in our central steering of inventories have made that a lot more transparent for us and has enabled the strong steering on inventories. The majority of the improvements here, however, comes from receivable. And there has been a strong effort made by the organization in reducing receivables during the course to 2020. Overdue receivables, cleaning up, speeding up invoicing and making sure that they are absolutely cleared by the customers before they received a lot of operational issues had made this possible faster And also the collections more smooth than we have seen back in 2018 2019. On trade receivables, that has dropped by over $1,000,000,000 and that's predominantly because of less use on the supply chain financing and of course also an element of drop in activities. Work in progress, we are executing on less projects than we did last year. But also here, there has been focus on the projects managers on Driving work in progress forward, clearing punch list and making sure that milestone invoices are raised fast. And swift and otherwise, that has also trimmed this bucket. And Prepayments from customers is coming down because we're doing less projects. However, in Q4, we had a prepayment coming in from the project in Ethiopia. All in all, almost SEK 1,000,000,000 improvement of net working capital, SEK 158,000,000 of that is currency. The rest is actually activity based and hard work from the organization. I think moving forward, we should not expect further improvements from here, but more in line with our business activities. Moving to the next slide. On left hand side, we're looking at the quarterly breakdown of cash flow from operations. We have had strong improvements in net working capital from Q2 to Q3. And also in Q3, less marginally less on net working capital in Q4, and we also had tax payments, still a relatively strong cash flow from operations in Q4. And all in all, netting up on the right hand side in a cash flow from operations on group level, dollars 1,400,000,000. We have had CapEx or investments for 3 100 €1,000,000,000 we have had CapEx or investments for €339,000,000 The net of our acquisitions and disposal of companies for $37,000,000 and thereafter free cash flow of $1,045,000,000 for the year. If you then move on, have a look on our capital structure, we are still well in line with our targets and solvency ratio of 39.7%. And we are continuing to reducing our net debt level in Q4. However, we are now dividing that by lower last 12 months EBITDA level and thereby our leverage ratio is going up by 0.2 notches from 1.4x to 1.6x. Yes. And with that, back to Thomas. Yes. Thank you. And now we enter the year 2021. And the year 2021, of course, overall, when we look into that what we see in the market, we analyzed with internal, external experts how the year will go regarding the pandemic. And we say that we will have an improvement of the pandemic situation from the mid of the year on. That is important when we look into the year 2021 and beyond. If we then look into the industry outlook, Starting with mining. The fundamentals are really positive. We have quite a big need for investments. Investments in capacity improvement, investments into sustainability, into energy reduction and a lot of other things, greenfield and brownfield. It is all over the green transition to drive minerals demand. There is a very strong correlation in both businesses, what we cover between the pandemic and our business activity. To give a flavor on that, when we entered into the, what we call the 2nd wave in October, we immediately Could see in the weekly performance how activity was dropping in line with increasing restrictions in the different countries. And in the other way, when they ease down the restrictions. So the correlation is quite clear. We see that the EBITDA and the revenue or the revenue and then the EBITDA out of it will grow out that in mining when the activity level allows us to visit the site and doing the work. And there is, of course, a lot to do because our customers produce a lot, and they have fantastic good commodity price level. They have good cash flow. And the sentiment in that industry is really positive. But what we see, too, in the year 2021 is based on the order backlog And a good run what we had in the capital order intake that we will have a higher capital share than the service share as we headed in the main crisis year 2020. So the business improvement programs and of course, all the activities what we did since our quarter 3, quarter 4, 2019 will be positive on the figures on the bottom line. If we then look into where the focus is of the customers, the focus is to get more out of that what they have and to digitalize more and at the same time to open up the flexibility to be more sustainable in countries in areas where the regulation is not clear. There are some significant messages out of the industry. I only take 1. Russia is investing more than $1,000,000,000 to get Rare Earth more up, which is a stronghold for us. I can actually list it on a very, very long list how positive that all looks like. Then we look into cement. Cement got already had a low activity level when we moved into the pandemic. But what we clearly see is there is a structural change in cement. We don't see, as we communicated quite open in quarter 3 already, there is no short to mid term recovery. We believe in a mid term recovery, which will be for a premium supplier as we are, mainly driven by the digitalization and the green cement agenda. And we see that already the need and the demand for that part of the business is increasing. And when we talk about the digital remote services Are growing more than 100%. Quite a big share is out of the cement guys for that. If we look into the revenue, what we expect there, we have we expect a slight decline in the revenue versus 2020 in that year. It is out of the backlog. It is out of the pandemic. And it is out of that structural change what the what the whole industry has. And to give a little bit of flavor what that means, we normally calculate that utilization rate of the kilns in an area between 70%, 75% is a growth situation. If we drop below 65%, it gets actually thin. We had last year in the mid of the 50s what we see. So we are really from an activity level quite low. Out of that with the reshaping, which means that we size the business as it is for that activity level what we see short to mid term in front of us, plus to position Cement into the leading provider for sustainability and digital solutions. We will have a very hard time to reach a positive EBITDA. Out of that, I would like to give to Roland. Thank you, Thomas. And what does that then mean in numeric terms? So let me just Just dwell a little with that. Today, we are guiding for 2021 a top line of between SEK 15,500,000,000 up to SEK 17,000,000,000 and an EBITA margin of between 5% to 6%. And I think the overriding assumption here is the pandemic. There will be another year with pandemic for Efelsmit. And the way we look at it is that the pandemic will continue unchanged until summer, after which a gradual improvement will kick in. And that's the underlying assumption. And then back to what we talked about with seasonality. So we will have pandemic in first half of twenty twenty one, like we had pandemic in second half of twenty twenty. By the same token, we saw on the revenue slide that Q1 seasonally is our lowest quarter and then comes Q3 and then Q2. So expectedly, everything else equal, H1 'twenty one will be lower than H2 'twenty. So on that basis, let's have a look at the revenue bridge. So as Thomas says, We absolutely believe in the positive fundamentals for mining. But mining will only really take off again once we are on the other side of the pandemic. So we are looking at growth in Mining, starting from when we are on the other side of the pandemic. Ease of backlog conversion and increase in site access and thereby in our served and aftermarket business. Now for cement, They are operating in the same environment, obviously, but we're looking at a lower backlog. And therefore, we are guiding that the cement business will be with lower revenue for 2021. And on top of that, Efelsmid is facing some currency headwinds. And this is admittedly harder for mining, also expected for 2021, like we saw in 2020, than it is for Cement. And that means that if all this is dragging out, ForEx is really against us and so on. We could have a revenue that is lower in 2021 than it was in 2020. And if it's less so against us, We will be in the high range towards $17,000,000,000 Now what does that then mean for the development in margins? And we have put in a few building blocks here that is the most important for us in our own outstanding of the business. And we're coming out of 2020 with a 4.7 EBITDA margin. We will move into 2021 with full run rate impact of our EBIT program that is already in from Q3 2020. We will obviously not have our one off costs in 2021, and there will be a little bit extra run rate on top compared to what we had in 2020. Then we are now clearing out of the low margin mining projects that we announced to you guys the market back in Q3 'nineteen that's also given. Then we are back to the revenue bridge on the left hand side. We will have 4x headwinds in 2021. There will be a more negative capital service mix, I. E, we will have more capital and service business in 2021 than we had In 2020, and Cement business will still be loss making. And then there's a bucket of costs to reshaping, pruning, sizing, maybe changing some of our products over towards the more green cement area and other initiatives. At some point after summer, we will have COVID costs kicking in again, people back in the office traveling starting off. And that will kick in before extra revenue or growth will translate into earnings in our P and L. And as you know, there will also be M and A activities during the course of 2021. And that leads to our EBITA margin bridge our guidance of 5% to 6%. If we look at the next slide, that's Basically summing up what we've just been through. So fundamental assumption is the pandemic assumption clearing from summer. And there's considerable uncertainties on these assumptions, obviously. Then we have also decided to withdraw our mid and long term financial targets. And there's 3 key reasons for that. So first of all, compared to 2 years ago when we did these targets, the cement and the mining industry for Efel Smid Has diverged considerably with regards to the end markets and thereby also with regards to the outlook we have for those 2 industries and the way that they will develop and have to be managed. Secondly, as Thomas went over, there's a structural change in the cement industry, And we no longer see short to mid term recovery in that part of the business. And for both Mining and Cement, We need to say that the pandemic has postponed a potential pickup towards targets by at least a year and a half or two years' time. And that means that there is increased uncertainty around the target levels as well as the timing for achieving our mid- and long term financial targets. So they are withdrawn as from today. We will, however, keep our capital structure targets and they remain unchanged. And these are the financial gearing, our leverage targets to stay below 2.0x through the cycle. We also want our solvency ratio to be above 30%. And our capital structure dividend policy remain unchanged the 30% to 50% of net profits. And we will then resume with investor communication on our longer term prospects for both the Mining and the Cement business once we have sufficient visibility. And with that, over to you again, Thomas. Thank you. Then from that, from the guidance into what we delivered in 2020 on sustainability. I would like to highlight 2 elements here. Safety, the lowest safety record what we ever had, quite well below the target set, which was 2.5 now on a one for the TRIR, which is a great performance. Yes, supported by the pandemic, but don't forget the pandemic put on us quite a lot of significant more safety hazards than we had before. Another part is the carbon footprint. The relative carbon footprint dropped from 2.6 to 2.2, which is a good and a great performance in that direction, too. Then we have new sustainability targets for 2,030 on our self and actually the value chain where we act in. And we committed to the TCFD and science based targets. And I would like to highlight here the science based targets, where we committed and looked and worked with it since January, which means that we are in scope 12 carbon neutral in 2,030 as FL Schmidt. And we will have a 7% year on year improvement. That is in line with that what we give as a target towards our customer And as an opportunity towards our customer with our solutions, with our processes in cement, as well as in mining to be mission 0. That is important for us and for the whole industry. We know that we are quite advanced and quite ambitious with it. But what we see in Cement as well as in Mining is that the pandemic actually gave a significant step change, not only in the direction of digitalization, in the direction of sustainability, too. And when I talk about digitalization, then something about innovation. We have, which is well known in the industry, Summit as well mining the process expert, ECS. And it's now the version 8.5 already. It started decades back with fuzzy logic and so on. Now we are on artificial intelligence, which means we provide to our customers a software which is self learning And without any impact and working from an operator or from customer into that setup, that system is always looking for the best energy setup and getting energy down and at the same time increase in production. It's a permanent ongoing self learning setup. And that is what the market demands more and more. And as I said at the beginning, especially in cement, where the customers are so much under pressure regarding their end markets. Out of that into the key messages. We had a strong cash flow focus. We said that from the day 1 when the pandemic hit us, that we look into to be capitalized properly and that having a very healthy balance sheet. And we came out actually quite good and a big thank you to my organization. We had a sequential improvement in financial performance from quarter 4 to quarter 3 to from quarter 2 to quarter 3 to quarter 4. Not as much as we hoped for, not as much as we communicated in quarter 2, but relatively at the quarter 3. We have a strong regional setup, Which gave us, in a time where travel and restrictions to visit sites was quite traumatic, still opportunities to work with customers. And our supply chain proved that it's very agile. And the reduction of suppliers in a significant amount as we did it in the 5, 6 last years was very beneficial. On the negative side, there is an ongoing negative impact of the pandemic. We have now 2 waves in what we have data points. And we have a clear correlation in Cement as well as in Mining on that activity, predominantly on the service activity. And the other part is, it is, of course, a pressure on us, but an opportunity to the reshaping of cement business Because it will be not profitable, most likely as we see it for 2021. But from there on, with the sustainability run and the increase for sustainability demand, which is significant higher in complexity than the regular cement, will help us and support us. You will see cement in the foreseeable time in midterm as a multi commodity industry, little bit like bulk handling in mining. The focus for 2021 for us is clearly to navigate through the pandemic until debt is out of the business. We strengthen our industry setup, as we said in quarter 3, which means whatever we invest in mining comes out of the mining result. Whatever we invest in cement comes out of the cement result. And we actually invested in digital R and D innovation more in 2020 in absolute numbers, not only in percentage than we had in the years before. Cash, cost and pricing now is important, especially with increasing raw material prices. This is important to drive. Customer relationship is always an important part. We see that our sustainability and mission 0 is very attractive both industries that our leading position in innovation and digitalization helps us quite a lot. And standardization is a given in that business what we have to do in the future too. Out of that, We had, as a key highlight for 2020, of course, a negative impact from the pandemic. We have a positive outlook for Mining more than for Cement if it comes to short term. Strong cash flow, revenue, order intake and EBITDA improved in quarter 4 to quarter 3. And the guidance for 2021 is DKK 15,500,000,000 to DKK 17,000,000,000 on revenue an EBITDA 5% to 6%. Thank you. Present. Present. And our first a question comes from the line of Lars Kopong of Carnegie. A couple of questions from me. The first one is around cement and Thomas, what you refer to as the reshaping. So the market for green cement, is that going to be retrofit our brownfield market or is it going to be a greenfield market? And if it isn't going to be a greenfield market, should you sustain the what would you call it, the greenfield capacity you have today? Or should you structure cement completely different? I guess, in a retrofit market, it's access to installed base that is maybe more important than the ability to deliver whole cement plants. Then a question on cash flow. What will happen to your cash flow if when mining activity to begin to pick up because as far as I remember, you have a situation where you need to the place orders before you begin to generate revenue in an optics. I'm just wondering if cash conversion might come down before it comes up. And then a related question because you have announced you may or may not the acquiring the mining activities of Chusen. With a net debt to EBITDA of 1.6 right now, is it at all realistic to make such an acquisition without issuing new equity? Those would be my 3 questions. Thank you. Thank you, Lars. At first, I'll start that, Roland, with the cement and the structure. What you see is at the beginning, brownfield investments. You see, for example, clay substituting limestone, not 100%. And we built installations to substitute a part of the limestone. And we are already able to reduce with these kind of brownfield installations 40% of the CO2. If we would put in that maybe as a mark, 7% to 8% of the world's CO2 is from cement. If we take already technology what we have in house, Yes. Quite a big part of that is very expensive because not a lot are buying it. We could reduce up to 70% CO2 already. And we promised 100% up to 2030. What does it mean for the structure? We already announced in 2019 on the Capital Market Day that we are only interested to keep project business for the whole group and Cement 2 below 20% of the total revenue line and only going for it when it's profitable and risk low or risk free. To be and to stay partly in that what we have today in the project business gives us the knowledge of the whole process and the chemistry throughout the whole line, what you have to have to get the whole industry to mission 0. But we strengthened with the region structure, of course, the retrofit and the upgrade business. And with that, the brownfield installation for sustainability. Last thing what I have to mention, which I think is a very good question, Lars, on that. Yes, we have to let our business go. And we did that. We announced with Muller. We announced the fabric filter. We will let to have business goal which will not contribute and substituting that with sustainable business, what we are actually doing quite big steps ahead. And that is part of that reshaping. And it's actually built into the guidance, too. And out of that, to the cash flow. Roland? Yes. Thank you, Lars. So as I understood your question, what's going to happen to the cash conversion if we start growing in Mining? And I think admittedly, we have taken some the low hanging fruits in 2020 on bringing down our net working capital. And if we start to grow in mining, I think it's crucial to segregate whether we grow our service business or we grow our capital market business because the service business will tie up inventories and therefore also working capital. And that needs to be steered firmly as we start growing. Whereas the projects business, to a larger extent, will have milestone payments and maybe not large prepayments, but milestone payments as we move forward. So I think for us, internally here, there are operational a target set for the organization to further improve on our receivables. There's a lot of structural things we can do to make that more smooth. But everything else equal, if we start to grow in mining, say for mid summer, I would expect working capital to follow-up a little bit in line with that activity. Then secondly, as with regards to financing of the Susson Krupp deal. It's a little premature to discuss it because we don't really know the structure of that the deal, what are we taking, what are we not taking yet and so on. But if you look at our capital structure target, we are Currently at 1.6 and it's not an issue to go above 2.0. We have been that historically as well. So we have a number of options available to us. But currently, it's too early to speak about exactly how we want to finance it. Can you maybe comment on in this environment where cement is under pressure and visibility is shuttered because of the pandemic. How high would you be willing to go in gearing short term? That's I won't sit here and guess on that, Lars. I thought that was a super good question. Thank you. It was a super good question, but I have one small question. But you know that we look very much into our balance sheet and our capital structure. This is so important for us. Yes. I know, Thomas. One final small question. You mentioned that demand for digital remote services was more than doubling. Just to understand that in numbers. How much of the cement business is there? It's only a single digit number in cement of the total revenue as a separated business. But what happens if you have the remote control and the digital business with the customers. When we are able to go on-site again and customers are willing to invest, actually both in Mining and Cement, of course, we have a preferred position, a significant preferred position. Makes good sense. Thanks, guys, for answering my questions. Maybe that as a final thing on the remote, when we talk about that, we are not talking here only FH Smith sites To make that clear, that is independent of the original supplier of the equipment or the whole line. Other questions? Thank you very much. The next question comes from the line of Arthom Sogarenko of Credit Suisse. Please go ahead. Your line is open. Good morning. Thank you very much for taking my questions. I have 3, please. My first question is around your 2021 guidance. Could you maybe give us some color about the major moving parts determining whether you will end up in the lower end or the high end the major swing factors between low and high end of your revenue and EBIT margins. And maybe as part of this question, maybe you could comment on the thought processes behind the margin ranges for the division and also how much of a delayed revenue recognitions from existing backlogs that you're factoring as a headwind into your guidance. Yes. So it's a little bit back to the bridges that we had. And The biggest uncertainty for us is really the pandemic, because not only does it drive how fast we can build our service business and that within the year book and bill, but it's also the speed of which you can convert the backlog into project and capital revenue. So for us to reach the higher end of that range, the pandemic needs to ease on us In the sites where we are currently predominantly operating, that's one thing. Then secondly, the faster we can get right shaped in cement will, of course, improve the speed with which we Can come back both top line wise and also with regards to the bottom line. And then frankly speaking, the dollar exchange rate the Danish kroner is we are a little sensitive to that on the top line. So to the extent that, that goes stronger, it will We will be in the high end and vice versa. So that's really the main drivers for our guidance. All right. Thank you. And just to clarify in terms of the comment of the pandemic easing on the existing side. Does it largely refer to service order intake? Or does it largely refer to the delays which you the in year backlog deliveries because of the pandemic. Yes. As far as I got it, the yes, the normal we have roughly 1 third of our service business, aftermarket business, is actually that we send out experts to help customers to get productivity improvement. That is what we do. We go there. And based on the fact that this industry is absolutely not standardized, not in cement, absolutely nil in cement, I have to say, and to a large extent in mining, too. And I will not go in why that is the case. It's simply borne out of the fundamentals in that in both industries. So we send out our people. They get then with these order or with the visits, the order intake and then, of course, realizing the revenue by sending in experts to help customers or that we do the rework and the aftermarket work on our own. So we are very much depending on the assess to the sites, maybe more than others, because our business model is that we offer at any equipment, at any point in the process, productivity improvement. Understood. Thank you very much. My second question is around the Cement business and the outlook for short to mid term. I guess if we look at all the lead indicators and all the kind of reports from cement companies, they have been quite rapidly improving recently and also infrastructure plans look quite optimistic. So I guess, can you maybe talk a little bit about why this is not turning into a more positive outlook for the cement industry at the moment. Jose, could you maybe? Yes. It has to do when we look into that what our cement clients our reporting on. Of course, they have an installed base. And that's the important thing in a cement plant, that kiln needs a minimum capacity to be fired up and to operate, to actually produce clinker. If you get too less material through, which means you have not enough demand, then you get a problem. Then the quality drops and actually the whole thing is not good. So out of that, they are now we see in a lot of countries based on short term infrastructure projects, all the business comes step by step in some areas, not everywhere back, then they produce more. But the overcapacity in the market with a 55%, 56%, 57% utilization rate on the kilns is not triggering any capacity increase. And at the same time, the uncertainty, what they have in all the different markets. I take India, I take the whole Eastern block, I take South America, partly North America, South Africa, in Asia, in some countries, which were booming before. That triggers for them not to spend money as much as possible. And we see that with the remote digital service. When we come and say, you have now to look into to make that service on the site, and they try to postpone as much as possible. The amount of calculations we do to prevent customers to have what we call a hotspot on the kiln, that means that you get a breakthrough, the liners, which is very costly when it happens, is rocket high. That's actually the situation what we have. Then to the outlook. What we should not and I know that Cement always gets negatively discussed. That's clear. But don't forget, we had a €8,500,000,000 business with close to 6% in Cement in 2019. And that and the year 'twenty didn't start that bad, too. Yes, on the lower revenue, but actually quite profitable. Out of that, the pandemic brought a step change End structural change because customers now, whatever they invest, look into, can it be transformed into a more sustainable setup? Do I fulfill with my cement plant the regulation coming up? And when we come with a 2,030 technology to have nil emission And the European Cement Industry says we will be carbon neutral in 2,050. You can imagine which kind of potential is out there. But based on the technology, the regulation and the planning for that, it takes 2, 3 years until that really drops into our order book, and it will drop into our order book. We already see 2022 significantly better than 2021 in the cement industry. Thank you very much, Thomas. And my last question is around CHK Mining Business negotiations. I guess two questions. Is there any time line for the negotiating process? And the second question, considering that CCH's mining business has been a long standing underperformer with currently being loss making, what gives you confidence in your ability to turnaround that business? Yes, I have to say, I start with the second part, the confidence what I have is we proved that we can underperform too. And we proved that we can recover out of that. We think we have quite significant knowledge in Yeah, about how to make projects wrong and how to improve them again. So we are actually quite experts in that. And we know the industry and the market. It's actually quite a lot complementary what they offer, which we miss in our offering. And especially in sustainability, the whole in pit crushing setup, what they have is quite strong and that is some definitely an added value into FLSmidthgroup if it comes to an M and A. Then the time line, that depends really on Thyssenkrupp. That is actually more and that's typical. The vendor actually gives the time line. Thank you very much. Thank you for answering my question. Thanks a lot. The call. Our next question comes from the line of Nick Carlson of RBC. Yes. Hi. Thank you for taking my questions. I have a couple. My first one, and this may be a question you're expecting and it's certainly one that you've had before. But have you had any further thoughts about potentially divesting the cement business, both the 2021 guidance and the medium and long term outlooks you gave. They seem quite pessimistic about cement. And it seems like there's no clear time lines when that business will see a meaningful improvement. And then also with the discussion about the tips and assets, but that's a further shift towards mining. So I'm wondering if you could just start by talking about the value that cement brings to the business. So the at first, there is improvement visible. And we said it in quarter 3 that the recovery will be mid term, 3 years roughly, heavily with the green cement. And that is what we see. And we worked a lot in the last few months to get visibility on it, not only internal with external experts, customer groups, consultants, no matter what you can imagine. And there is definitely a significant business for premium suppliers in cement upcoming. And as I said, actually in the Financial Times too, based on the pressure, what cement industry will enjoy in the next few quarters on sustainability, especially on CO2. You will see that cement moves into a multi commodity industry. Clay, 3 types of clay is unbelievably important to make a CO2 neutral cement. There are other minerals and other materials what we work on based on our mining competence on all the different commodities, what we can substitute limestone into. It will be a multi commodity, more processing related industry, Which is then with a high technical entry barrier and with that profitable. Then if it comes to divestment, we look For years, each year, strategic wise, together with the board, what is the setup of the company? What are the synergies and what are the different elements where we cooperate and where we shouldn't cooperate. And we announced that last year already with the 2018 reorg, we are able to finance mining wish list, no matter what it is out of the mining result and the same we do out of cement. We have quite industry focused management style already today. But at the same time, we use the synergy on the region setup, service as well as supply chain procurement. And that makes the company quite strong. If we would see that the diverging industry Or any other thing is reducing the synergy package so much that it actually gets negative, then of course, the picture would change. I can make it in one sentence. Mining and Cement are not married in it, and it is not an emotional thing. We have clear business reasons and synergy advantages why we are together with both industries and one company. And in 2016, colleagues of you on the phone here actually asked me quite emotional, Very detailed why I'm not letting or why I'm not shutting down mining. That was at the beginning of 2016, roughly. Nick, any other question? Yes. Another one for me. Your order backlog in Mining has developed very nicely. It was up 18% in 2020. Why should we not expect a similar growth rate in sales for that division in 2021? Is that purely because the pandemic headwinds that we're still facing in the first half of the year? Or is there also some project timing issues with that? Can you maybe just Yes, explain that one for us. There are 2 elements. At first, the large orders, what we got, will not have a big revenue impact in 2021, only towards the end of the year. But the big impact is really the pandemic. Please understand, we had to sit here and to forecast something, Which hits us quite dramatic with the business activity, the pandemic, when it will ease. And we decided to go for the OECD model, which says Because that was for us the most logical, which says from the mid of the year, the restrictions in the different countries, that's actually the main thing what we have will improve and governments will be more dedicated in the lockdowns and in the restrictions than they were before. I have to give a little bit a sentence of cautious here, because there was exactly the same wording what we heard out of media after the first wave. If a second wave comes, governments are more dedicated. They were not everywhere, I can tell you that. 2nd, with the pandemic, our miners, the main sentence what we hear from them is, guys, FLSmidth, no panic. You get the orders, everything is fine. But at the moment, we are focused on producing a lot because commodity prices are good. And we have to be careful that we are not getting the virus on the side. So when you calculate that in the first half of the year still under the same pressure as we had it in the second half of twenty twenty, And then an improvement, no matter that it will be there in the second half for mining, then you can imagine which kind of impact it has on the full year. And that is what we calculated into the guidance, and that is what we then come out with. Your questions. Thank you. Our next question comes from the line of Klas Amor of Nordea. Please go ahead. Your line is open. Thank you. Also a few questions from my side. The first question goes to the order intake in 'twenty one, and I know you don't guide on that. That Thomas, in the past, you have provided some color to how the order intake could trend. So maybe you could do the same this time. How do you expect order intake in 2 divisions on group level to trend this year. That will be the first one. Yes. If I would give you figures, Some people here would really, really have a problem, Claus, with me. But the what I can say is, we are actually positive on the mining side. And in Cement, we have to see how that year goes. We think that large business large deals in cement in 2021 will be very questionable based on the pandemic. That is because we know there's a lot of infrastructure work needed around with a lot of approval and regulation. And we see quite in the areas where we normally would expect some larger orders in cement. We see that a lot of government offices are working from home or not working at all. So they will simply not have the permits. And with that, it will not come into a real order intake. Not to talk about the banks, which then have to give their blessing to. But in mining, we are more positive if we look into the order intake. So does that mean that let's just take them as a scenario that Mining, for instance, could be growing double digits in the oil and gas this year or more I know you can't give any specific numbers, but more in broad terms. Claus, the you are quite good in asking. But the, Claus, I can't give you a figure. Of course, it depends on if some of the we have quite a long list of engineering projects in our books. And these engineering projects will end in larger capital orders. And if they are very large, normally they ask at first for the long lead items. That is normally the thing. And that is what you then see with order announcement, which really move the needle upwards in percentage wise on year on year. We have to see what happens there. The sentiment is there. The fundamental is there. The hot list, the order, the orders of engineering orders is there. That's all looking healthy. But about the timing, it's very, very difficult to forecast because our customers can't give us any information on it. If the year goes well, yeah, it will be a good growth in order intake. If the pandemic goes on and gets a 3rd wave, what we all or 4th wave then in end of 2021, then of course, it would look different. Our assumption is that the mining in the second half of the year will develop quite positive if the pandemic goes out of the business. Fair enough. Okay. And then the second question goes to the Smith division. So this loss making outlook for this year include some reshaping costs. If you're going to strip out these costs, what would would it still be loss making, profitable? Can you maybe some color for that. The, yeah, I make it like that. We have no special program for cement. And there's a reason. And I think in one of the reports, which were triggered this morning quite quick, this is in cement, we improve, Then we have to make a reshaping or restructuring. Then we improve and then the same again. So that goes up and down, up and down. So we don't want to this is part of cement. So we don't want to talk as a one off cost any longer about it. So that actually It's not really a talk about adjusted or not adjusted EBITDA in that case. Then when you look into the cement industry per se, we see that the utilization rate now moves more slowly towards the 60% from 55% to 60%. If it goes in the year over 60% and the pandemic Ease down. Then, of course, service business will have quite a good contribution into the result. That, of course, would move the needle quite significant. But we don't want to split between one offs and not one offs. This is now an ongoing thing, because it's not only the resizing of cement, we reposition cement into sustainability. And I have to say it again. It's a little bit like with digitalization. If you go that line more, you have to let other things go, which are not contributing, which are actually negative in it. And we have that in mining, and we have it especially in cement. Some products what we were selling before quite a lot, we will not sell in the future because they are actually increasing the CO2 footprint and that we have to maneuver. So a comment on the year, it will be a very hard time To reach the nil line for the year, and we will not make a one off excuse out of it. Sure. Okay. Then just for my understanding, so let's just make this thinking in the scenario that if you had made your reshaping all read for 1st January 2021. Would your Cement division in that case have been a profitable business? Yes. That is what we can expect, yes. Okay. Thanks. But the reshaping is not only resizing, it is a repositioning too. And when you look into, we have today a revenue in 2020 or we had in 2020 revenue, which is 30% down to the year before. And we still invested more into sustainability and digitalization and innovation. And that costs money. This transition into sustainability into digital is not for free, But it's not a one off. It is something what you have to do to build your business for the future ongoing. Sure. Thank you. Our next question comes from the line of Robert Davies at Morgan Stanley. My first question is just really around, I guess, the meeting of the sales profile over 2021. You mentioned clearly on the mining business, you will see a much more second half loaded kind of delivery. And I know the Q4 is often you see a sort of ramp in deliveries anyway. Just wanted to get a sense of do you have the capacity in place to be able to ramp up to keep within that sort of guidance range based on your current sort of backlog execution, what's the risk if we get to sort of into 3Q of 2021, the pandemic is still going on that you're not to be able to deliver some of these projects in the back half of the year as expected. Thanks, Lee. That's my first one. Thank you. The we have the capacity. We are actually quite well set up. And if it comes to mining, we were very cautious which kind of cost and structure we took out in the pandemic. Always in the view and in the knowledge that the pandemic is only a temporarily step down and that step will come back and then it will grow from there. So it is not only a competence and a service setup question, it is of course a question of supply chain and logistic too. And you all know what happened since December roughly in logistic, and we have that fairly good under control. And that all the program what we did with having capacity in the back from suppliers as well as in your own assembly centers and to reactivate that within weeks, we can reactivate complete holes, big holes in assembly centers within 4 weeks to produce more. That is all working very well. So that is, for us, not a problem at all. Thank you. And then my other question is just thinking about the sort of year on year changes in your EBIT guidance. Just maybe if you could give us a little bit more color in terms of the potential wiggle room around sort of margin mix, currency, the temporary cost savings coming in or out. Where is the biggest risk of you coming at or below the bottom end of the range or towards the top end of the range within those 3, can you give us some sense of which ones are the ones we should be following most closely in terms of the biggest upside or downside risks for the year? Yes. So the biggest risk would be that the pandemic is dragging out or that our assumption on how fast we can convert the backlog of do our service aftermarket business. If that drags out, we will lose contribution margin of gross profit, Right. That's the biggest risk to the margin. 4x And the cost picture and so are well in our control. But what we can't control is to the extent that the pandemic We'll block our ability to execute on our current plans. Take the capital service mix. And then my final If you take the capital service mix, especially in mining, if the pandemic is earlier, we have a higher service share, Which is our most profitable business in the group. If the pandemic is later, we have a less service share because we can't assess the sites. And that is, of course, what we mentioned in that building block when Roland explained the EBITDA bridge regarding the FX and the capital service mix. But you have another question. Yes. Sorry, it was sort of related to that. My question is just really around the sort of orders you've got in the backlog at the moment. Has there been any noticeable change in margin makeup or margin mix of that backlog. So I guess, are your OE orders still coming in where they were 12 months ago? Or is your sort of the market in service margins, your OE margins coming in where they were 12 months ago and same thing on the service side as well. I know there's some different mix within the service business around sort of slight access to spare parts and work parts and consumer reports. But how is the sort of margin makeup of what you can see in your backlog different now to 12 months previously? Thank you. So, the if we look into that, generally, wear parts are Wear parts are lower in profitability than high complex spare parts. But we don't see any profit change through the pandemic on that. Then if it comes to the bigger projects, as more bigger project revenue we have in the quarter, as more margin pressure we get because they are per se by normal view, lower in profitability than, of course, the aftermarket. So the mix between capital and service in the quarter is quite important on the profitability. And we know, of course, when we look into the backlog, if you forget about the pandemic, we know exactly, actually, if not customer change something, when we deliver things. So we have actually quite a good visibility. What we learned then out of March, April last year, When the site assess is not happening, then of course, it makes it for us more tricky to forecast, which we call the correlation in the pandemic in our business activity. Our next Thank you. Our next question comes from the line of William Ashman of JPMorgan. Please go ahead. Your line is open. Yes. Hi, everyone. It's William Ashman from JPMorgan. I've just had a couple of questions. The first one is on the EBITA margin bridge and just the last block, the cement reshaping COVID-nineteen and M and A. Now I know that you sort of guided the €70,000,000 of cost for the H2 in 2020 and €40,000,000 was actually incurred. So I assume that extra €30,000,000 comes in Q1 or Q2 this year. And then there's obviously significantly more to do that, and I know you don't want to disclose it, but kind of could you just give us a sort of more quantified number around that. And secondly, on the sort of COVID-nineteen costs, I know that in Q2 and Q3, that was actually reported as a positive in the bridge. And I'm just wondering, is the headwind in the bridge here due to a reversal of the savings you saw last year or is it additional costs that you won't be able to offset the savings this year. Yes. So I think cost of reshaping, That will we don't want to be too granular, right? But it's fair to assume that it will be more than the $40,000,000 we have spent this year. And that will be spent during the course of 'twenty one, expectedly. Now what we're saying about COVID-nineteen costs is that, At some point, travel cost and furlough is or the different schemes are running out when people are coming back to the office. And those costs are going to hit the P and L in Q3 and Q4 Before it actually translates to new revenue streams that will hit the bottom line. So there will be a pickup, of course, you can say that we haven't had Now that is related to generating business moving forward, but there will be a lag until that revenue kicks in. So there's a bucket of costs that are expected to hit the P and L during Q3 and Q4. And then there's also our M and A activities in that sort of bridge pocket. Okay. That's very clear. And I just had a question on the comments you made around mining orders for 2021 and obviously the fundamentals are positive there. I'm just curious, Is potential growth a comment around the sort of base level of activity? Because obviously, the Q1 orders were very high due to the large orders amounts, and I feel like it might be difficult to repeat that this year. So just show some clarity around that, please. Yeah. The I would not expect, big order intake movement up, when the pandemic is still very active, because the boardrooms of our miners are very much focused on 2 things, managing the crisis in a way that the virus are not hitting their sites and producing as much as possible with the reduced availability of parts and services and so on what they have on-site. That is what they maneuver on. And when you talk with them, they are actually quite occupied with that. What we hear, That is what I can say too is that the sustainability part, tailings management, water management, energy management, emission management gets bigger and bigger in the board meetings too. So based on that, Of course, it is a good thing that we have quite a healthy order line, what we expect to come in And especially where and which commodities and so on, that's very healthy. But it has to get an ease of the pandemic impact. Otherwise, we don't think that the customers are focusing on these investments. And these investments to why that is so important to get the crisis out. These investments, what they do, they will stick decades On it, it has a huge impact on them. If they would do something wrong, it can hit not only business wise, it could hit privately on each individual in the board legally, too. So the scrutiny of projects, no matter if it's brownfield or greenfield is quite Significant, but we have that already since mid of 2019. So out of that, the order intake development in the year. As more as the pandemic goes out of the business, as better the situation for that will be. Okay. Thank you. And just one final question for me. I think you mentioned earlier that it's not clear what the scope of the negotiation with Thyssenkrupp is. And I'm just not quite sure what you meant by that. So it'd be good if you could sort of clarify. Yeah. It is, we are in a stage where we Where we are only talking with them. We need more time and they need more time that we go the next few steps. So that's all. It's no real uncertainty or so. It's simply the normal talk at the time where we are. Okay. That's very clear. Thanks very much for taking my question. Thank you. Our next question comes from the line of Michael Peterson of SEB. Please go ahead. Your line is open. Hi. Thank you for taking my question. My question is related to the midterm targets which have been withdrawn. If you look at the mining, it doesn't seem that a lot has changed. Of course, you have the pandemic, etcetera. But with the implicit guidance that you have for 2021, you, of course, got close to around 10% EBITDA margin for mining, and that is rather close to your midterm targets or previous midterm targets between 11% 13%. Is it reasonable to expect that you will be able or could be able to reach that in 2022? Yeah, but Michael, we're not guiding on 2022. But obviously, if we reach those levels, Your guess is as good as mine, we'll probably improve from there. So that has nothing to do with us pulling the midterm guidance. That has to do with the combination Of the three things and that the 2 industries are changing in the group. So as we also said, we have not changed our positive a view on the fundamentals for the mining business at all. So the midstream targets for mining could to be potentially reached. The guidance are not there any longer, so that will be guess where it could be reached 10% I think so. Okay. Thank you. Thank you. And the last the question on the queue so far comes from the line of Magnus Kruber at UBS. Please go ahead. Your line is open. Thomas Zoran, Magnusi with UBS. What was the return to cement and the arkip there? I mean, I've seen some analysis showing that up to a third of the used cement capacity will need to be replaced within the next 10 years. Is that first something you agree with? And if so, do you think it would be investments to replace them? Will they take place in Europe or outside of Europe? And what kind of an ambition level do you think producers will have when it comes to due to emissions that this happens in Europe. Do you think they will go for, say, a full offering of a 70% duty reduction? Or how do you see the next replacement cycle thing up. The what we think is we looked into, for example, the automotive industry with electrical mobility. 5 years ago, no one believed that it will be that strong change and pressure on combustion engines. No one believed that. On wind energy that took significant longer time was very much subsidized and so on and now it takes off on their own. When we look into cement, cement is a huge contributor into emissions. And the societies will not accept that any longer. Take China. China says they will be carbon neutral in 2,060. Now with Mr. Biden in U. S, They are back on the Paris agreement. It's not only Europe. We see actually a lot of demand already today for more sustainable talk and solutions in cement in India. So the it's not a European thing. It's actually a global thing. And to mark in the future, your cement as green cement will be a market plus, a branding plus. That is what we clearly see. Then what we see else is that the cement industry to produce cement will get more complex from a technology point of view, because the limestone, which is more or less everywhere available, which is a very simple from a chemistry point of view product. It's easy to handle to make cement out of it. But the negative is you produce CAO, calcium oxide and CO2 as a byproduct. In there are other materials, I always take clay because that is well known in the market, but there are other minerals what you can use and you get very high quality cement out of it with significant or no CO2 production related with it. And these kind of minerals are in 60%, 70% of the world available, but to process them is more complex. And that what the cement industry hit with commoditization over the last 10, 20 years in that industry will go backwards. It's the entry barrier in technology is significant higher for that. And we see that. When we work on these, for example, clay calciner and so on, the amount of competitors is very limited in that area completely different than in regular cement technology areas. And we invest in that. And it's a combination out of the green cement and digital. Digital helps there. And we have a fantastic position for that Because we have the process knowledge, we have the installed base, and we have the willingness, we have the moral in the company to go for it. It motivates people quite a lot. What we don't have as FLSmidth Cement is that the market is around for that. It will not happen this year. It will not happen next year. There are, I take Europe, €750,000,000,000 investment. And out of that, a third should be environmentally related, which means a lot of infrastructure is binded into that. Let's assume Europe triggers that. And then they will start to go into the market and say, we would like to build this and that and that. And then it takes the cement industry 1 to 2 years to decide on the capacity change, not increase, a change from limestone based into other technology. Out of that, it takes 2 to 3 years until we see it as order intake. And that is what we talk. We think Cement is in a few years a very favorable high-tech industry in the premium segment. That's actually the explanation of how we see cement industry. That's very good. That's very good. And I think from that, that basically takes it doesn't really matter where the investments are going to take place. They will still go green, basically. And if we return to sort of the original assumption on the European replacement cycle, how do you see that? Do you think as much as onethree would need to be replaced within 10 years? Or do you have a view on road placement that would take place there. We see for the next 5 years, not a huge movement. We see here and there are more installations on brownfield, added installations and so on. And then in 5 to 10 years, you will see the bigger shift, the significant bigger shift. And one element in it is not the CO2 taxation, what is in Europe. The element is that we will be able to provide equipment and processes which are actually more productive and less costly on cement. Then we have it with normal firing, coal firing, fossil fuel firing. We work on getting green energy into cement. It's not only alternative fuels, wind power, hydro power. No matter what it is, there's a lot what we can do more. So out of that, it will be not only the call for I get a more emission free cement. I actually can produce then cheaper. Because at the same time as green energy and resources are coming up, it will get more costly regarding fossil fuel to get it. We see that with coal. Coal is relatively, yeah, cheap, if I may use that word. But you have to ship it around the world. You don't have a coal mine around the corner. So if you would like to have coal to fire up your cement plants in Europe. Where's the coal coming from? That costs money, and it gives the CO2 footprint, not only on coal, actually on transport, too. And without going too much into detail, when we look today into green cement, a big part of that is the trans the report of the cement from the cement plant to the place where we need the concrete. That is a hell of a CO2 footprint as long as we have diesel fuel on trucks transporting the cement. So that's a significant bigger thing, but that will take off in 5 to 10 years in Europe. And then having and China, not to forget China year 2, it's more than 50% of the world's cement market. India too. We have pockets of overperformance already today. I find that it was very, very interesting. I think you mentioned now that you think that the OpEx cost or the production cost for this new green cement in 5% years, do you think you can actually get the OpEx cost down even if you don't consider the extra cost for CO2? The when you look into when we look into what we need as energy input and where the energy input comes from, a big part Of the CO2 footprint in a cement plant is coming out of the energy part. If we can replace that, that immediately has a significant impact on the whole CO2 footprint. So out of that, the not only the our technology and maybe some competitors too, I guess, will have a lower OpEx than we see today. But the whole infrastructure around with the energy provided, transport, logistics and so on will enable the cement industry to be cost competitive. Otherwise, people will go for other building materials. Perfect. Thank you so much. Thank you. Thank you. And we've had one further question come that's from the line of Claus Kjell of Credit. Yes. Hello. Just one final question. Currently, there's a lot of focus on this green energy transition. And in this transition, we're going to need a lot of renewables, wind and solar, just to mention a few. And renewables, they use a hell of a lot of carbon and silver. So I guess the midterm outlook for both carbon and silver is pretty all this. But I was just wondering, what kind of feedback do you get from your mining clients about this? And is it something they're talking about? Or is It's something that potentially could be a positive thing 2 or 3 years down the road. Yes. Any info on that? Yes. The that talk is ongoing for several years now. That was already in 'sixteen. Electrical cars are using up to 7 to 8 times more copper Then combustion engine cars. The building up the grid for windmill is for us fantastic in, in how to say, in the copper demand, what they create. And Roland is from NKT before. And we had always a good talk with the guys, Because they gave us quite a good information how the outlook is on copper. Because cables is quite a big part in it. So if it comes and it's not only copper and silver. Rare earth, when you look into, you can actually, Vestas is It's quite open in that we have it in our sustainability report, too. There's quite a lot of rare earth in windmills. But it's not only the green energy. It is actually the whole digitalization of the world. If people would know how many mining resources on a mobile phone. I think they would look differently into the mining industry than they do today. There's a huge demand driver for these kind of minerals. And at the same time, the deposits are depleting. And we always say that, and from time to time, we get comments, not only we as FLSmidth, the whole industry, this is overstated. We know it because we analyze each deposit, because that is what we earn money on to offer then processes to get that little copper out. And I use my typical sentence in it. When I started to study in the 80s mining, a a copper deposit with 4%, 4.5% was normal. Today, we are happy with 0.2% to 0.4% copper in it. And there is no trend upwards again. So out of that, there is quite a demand. And when we talk about green energy all over the world with windmills all over the world. Fantastic idea, but we have to look, are we able to have enough material for that? I hope that helped a little. Yes. And in this respect, what are the yes, the mining companies, what are they talking about Yes, because I need I guess, at the end of the day, if this continues, they will need some more capacity and they will need to start some greenfield investments, but that's been holding back for years. So it seems like nothing really happens, but everybody can see it 2 years down the road. Yeah, but the but the situation where they are in, forget about the pandemic, which is a kind of taking a break in that whole cycle. They are faced since 2015, 'sixteen on with all rights, by the way, not that I give the wrong impression, they are faced with a significant increased sustainability view of the societies around them. Their water management, their emissions, their tailings management. That is what pressed them up to the level if they are wrongdoing that board members have to go into court and getting sued as private persons Because they approved something in the board, which is not good for the environment and kills then people or harms people and so on. That break, that, how to say, situation that they now scrutinize everything is since mid of 'nineteen ongoing. We call it a sit and wait situation. And that sit and wait means that whatever they would like to plan, and they have a lot of planning ongoing. It's not fair to say that they are not planning. They plan actually quite a lot, but they have to look into, is it possible to make a feasible study out of it that they get the approval. And that is where they look into, and that makes it for us so difficult to predict when the big ticket items are coming. And that is ongoing. And you will see that, that how to say trouble, ongoing for quite a while that it will not boom out like crazy because a lot of governments are not clear which kind of regulation they put on the mining industry, too. It's not only the miners to make that clear. We guys are always working with that. But we need, of course, clearance out of the regulatory offices means the governments and societies around the mine sites, what they actually target for and which kind of limits we have. And that combination gives that lowest investment level versus cash generation, which gives a fantastic potential for the future. And it will happen. Otherwise, we will have a problem to have mobile phones or the cost for mobile phone will go quite dramatic up. Okay. Thank you very much. And during the talk today, we'll start to do something so our phones don't increase in prices. Yes. Thank you. And as there are no further questions at the time I hand back to our speakers for the closing comments. Good. Thanks a lot. Thank you all for listening in and for the ones who ask questions. We wish you all the best. Stay safe.