M&A Announcement

Jul 29, 2021

Press Release

Hello, everybody. I welcome each and everyone around the world for the information on the signing date for the acquisition of the Thyssenkrupp mine business through us, Efelschmidt, here out of Copenhagen. When we look at from a bigger picture, This is a milestone acquisition what we do to, yeah, build further on our productivity provider number one position in the world. We come similar as Thyssenkrupp Mining looks today from being a big project and some service company and made in the last, yeah, 5 to 10 years a journey towards the productivity provider number 1 in the mining industry, built on sustainability and digitalization. That acquisition is and significant acceleration on our ambition to be leading in that sector. If we look into this transformational acquisition, at first for the shareholders, there is restructuring potential. There is a big potential in the Thyssenkrupp Mining Business to take it out to carve it out of the whole group structure. There is a big potential in towards higher growth, towards significant higher profitability based on our business model to focus more on products and especially aftermarket. And there is quite a big package of cost synergy potential of around €50,000,000 in it. For customers, we are now again in the top ten of the peer group into the mining industry and actually the leading one in the direct competing situation in technology and in size. We are then able from the pit to plant to offer any solution, no matter who supplied the original equipment and services, and of course, for greenfield too. That is an unbelievably valid and not to bypass supplier for our customers. Our improved geographic coverage and stronger aftermarket setup out of the FLSmidth culture will make us as a combined group significantly more attractive. If we then look into the 3rd pillar on the employees, the strong talent pool what we get because the majority over the round 3, 3,500 employees. By far the majority are mining people and they will join us. We have then a significant talent pool. We get great people on board with a great skill set, with a traditional setup to make good technology for several 100 years. And of course, we offer here a good path for development for each individual. When we then look into what we actually acquire, Thyssenkrupp Mining is the leading full line supplier in the pit side. They have a total installed base over 15,000 units and around 5,000 are active. They are around the world with engineering centers and service centers, very much fitting and complementary to that what we have. It's around 3 and 3,400 employees. And as I said before, by far the majority are business people, not overhead, not group function, not headquarter people. They have more than 900 active patents. They are market leading in a lot of technologies. The in pit crushing systems to electrify the mine site, to digitalize the mine site. That is where we have the big potential. They have market leading technology for example in grinding with the high pressure grinding roller mill which is their invention where they have reference list, competences and innovation. That combined with that what we have is very strong. The revenue is around €780,000,000 or close to €6,000,000,000 for the year 2020. And the year 2020 is of course the worst business year after the 2nd world war with the COVID impact and the figures are very much inflated negatively about that. If we then look into the strategic rationale, this acquisition will accelerate our growth and profit ambitions and gives us in the group around 75% focus on mining. It is definitely a significant better stronger value proposition for our customers. We cover more customer groups. We cover a bigger part of the value chain. We are very difficult to bypass in any decision of investment on the mine side. We have a significant opportunity here to do the same as we did with our mining business in the last 5 to 10 years, to bring it from a project service business into a product project and big service business. The aftermarket potential is significant. It gives us the possibility to be the driver of sustainability and digitalization from pit to plant in all the commodities. And the value creation with the synergy potential what we have is quite significant. If we look into the growth ambition what we have here on the left side you see a peer group analyze and you see where Thyssenkrupp and us are together with cement but the mining block and both together we are leading in that market in the mining space. And with the revenue what we then generate and have in the mining space. We are one of the big players and scale matters in mining too. Big investments of the mining industry will be only done with the suppliers who can prove that they are in size, in innovation and in capacity big enough to play in that league. Then we look into the market. We have since 2016, 2017 a little bit up and down development in the CapEx spend in the commodity space. On the other side, we have a significant higher commodity price level. We have well performing end customers, but we have the lowest capex spend versus production rates what we could measure ever. And the miners have to invest if they would like to keep that these production rates, if they would like to work on these deep leading ore grade deposits. If they would like to invest in more greenfield, That is where we will play and where we can help them and support them to do the business better in the future, especially under digitalization and sustainability parameters. If we then look into the value proposition for the customer in detail, Here you see on the top line where we as FLSmidth with the dark blue color play very strong and on the second line the Thorsten Krupp mining business. And you see that our strong play is actually in the plant the combination, the recovery, benefication, refining that is where we play very strong. We play very strong in the laboratory equipment too and we have some identified areas in the minerals material handling. Whereas Thyssenkrupp plays very much in the pit side and with some extraordinary important products on the processing side too. This is a very much complementary combination of 2 companies which creates a fantastic setup in the whole market space. We are then able to offer to the customer from the analyze of that what they have in the deposit to the concentrate any kind of digital and sustainable solution and making them more productive means more profitable. That's very compelling. Then if we come to the geographic coverage What you see here is a map where the triangles are fhmit sites and the circles are Thyssenkrupp mining sites and the reddish color in the countries is where Thyssenkrupp is bigger than we are and the blue one is vice versa where Efelschmitt is bigger. And you see it's quite complementary by especially knowing where mining business happens in the world. You see that with that acquisition we get a fantastic good coverage throughout the world in the mining space. A target what we had already with the implementation of regional structure and industry structure in the year 2018. This is a step change ahead and gives us a significant better balance between the different business developments in the different areas in the world. If we then look into the business mix especially with the aftermarket, we are around 60% aftermarket in the mining business. Thyssenkrupp today is around 30, a little bit more than 30% in 2020. 2020 is the COVID year, the year where not a lot of capital business was awarded to the suppliers where it was quite difficult for the mining suppliers to do business at all. The potential to bring that Thyssenkrupp Mining business into the range what we have so that we are together in the range of 60% The market is there. We proved it already with our own mining business that we were able to do it and we will be able to do it with the Thyssenkrupp Mining business too. Out of that, what is it with sustainability and digitalization? It's not only about the technology, it's actually about the market and when you look on the left side the premium market gets bigger through the demand on sustainability and digitalization because this is not easy to do. You need a lot of innovation, you need a lot of high-tech to cover that up. To make an emission free mine site is nothing what you can do through simple production. You really have to have good innovation and competence. That market, the premium market will grow and a combined company will play very well in that. And when you look on the right side about different approaches of the 2 areas and the 2 companies what they do. If we look I would like to highlight here one area the HPGR the high pressure grinding roller mill. We are leading in the segment part and then in the grinding part of that. A combination of both leading technologies will offer the industry a highly productive sustainable solution and that under the influence and value creation out of the whole line from the pit to plant creates a fantastic productivity improvement for our customers. Then when we look into the the driver of sustainability in pit crushing to electrify the mine site. This is where Thyssenkrupp plays a big big role in the industry, significant bigger than anyone else. We have a lot to offer from digital, from sustainability. They have a lot to offer in in pit crushing and making The pit completely electrified both combined in digitalization gives a full line setup which helps customer simply to earn more money in a better environmental footprint. Out of that I would like to give to Roland regarding the value creation. Thank you for that, Thomas. And as Thomas mentioned, we also estimate this deal to be highly synergetic. We are estimating a €50,000,000 run rate Annual EBITDA level of synergies that would be fully implemented by the end of 2024. We're also estimating about €75,000,000 in integration costs to complete the synergies that will be spent over the 3 years from 2022 to 2024. And let's just Remember, the assumption here is that closing will happen in second half of twenty twenty two in order for these years to apply. Another important thing with the synergy here is that this business is a carve out. And that means that Sella retains the entire headquarter structure, and we will take over the operations of this business. And that's considerably overhead that we actually leave behind. And then we will run the mining business In the existing EFL Smith structure, that is, as you know, more lean setup in terms of group and headquarter costs. And already there, we have cost leverage. Geographical overlap obviously also offers a great part of for potential synergies and footprint rationalization. If we look at the left side here, we expect most of the synergies to come from our site operations, production facilities and engineering. There will also be administrative and support function synergies, but a lot of that, as I mentioned, will be left behind. Procurement synergies, there will be some of And to a smaller extent, sales and service as we actually want the frontline to be the one from day 1, driving the Especially the increased sales and growth in service and aftermarket business. And then there will be some synergies from rationalizing the product portfolio and also combining our R and D efforts. And on the right hand side, we have given Our first estimates on how we think that the phasing of the €50,000,000 run rate synergies will flow into the P and L and also how we spent the integration costs. And between signing and closing, we expect to spend about 20% of the Implementation costs 50% in year 1 after closing and bringing 30% in year 2 plus after closing. And the synergies will run-in with 15% The first year after closing, 80% after 2 years. And then we had 100% run rate in 2 to 3 years after closing. And with the assumption on closing in second half of twenty twenty two that means full synergized by the end of 2024. And if we move to the next slide, transaction highlights, we also have to pay for this thing and the enterprise value Has been agreed at $3.25 And as most of you know, this is a price that we have agreed on a so called debt free and cash free basis. Reality is never like that. There will be different liabilities, lease liabilities, pension liabilities and so on that will be deducted. And there will also be cash in the acquired entities that will be added. And currently, we estimate the equity value at €241,000,000 And this will be finally pinned down once we close the business, expect to be next year. And that also means that We are acquiring this business at an EV to EBITDA, fully synergized and normalized at less than 4 times post integration. And yes, So synergies, we touched upon €50,000,000 full year run rate synergies and €75,000,000 cost to implement. We have secured funding for this acquisition through debt facilities and we expect to supplement that with equity before the transaction closes. We plan to seek approval at an EGM to raise up to 20% new equity. At the current market conditions, we expect to raise 15%, maybe up to 20% new equity market conditions depending. And if we should say a little bit about targets, then we expect Teekay Mining to be net profit and cash flow positive from 2024 on a stand alone basis. And then in addition, we will get the net effects from the synergies. We also expect the service targets or the share of service revenue of the acquired business to push the 60% level as we move forward. And just to say a little bit about the bridge about the negative earnings in 2020 and then these targets in 2024. I think it's important to remember that 2020 was the COVID year also for TK. They had some restructuring costs in 2020. At the point in time, secondly, when we acquire this business, it would be lifted out of the Headquarter structure in Germany, we will from day 1 start to push sale of service and aftermarket business to the installed base that will be margin accretive for this business. And on top of that, we will add synergies. And fifthly, The management team is currently restructuring this business. They are doing considerably better from the numbers we have seen for 2021. So we are confident that this is a deliverable plan. With regards to risks related to this business, as you know, we have been working on this more than 6 months. We have assessed the business and the projects that we Acquire via customary arrangements, we have done thorough a due diligence review that has been given reps and warranties from the seller. We are taking out customary insurance coverage for projects and for professional and liabilities and for known issues and issues highlighted in the due diligence, we have done risk sharing arrangements with the seller. And then we expect the transaction to close in first half of twenty twenty two, primarily conditional on merger control approvals. And just next steps, we have just signed and agreed to acquire Teekay Mining here late July. We will start immediately filing to relevant authorities, primarily merger control authorities to get the necessary approvals. That will run unexpectedly 12 months, maybe a little less, maybe a little more. So expect closing second half of twenty twenty two. We will one of these days invite for an FLSmidth extraordinary general meeting and ask for authorization to issue up to 20% new equity. And we will then execute that transaction between signing and closing and most likely sooner than later depending on market conditions. And with that, we give it over to Q and A. Thanks a lot, Thank you. Our first question comes from the line of Nick Houston from RBC. Please go ahead. Yes. Hi, everyone. Thank you for taking the question. I think I'll start with the service business of the assets that you've acquired. You did partially And to my original question by saying that you can get the acquired assets up to 60% services. But firstly, Why is it currently so much lower than FLSmidth's current level? And how long do you think it will take To get up to the roughly 60% level, will that be by 2024? Or is that more of a long term project? I'll start with that. Yes, very good question. So the target business of the combined company is 60%, around 60% in the service business. What we already have with that, what we have as own F. H. Schmidt Mining Business. We were on a similar level the aftermarket roughly 10 years ago with the mining business. It's actually not nothing what we saw before this 30%, 35% aftermarket in mining. Where does it come from? It's the old weakness of engineering service companies only to be focused on the next big deal and not so much on the little nitty gritty bits and pieces. Years back 2012, 2013, 2014, we did a lot to improve that. We changed the business model away from purely focused 70%, 75% project business into a strong focus on the aftermarket and products and only projects where it's profitable and when it can work out. And the same what we did over the last, yeah, 5 to 10 years in FLSmidth, we will do exactly with Thyssenkrupp with the big advantage that already the business model, vision, way of working, structure, region, customer says is already existing. The free the more than 3,000 people will come into our organization and fill up that structure what we have and giving us with that filling up and the business more potential to do aftermarket, what we already know what to do and how to do it to reach the 60%. We expect actually quite a fast speed in bringing the service business up percentage wise versus the total. Right. Secondly, obviously, Yes, as you mentioned 2020 is not really a fair comparable year. I'm just wondering what maybe a more underlying rate Profitability is for the assets that you're acquiring, maybe a 5 year average, if you have that information? Yes, we simply don't have those data, right, because this is a carve out by nature and it's also mixed in in other businesses with Teekay. But I think what we can say is that the run rate numbers we now get on a quarterly basis is considerably better, Considerably better. Great. And then the final one is Just about the size of the order backlog that you're acquiring, and whether there are maybe any An attractive long term project in there that we should be aware of. So the, we had in reality actually 6, 7 months work to come to that signing point. And be assured, the main work what we did was to analyze the risk. So risk mitigation was number 1 for us. And we think that we have with the reps, warranties, the whole setup, shared risk approach and so on, quite a good agreement together with the seller on it. We went through as much as we were allowed as competitors through all the projects. And of course, the projects what they got, we didn't get. We know the customers. We know the industry very well. And with that, we know how to how we had to evaluate the different risks in the projects. And we used the F. H. Schmidt system to evaluate if it's high risk low risk and so on. And that is what we covered with reps, warranties, the whole package, how we build up the deal. So from that point of view, we don't see any significant risk coming into our books. That's great. Thanks very much. Thank you, Nick. The next question comes from the line of Will Turner from Goldman Please go ahead. Hi, everyone. I was wondering, could you share a little bit more about The history of the Pacific Mining business. How long has it been Loss making for. And what was the impact from COVID last year? So like How is 2019 margins compared to the 2020 loss? And then like kind of related to this, You've touched on some points, but why do you think they've been loss making over the years? Like, what do you think has been the cause of them to Then this loss to make the situation? Yes. The at first, when you look into the PR landscape, All the companies still being on service and aftermarket disappeared, are getting acquired or disappear off the market, Western Companies. And that is a development what we see now for 10 years. And we took that by knowing that this will happen on our own company to develop into a product and strong service company in the mining part. And the same we will do with Thyssenkrupp. When we then look into the profitability of the Thyssenkrupp business, Thyssenkrupp is a huge company, around 200,000 employees, a lot of different divisions, a lot of group structure, headquarter structures, what big companies, of course, always have. But a cyclical business as the mining business is limited what you can take in bad times as these so called group costs. And to carve it out, to sell it off is actually the right thing what Thyssenkrupp is doing. And they say that themselves, that they are not the right owner for that. So the overhead structure, what they allocate into that business is significant and has a significant impact on the bottom line. On top of it, when you have that situation, this cost allocation and so on is quite demotivating for an organization and very difficult for an organization to know where to focus on. And that is in a structure as we have it significantly easier. We know if we make an aftermarket deal on the day what we earn and what it impacts us. We know on the day when we make a project what the profitability, what the impact short term, long term and so on is. And that is what we will provide. When we then look into the profitability of that business, the underlying business, it is actually significantly better then the year 2020 can show. Because in the year 2020 very big impact from COVID and on top of it the impact of the turnaround what they already started to initiate in 2019 by seeing that they are not performing where they would like to perform. And as Roland rightly said, we are limited in that what we can share, and the figures now look significantly better. And our trust against the whole organization and the management, what we saw, what they promised and what they delivered is quite there. But that cost money in 2020. And that is what you see in the result beside COVID, very loud and clear. Okay, that's very useful. And Kind of like you said, things are improving already. So I mean, could you give us an idea of just how they've been performing in 2021 vaguely so far? We're not really allowed to disclose that, right? But what we're saying is that they're doing considerably better on a run rate basis than in 2020. And it's still improving. That's what we can see. Okay. Thank you. And it's without all the advantage by being carved out of a significant group structure, what a big company like Thyssen Group, of course, provide the business with. Next question comes from the line of Magnus Kruber from UBS. Please go ahead. Hi, Magnus here. I was sort of wanted to explore the same angle on the margins there because obviously the €15,000,000 won't even Bring you into black here if you look at 2020 numbers. So to assess this properly, I mean, it would be very helpful to have a More up to date number on what they are running, but I appreciate it's not possible to comment that. I mean, if look at the project business in Tissenauer and on the Pure Project business, how large proportion is that of group sales? And is that something that you expect to sort of phase out over the next 2 years or so? How do you look at that? We have the same, if I may say so, weakness as we had. Every little business was defined as a project business. But when we look into, when we analyze it through as much as we could with the due diligence, quite of that what is today project business, which is around 2 third, more than 60 percent of the current business in 2020, is actually product business. And why is it defined as project business? Fairly simple, because the whole organization was built up like a project organization. Then whatever you do, it gets project business. It was exactly the same what we had in FLSmidth in 2013, absolutely no difference. When you look into our figure setup and what we do today, we have in the whole group around 25% project business left coming from 75% down. And if we only look into mining, it's around 20% of our mining business is project business. Around 60% is aftermarket, around 20% is product business. And that out of a year where the capital business was very, very low in 2020. So the transformational potential what we have and what we see by simply implementing a real product line management structure as we already have it in FLSmidth and where we will implement the on boarding business into will immediately improve not only the profitability, It will immediately improve innovation, customer intimacy and untapped the big potential of aftermarket business. Thyssenkrupp is quite good in crushing and grinding if it comes to products. And these products have a huge wear, a huge consumption of parts. That is what we will leverage. That is not what we see leveraged enough at all in the in the current business. There's a huge potential of refurbishment and improving and digitalization of installments in the pit side, where we think with our regional setup what we have already today and getting the new colleagues on board in the regions, we immediately can leverage and perform significant on a higher share for aftermarket. The profitability of that business what Thyssen Group has is in the line of that what you can expect in the market. So out of that the year 2020 from a purchasing point of view is actually a favorable year because we look into a company to acquire out of a disaster year based on the COVID mainly. And that from a timing point of view, when we look ahead on the CapEx spend in the mining industry, it's actually a perfect fit from a timing point of view. Got it and then if you sort of go back that did you say about 60% is currently sort of a product business as you define it for for Ecosmet? Now what I said is that we have in our mining business currently around 60% aftermarket, around 20% product business and around 20% project business. That should give €100,000,000 yes. Okay. Okay. And for Teekay, what would that be then for them the corresponding mix? Yes. So for Teekay, their projects business is currently what they call project business, currently 70%. And it's split fifty-fifty projects and products. Now what you will then see us do when we Hopefully close the deal. It's been more restrictive in terms of how we accept projects and into our backlog and at the same time starts pushing for us an up sale of service and aftermarket business. And that is why the split will relatively fast improve in favor of service and aftermarket business as a percentage of total revenue. But you will probably see, maybe in the short run, a slight decline in the revenue before we start growing again. But it will be highly margin accretive. Got it. So the mix shift to the 60 Percent in aftermarket, should we say, that comes more from growing the aftermarket rather than for services stepping away from the product business? It's both. It comes from both. Okay. And I'm not sure if you can comment anything, but If you look at the current aftermarket of the TK business, as you see if you look at the aftermarket for Freshmid, is it is The margin level comparable to what you see for your business? Yes. So Teekay's Major issues have been in their projects business and not so much in their service and aftermarket business. So the service and aftermarket margins for Teekay resembles what we see in our own business more. So they are relatively sound. The only issue is they are from a cultural point of view, from a mentality, organizational mentality point of view, the same as we were, not to forget that. We we we had exactly 100% the same setup and experience. They are all focused on making the next big deal. The little nitty gritty bits and pieces are not attractive in such an organization enough. And to create accountability, visibility, and clear performance measurement helps a lot to know where to focus a lot in the future. Got it. Thank you so much. And just one final one, if I could. Is there any product group you will sort of Yes, to highlight as a potential sticking point in any antitrust process? No. Where you see the highest overlap? No, nothing. Okay, perfect. Thank you so much, guys. And the next question comes from the line of Debasis Chand from Societe Generale. Please go ahead. Thanks for taking my questions. And just looking at the closing period and more than 1 year for closing, So just to follow-up on the last question, like do you see any kind of major roadblocks in terms of antitrust issues coming through Some degree overlap on business or regional. So I guess you mentioned not much on the product side, but anything on the retail side you might highlight. Just trying to understand like why it will take more than a year for the business to deal to close? Yes. The of course, we have to make merger filing all over, that's clear. And of course, the project business has from time to time can create in one country a huge business in a year when get one big order, and then the next few years it disappears again. So the, from a geography point of view, this is a moving thing. But we actually don't see a significant, how to say, issue regarding merger filing in any jurisdiction. But we are we have 12 months to go. We see when we compare the offerings what we have we have less significantly less overlap than similar M and As out of the decent time, out of the last few quarters. And areas which are named the same doesn't mean it's the same offering. I take grinding as an example we are very strong on seg mills we are only very very little on HPGRs and Thyssengrupp is little on seg mills but very strong on HPGRs. Both are in grinding, but in complete different technologies and offerings, where we have no or more or less no overlap. So that risk regarding merger filing we actually see as low. Thank you. Just looking at your comment on the negative free cash flow to the year 2023. So I was trying to understand like what kind of in terms of initial assessment, what kind of free cash burn are you expecting from the business, I would say over the next 3 years. Yes. So what we're saying about the cash flow of the acquired entity, that it will be net profit accretive In 2024 and it will be a cash flow positive in 2024. And then in addition, you get the net effects of the synergies. Yes, sure. Now just on a more broader question, I mean, I just want to understand what this It could mean for the Cement business, like does this push forward the timeline on your assessment of the Cement business So performance recovery potential means is there would there be any shift in your current decision over like the long term viability of the 7 business if it doesn't Perform according to your estimates. Yes, it is, if I understood it right well, it was about the cement business. The cement reshaping, as we announced it already several quarters ago, is ongoing. No change. And we already announced and made it fairly loud and clear in different quarterly announcement that we already since last year managed the business significantly more separate than we had it before. In the future, we will have around 75% Mining Business, around 25% Cement Business. And we see clearly a positive future for Cement. It is not short term. It's mid to long term, but we already see out of Cement business and the announcement what we did with clay calcination and so on that there is a huge demand coming up for Cement. And the interesting part, I highlighted that before very often, cement will be in the future a multi commodity industry, more similar like bulk minerals business in the mining industry. Because it will be not only limestone which will be the resource to produce cement. These, yeah synergy potentials what we then see already between mining and cement will be of course going on in the future. And Summit will have the advantage with the knowledge background out of mining. But of course we already said last year that it is important when you have a difference in size and or development of the market as we see it between mining quite positive in the outlook cement more subdued in the short term that we have to have a management structure which is more separated in managing the 2 businesses so that the top management is putting the capital allocation right and making the right operational day to day decisions. And that is already what we implemented. That's part of the reshaping of cement. Thank you very much. And the next question comes from the line of Claus Kiel from Degroof. Please go ahead. Yes. Hello. Can you hear me? Yes. Hey, Claus. Okay. Excellent. Hello, Thomas. First of all, a question about this restructuring plan that Teekay is having on their own. It is correctly understood that the company or you expect the company To be profitable in 2024 on their own. And then on top of this, we should expect the synergies that you're talking about, That should be absolutely clear. Yes, exactly. That's correctly understood. So Teekay is currently undertaking a significant restructuring of the business that we're acquiring. That has been on its way for a year, 2 years. They are ahead of their own plans on that. And we expect them to be on their own stand alone basis to be positive in 2024. So on top of that, there will be the net effect of the synergetic initiatives that we will implement. Okay. And then if I try to do a little bit Forward and try to add some of these synergies. Then I get to a point where the company will be Close to breakeven on EBIT level in 2023. Would that does that sound like a reasonable assumption or am I way off? I think you should look at 2024 2025, right? So we are giving you EV to EBITDA of less than 4x. And if you say EV is 3.25, Synergies are 50, then the underlying EBITDA run rate will be 30 plus. That's how you should look at it. And then we today telling you that they are well underway on their own. There will be initial initiatives once The deal closes in terms of our implementation of synergies and also the impact of detangling them from the headquarter structure in Germany will add cost savings. So that is the bridge towards that earning level. Is that meaningful? Okay. And just about yes, that's meaningful. But now you have mentioned these overhead Cost a couple of times and they sound like there are some very heavy overhead costs. But could you give us any indication of what The level is what are we talking about? We can't really do that. I don't know if you can say it's very meaningful, but It's a chunk of cost that we will leave behind. And it's one of the building blocks towards the €80,000,000 plus that we just deduced. Okay. Right. Thank you very much. Thank you. Welcome. Next question comes from the line of William My first one is really a follow-up on the services target 60% discussion. And I'm curious to know Whether you need to invest more here to build this service or whether the existing sort of capability at FLS can drive the change and whether this investment is captured in the guidance? Yes. At first, thanks, William. The Everything what we said regarding the bridge, the profitability outlook and so on is implementing that. It's all in. It's all calculated in as much as we see it. And we see quite a lot because we did exactly the same a few years ago with our own organization. The reason that the aftermarket in Thyssenkrupp is underdeveloped lies simply in the fact that they were more or less 100% focused on big projects. And then you let the aftermarket being done by others and smaller companies or Customers really have to knock very heavy on the door to get anything. And of course, you don't develop bits and pieces for that business. We already did that. We have a significant larger offering in the aftermarket than a few years ago. We implemented in 2018 a region structure where we cover all areas, some more, some less. We get new colleagues on board that will help us to be everywhere some more than some less in offering service and support to the clients. And then a lot of that what TK supplied and is supplying as well as what Eiffel Schmidt supplied and is supplying. You need people on the side to help customers to do the right decision and to implement it and to realize it. That is where we are great. That is where our business model really takes off, because we have the knowledge out of the process, because we still do some project business. We have the knowledge out of the products because we have minimum in the processing all the core component components what we think are important for the processing part. And we do all kind of services up to the level that we can take over mine sites or lines on mines to operate them and to maintain them. That all together is where the Thyssenkrupp people will come in and we see their run out of the last one, one and a half years to do more in the aftermarket. They see that and they work on that. So it's a welcoming, opening what we have for these colleagues to come into an existing structure. We don't need to build up anything new in structure. We don't need to build up anything really new in the offering in the aftermarket versus that what we not already would do and having on the list. Because our aftermarket percentage what we created is not only on our own equipment and offering. The offering can go to other brands too, but it is in the mining industry more and more important that you as the OEM provide the aftermarket. Mining industry is looking for the OEM supplier to provide the aftermarket thing. And that is what we can do with an installed base of more than 5,000 units from Thyssenkrupp better in a combined way between Thyssenkrupp and us. So the 60% is definitely not overstretched. We proved that we can do it and we will do it again. The question is only the timing, how long it takes to come there If we have a favorable business environment and not lockdowns and limitations to go on-site it will happen quicker. Okay. Thank you. That's very clear. And then I just had a question around this project backlog. Claude, I know you sort of talked about after due diligence, you have some protections in place. So my question is really about what happens now until The close given that Thyssenkrupp and FLS will be competitors and run separately. How are you protected against It is taking on any new projects with, say, unfavorable terms between now and the close. William, we are still competitors. It's Thyssenkrupp's decision, and we trust that management team and that organization a lot. Otherwise we would not have been bidding on it. Because in reality what we take over are people. We take people and their competence, the IP, the reference, the installed base. That is what we take over. And we know that they will act properly. I have in the group working with that M and A, as well as myself experienced to be on both sides of the table regarding acquisitions. And organizations behave when signing is done to make a good future because there is a day after closing where the new owner looks into and you don't want to come then with rotten business. You really don't want to come. And we see that the management which is in place today in Thyssenkrupp Mining already did a lot of good work in the last 1 to 2 years to get accountability up, which is in bigger companies like Thyssenkrupp more difficult to create. And with the announcement of Thyssenkrupp to separate the business out that they are not the right owner, that accountability increased significantly and with that actually the bottom line performance. So from that point of view, we are quite, yeah, how to say, yeah, full of trust that they will do the right thing. And then the last thing what I have to say, we are competitors based on competition law. We are not allowed to tell Tusa Group what to do and what not to do between signing and closing. Okay. Thanks, Thomas. That's all very clear. Thanks a lot. And we have another question from Markus Kruber from UBS. Please go ahead. Hi. Thanks a lot for taking my follow-up. So I think you mentioned 5,000 units installed base for Teekay. How large portion of that are they servicing themselves at the moment? And do you have any sense for how much the portion you might be servicing? So the Of course, we are not allowed to share a lot of data to make it like that or we don't know it, not myself, because we have to be in confidential teams and so on. But fact is that the 5,000 units, what they have are not served enough. Otherwise, you would have automatically a significant higher aftermarket share. And we know that if I look into our own business, This has nothing to do with DK. This is now about FLSmidth. When we started to come into a level of 40%, 45% range of the aftermarket by simply having an aftermarket structure fully focused on it is easy to achieve. Is really easy to achieve because you come from an own coverage of your own setup of maybe 20, 25 percent to 40, 45, 50 percent of the own coverage of your aftermarket or your installed base regarding aftermarket. On top of it, if you would like what we did to go higher, it is not enough to be only with the customer. You have to give the service people and the sales people, of course products to sell in the aftermarket. We did a lot. We developed a lot. We promised for 2019 to have more than 10% of our aftermarket out of the wear part business. We over fulfilled that by having more own produced wear parts. That is of course where the ThyssenKrupp organization as well the installed base and customers will benefit from. They immediately can go and it makes it easier for us to go to the customer because the original supplier is then FLSmidth and not Thyssen Group. So from that point of view, we see a significant upside in that we are already well prepared to welcome this the installed base and all the competence with the people. You will see quite a step change upwards. Got it. I'll actually ask this question a bit differently. So if you go back to 2013, how large proportion did you service then? And what do you service now for yourself, it was definitely the now I have to be careful what I say because you will look into the annual report or into the quarterly It was significant as far as I remember the real service work what we did was in the south of 40%. And then we had some other businesses in what we actually got rid of with some products and the wet gas business and so on. It was actually fairly low for a mining supplier in similar range as Thyssenkopis. Maybe a little bit better because we are quite strong in pumps and cyclones, which, Teekay doesn't have. That is the only differentiator in it. But otherwise, we were on the same level and the same mentality. Okay, got it. That's very helpful. That's good. And maybe also one book Do you have any comment on the on the commodity exposure for the ck business? Yeah, of course the they are more in the bulk where we are quite weak. That's clear. And the we are stronger in copper and gold, but we see that copper and gold is talking and investigating and doing significant more on the open pit mines to electrify. We see the demand, especially out of the copper industry for input crushing and so on, which was before mainly on the bulk like iron ore, really shifting, which we see as an additional upside for the technology and the competence we get into our company. Got it. Thank you. And maybe just the final one, I'm sure if you can Anything about that. But I mean on the surface side stand alone restructuring program TGS currently running, do you have any sort of Number on what they targeted in terms of profit uplift or the cost associated with that? No. We don't really have anything. We are trying to do what we can to enlighten you a little bit here, right, in how we bridge 2020 and then to 2024. The way we're doing it, we can we don't have anything else we can disclose Currently. That's okay. That's okay. I just one final one then, sorry. Is there any time between now and close that you will be able Any update on the run rate profitability of this business? Not that I know of, not that I currently know of. We may be reporting on a quarterly basis, sir, whether we're on track or not on track. That's it. Okay. That's helpful. Thank you so much, guys. And we have a question from the line of Robert Davies from Morgan Stanley. Please go ahead. Yes, thanks for taking my questions. My first one was just on the strategy to push up the aftermarket, the proportion of sales. Is there anything involved in terms of disposals within the assets that you're buying or form part of that strategy or is that just selectively Stepping away from more of those project businesses, I'm just trying to get a sense of the kind of top line progression that you're assuming While getting that asset market share up so sharply over that relatively short period of time? That's my first question. Thank you. The we have an existing region structure, which takes care of all the aftermarket and standard products. And that is where the new colleagues to a big part will drop in and serve and help and support to make that business. We know how to do that. They come with the competence where the installation is. They have the customer contact. They have the technical knowledge as well the IP, and that will immediately drop in. It's a fairly, fairly fast thing. Day 1 they will come in immediately in the business. Then when we look into regarding projects, we are of course very much focused on aftermarket and looking that real product business gets dealt like product business with and not project business. But we will go on with project business. That's clear too. Because Thyssenkrupp is a significant player in that and actually quite a successful one. Don't judge a company on 2 difficult years where 1 year is a heavy COVID impact. Don't judge a company on a huge Mava and group structure, which was struggling and struggling with a lot of other things, too. That all hits financially, the bottom line and that organization too, especially if the organization is relatively small. The Thyssenkrupp Mining is the old Krupp further technique with more than 100 years of competence, market leading in a lot of areas, still technology market leading. And that is what we will get in and that is what we will combine with our market leading approach and that in itself immediately opens the door for a lot of aftermarket business. Understood. And then just a couple of follow ups. One was around the lag between orders and sales in the business. I'm just trying to get a sense. You mentioned 2020 was a difficult year, but there must be some sort of lag between orders and sales. I'm just thinking about into 2021 2022, isn't there going to be a spillover effect into your No, into their sales number from orders that were weak due to COVID through 2019. So it's not, I'm just wondering how quickly that So the top line can really turn around if there's a significant lag between orders and sales. Thank you. Yes. As I said in the root cause of that webcast, A lot of these Western companies being in projects and services disappeared or were taken over by Airbus. What is actually the reason for that? The reason is that we enjoyed from the end of 2011, a downturn in mining, which was going on for the longest time measured and we measure since 190 4 in the mining industry. We had then a recovery of the business with smaller projects and more processing related ones in 2017 and then at the beginning of 2018. And then it slowed down again. That of course, that is what you see in the order book of Thyssenkrupp 2, because there were not a lot of huge orders everywhere available. That of course impacted them too. So out of that what we will see then in the revenue creation in 2021, 2022 and so on is the result out of that with COVID and the mining industry, how it went through the whole recession and the downturn. On the other side, we see in the market a significant increase for brownfield sustainable solutions. And sustainable solutions is not, how to say making a plant simply more green. It's actually sophisticated in-depth product, engineering, service supply to make customers more productive. I take tailings management where we as F. O. F. Schmitt play a big role. But we still have some gaps there where the product range what Thyssenkrupp brings in can fill up and offer more towards the customer. But when you make tailings management, this is an in-depth engineering project, processing project, where you then end up with selling products and services to the market or to the customer. So from that point of view, The result in on the top line on the revenue for 2021 2022 is actually out of that where we come from a mining downturn as well as the COVID impact. I see. Thank you. And then my final question is just, I guess, a bigger picture question. Essentially, why not focus on the existing SLS assets and try to push margins higher, maybe Target more acquisitions around digitalization or you obviously mentioned quite a lot around the digital strategy across FLS, which has Being quite important to you. I just wondered why you decided to go after this particular asset rather than doing maybe small technology bolt ons Focusing on the existing business you already had. Thank you. We did that. We actually did that in the last few years. We acquired quite a lot of companies. Last one was Knowledgescape, which is a pure digital company offering significant improvement in digitalization on grinding stations. We did that. And we are we will do that still. That's not the issue. But here, it is a transformational deal to make us in the growth ambition and the profit ambition, what we have, simply more around the world with all the customers, so that we are less depending if we have a COVID shutdown in Chile, for example. Because these things hit us. We are not well established everywhere in the world and Thyssenkrupp will add quite a lot of competence in that. Then our offering what we have you will see in the future that the miner will be not so much interested if you take Russia A or B. They will be interested that what they put in and what they get out, that they get it for the best sustainable and productive parameters. And that is what you only can offer if you have a line offering, and we have that. We are then from pit to plant, the best in offering. Whatever customer would like to do, it will have an impact on the whole value chain what they have, alone from digital and sustainability reasons. We can manage it, we can engineer it, we can offer the best solution, no matter what they already have. So out of that, it's not If we take Thyssenkrupp or Havas, it is to take Thyssenkrupp and Havas, and we will go on like that. I see. Thank you. And then maybe if I can just squeeze one last one in. It was just you mentioned not having sort of long term historics, but Do you have any sense of where the 2020 sales numbers are relative to the last sort of 4 or 5 year average? Could you think they're sort of Within 5% of the top, 20% of the top? Just be kind of interested to contextualize slightly where last year's numbers were, just see how much of an outlier they were. Thank you. No, I think that would be guessing. We have a little bit of an indication, but The carve out nature also makes comparability between the years a little difficult. So I'll refrain from that. I think what Thomas said About the backlog coming through difficult years, enable you to model a revenue decline at least in the near term years after closing. And then it starts to pick up again. That's the key takeaway from what we are, I think, signaling here. Understood. Okay. That's great. Thanks for answering my questions. And we have one more question from the line of Max Yates from Credit Suisse. Please go ahead. Thank you. Good afternoon. I just wanted to ask about the synergies and effectively the cost savings that you'll make By removing Disen Mining from the sort of larger parent company. And I just wanted to understand, are you assuming Those cost improvements are in the underlying business, which will get profitable by 2024? Or is that part of your €50,000,000 synergy assumption? Just trying to understand sort of where the benefits of that disentanglement fall within those two improvements of the margin. Yes. So the short answer here is that it is not included in the €50,000,000 So the way you should think about it is that Once we get together in 1 combo company, then we'll be able to extract the €50,000,000 on top of the combo. But the acquisition of Chusenkop will be a bolt on to our existing group structure. So that means by doing that you will In one move, improve earnings immediately by assuming that you can bolt TK on our group structure. It's not exactly that simple, but that's the thinking. Okay. Well, I guess my follow-up to that then is if I look Historically, at acquisitions, you normally, when you look at synergies, have the sort of combination of back office, head office costs. And reduction of those is typically quite a big part of the synergies. So I was just wondering then if that's included in the sort of business getting Profitable by 2024, where is the sort of majority of the cost synergies coming from? I assume it's early, but I'd love Here, any kind of color on that CHF 50,000,000 that you could give? Yes. So the way we think about that, so one thing is the headquarter sort of Distangling it from the headquarter in Esmerald, that's on its own. And then what we call administrative or support function, That is synergies taken out of the operational structure. So we're getting an operational structure that are fully functioning obviously from day 1, Including administrative function, back office functions, IT platform and so on. And once we start integrating, there will be synergies around that. And that's part of the 50. Okay. And just So to clarify the synergies further, I assume this is kind of entirely cost is the €50,000,000 You haven't assumed any Revenue synergies in there. But is that something kind of mean term that you would see as upside? Or are there some revenue synergies in that assumption? No, so the €50,000,000 is purely cost efficiency combination savings. Yes, we have no revenue synergies, if that's what the question is pointing at. There will be revenue synergies, but we also think of this synergy in the top line. So in that sense, they are sort of even steaming in of €50,000,000 estimate. Okay. And just one very final one. Have you been able to I understand a bit more about the sort of challenges that Thyssen has had in terms of profitability. Is it With these large projects, would you put it down to execution being too overly aggressive on chasing volumes? Or is it something else? I'd just really love to understand if you've got to kind of the root cause of exactly what the problems have been in their projects business? Without talking too much about Thyssen Group in general when you have and we have some experience in that too. On the negative side we definitely have. If decision structures are too complex, too many headquarters, too many layers involved, then you get that automatically because when the problem pops up until it gets sorted out and approved to sort out, it takes simply too long time. As larger the corporation is where you have that business in as more difficult as more risky that is. We built with in 2018 with the 2 industries as flat as possible, hierarchy level to work these things out and getting quick done. Then of course the other part is in when you look into how ambitious are you to create in a timeline the return on that project. And that of course, you have to have a clear model, a digital based model which works that out and gives wrong behavior in different entities or on people no chance. We have already an effort to meet that system. We run that after the disaster what we had in 2019, unbelievable thorough through. And we see that an acquisition easily can adopt to that and coming into that. And last but not least in project business It is unbelievably important to have accountability through the transparency of your doing, that when you get a deal that you see what is the impact in the organization if you do it well or if you do it wrong that's the best school. If the people see it and being accountable for it. In the structure as we are more a pure play and mining with that versus a huge large corporation where elevator business, steel business and a lot of communication is about that makes it of course for us as FLSmidth significantly easier to reduce that risk significantly. Because risk in projects is created by people and not through, I don't know, a kind of a being anywhere in the world. And when the people are accountable and see what they contribute, they make the right decisions. We have our own experience on that too. Thank you very much. Thank you. As there are no further questions, I'll hand it back to the speakers. Thanks a lot for participation here on the webcast for the signing date for acquiring the Thyssenkrupp Mining Business and hope to see you soon and stay safe. All the best to you, bye. All the best.