Earnings Call: Q2 2021

Aug 12, 2021

Hello, and welcome to the FLF H1 2020 1 Interim Report. For the first part of this 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. Today, I am pleased to present CEO, Thomas Schulz. Please begin your meeting. Hello, everybody. I welcome you all to our interim report for the first half of twenty twenty one, Of course, with a lot of information on the Q2 performance, here are the Welby in Denmark. If we look into the quarter 2 directly With the key highlights, we had a very strong order intake and cash flow in the quarter. We increased revenue and EBITDA. Our net working capital showed a very strong performance, altogether done by a great performing organization. And we announced on the 29th July, the acquisition of Thyssenkrupp Mining, which will then, when we have it and integrate it, Create a big global industrial leader into the mining industry under the top 10. If we then look into the market, mining is in a growth cycle. And it will go on. Question is, if it's Normal growth or a bigger growth cycle, but we will come later a little bit more in details to that. And We see clearly a mid term recovery for cement, but already an increased demand for green solutions. The guidance for 2021, we updated. We narrowed the revenue guidance from 15.5 To 16 as the low point, and we kept the DKK17 billion as the high point for the revenue guidance. EBITA margin stays 5% to 6%, but it now includes cost of around DKK100 1,000,000 regarding the Teekay Mining acquisition. If we then look into the mining market, this is a positive market, really good commodity prices, Demand grade, demand outlook grade, driven by sustainability, by digitalization, infrastructure builds, Infrastructure demand at all. It's a good industry to be in. What we clearly see in the industry is That the outlook, the demand for bigger CapEx investments into stationary Equipment and stationary solutions like in the processing or in pit crushing systems is quite good. It is there. Engineering orders are all there. The demand discussions are there. What is not there is the big order boom in it. And the reason for that lies in the COVID with restricted assess, as well as the managing Of the mine sites to avoid to have too many non owned employees on the site, as well as The situation regarding sustainability, to have more clarity, what are the sustainability targets and regulations for the miners? And with that, with the investments, if they can be done or not under new regulation and which impact that has. And on top of it, it is important to recognize that the miners are producing all time record high production rates And any disturbance in that production leads to, of course, yeah, disruption for them, and they will not allow that. But overall, this is a good industry to be in. When we then look to the right side, to our revenue, We have an organic growth of 13% in the quarter 2. And service grew 11% and capital 12%. And especially in the capital, that's a result more or less out of the order intake situation from last year. We performed with an 8.2% EBITA margin Versus a 7.8% what we had last year. But if we take back the M and A costs what we had In the quarter, then we are actually around 9.7 percent EBITDA. Now to the order intake, Service went up 12% and capital grade 86%. In total, 32% In the quarter 2. Yes. And the capital order was a larger, around DKK 200,000,000 order in it. If we then look to the right side, how the development is for the orders, you see That we are with the order level coming closer to that what we had pre COVID. The level what we had pre COVID, that means in the mid of 2019, we are in the way to go there, Which is positive news. If we then look into the setup of the service, this is a bumpy road. Service is the light blue bar. But when you look more detailed into the industry, you will see a difference in order intake growth For service between the mobile suppliers into the industry and the stationary suppliers into the industry. It is clear that the stationary suppliers, as we are one of them, are lagging versus the mobile ones. And the explanation is a purely operational simple thing. It is easier for mobile equipment To make refurbishment or any change and work on the units by simply taking them off the mine site into a refurbishment center, Because they can drive, they are mobile and bringing something in between in. When you have at the same time and stationary equipment, you can't move out a segment For a week, that's not possible. And that means to make a big refurbishment there or big aftermarket investments, you have to stop the production, And that is not what they like with these fantastic commodity prices. If we then talk about the outlook, we talk, of course, about Thyssenkrupp Mining. We have 3 main pillars for that acquisition. One part are the employees. We are in a growth cycle. The war for talent to get the right competence into the right seat in the right location will get more and more difficult. And we will get more than 3,000 top mining competences through all layers into our company. This additional talent pool to our talent pool creates 1 of the top 10 in the industry. And it creates a situation for the employees with multiple career opportunities. And we get more attractive In the future, for other people outside the company to join us. If we then look to the customer side, We are able to cover digitalization, sustainability, mission 0 from pit to plant. Whatever happens there, we can cover. We can add value. We can make business out of it. We can improve productivity. On top of it, a bigger company supplying into the mining industry has more money, More talents available to drive innovation, to drive new developments, which are absolutely necessary To fulfill sustainability goals. Beside that, an improved coverage Closer to the customer, more sales and refurbishment offices in the combined business are for the customers very important. Last but not least on our shareholders. This is a transformational deal. It gives us a possibility to do the same with that what Thyssenkrupp Mining has today, what we had 8, 10 years ago, An engineering service business to transform it into a product service business with some engineering in it and project business in it. The potential, the synergy potential of DKK 370,000,000, the transformational potential And the potential to create value with the new business coming on board as we deliver it in our mining business is significant. Big part of that is the aftermarket business. And the aftermarket business is in that Thyssenkrupp part Around 25% to 30% in a normalized year, and we can bring it to 60%. And that is where we should play. And that is a huge additional on top of it. If we then look into what we have here, the transaction Has a total consideration of DKK 2,400,000,000. That's the enterprise value. The revenue in 2020, Which was the COVID year, the toughest year after the 2nd World War and global economy, Was DKK 5,800,000,000 Of course, the EBITDA out of such a year is very much scrutinized. When we then look into when we expect to close it, in the industry, in that magnitude, in average, you have 12 months closing time. That's nothing special. This is normal. This is more or less standard. The strategic rationals on it That we get as FLSmidth bigger in mining up to 80%, 85% of the whole group, that we drive growth, That we drive profitability with that is clear. We get a significant stronger value proposition for our customers, Who more and more will look into the whole value chain, what they have, to get more sustainable, more productive, and we can offer everywhere something. We have a potential with the aftermarket opportunity, which is, from our point of view, today still untapped. The colleagues in Thyssenkrupp work on it, but it's still, from our point of view, untapped huge potential. We will drive Sustainability and digitalization throughout the industry. Our mission 0 gets more real with that acquisition. And of course, the compelling synergies what we have. If we then look into what the timeline is, which kind of points we have to do. At first, In 2020, which is the reference here, they have a high single digit negative EBIT margin. They are part of a huge corporate organization, multiple headquarters, quite complex as these Multi industry corporates can have. They recognize that they have to do something already in 2019 And initiated the restructuring program, what they already run. And as you could hear yesterday, Out of the Thyssenkrupp for them quarter 3 announcement, they highlighted multiple ways in the text as well as in the webcast That they are very much pleased with the performance versus that what they expected out of the restructuring undertaken. And They highlighted mining in the upcoming profitability, what they have versus last year in that part of Multitracks. That from our point of view proves the competence and the knowledge And the willingness, the attitude, the positive attitude of that group, which will work towards a positive result when we get That business into us. And there we are with the corporate structure and what we really get. It is a carve out business. Thyssenkrupp carves that out of the existing structure. Carving out means we get roughly 3,500 colleagues And more than 95% mining business related, not a lot of overhead related people. No headquarter. No nothing of that. It is actually an unbelievable asset light organization and business what we get into our group. And that fits us very well. The synergy run, what we have is 370 by end of 2024. When you look into the timeline, If we assume in the mid of 2022 closing happens, then we will have the integration Realization, the execution, integration planning already started after signing directly. But the execution of the integration will start in the second half of twenty twenty two. And we will run through in 2023 with that integration. And then of course, it's clear that the first time we can show the full synergy run rate effect in 2024. And then it's up to us where we already proved that we can transform a project service business as we did with our own into A product, projects and service business market leading to show that to the market with the same profitability as we have it in our mining business. Now into cement. Cement market got, of course, last year quite a hit. What we can say is short term difficult. As we said before, no change. Mid to long term, good, great potential. The industry demand already for green solutions Actually outperforms that what we saw coming a year ago, and that is very good. We see that the industry can deal better With the pandemic, we see, of course, that big CapEx investments are still deferred. They preserve cash. But the demand, the talk, the information getting on the industry side from us Regarding sustainable solution is really, really high. And our organization does a great job in serving customer base with that. We are leading in that. And it's not only about CO2 to make that clear. We said it before, CEMET will Transform in the multi commodity industry, where clay is, beside limestone, one of the resources utilized in the future To make more green cement. Then to the figures, we had a slight down in The reported figures on the revenue, organic more or less unchanged. And that is out of the low order intake, significant low order intake, What we had last year. Still with the business improvement and the reshaping and the top work of our CEM and colleagues, We were able to improve the result, still negative, but significantly less negative than we had it last year. If we then look into the order intake, which is of course showing the competitiveness and the attraction Of our offerings versus others in the industry, you see that we were growing the service by 42% And the capital by 59%. It's a 55% organic growth, which is great. If we there look to the right side with the period from Q2 2019 to now, you see That we are able to build order book same as we did in Mining. Actually, our order book, what we have for the whole group After the first half of twenty twenty one, it's more or less spot on with the order book what we had in the mid of 2019 pre COVID time, Which is a positive news for us. When you then look here in Cement, I would like to highlight the service performance quarter on quarter now for 5 quarters Increasing. And that shows what we as FLSmidth with our regional organization can do To serve customers and sustainability on the service side too. Out of that, we got To inform, we got the 1st clay calcination project regarding here in Europe To cut 16% of the CO2 with our French customer, Vikat. This is again a landmark Investment from their side, a landmark order for us showing how competent we are in sustainability and that this is not only talk. On the right side, it's about linked actually with that, the Fit for 55, the Europe Climate Deal. And when you calculate what it means for the cement industry to give some crisp figures here, we have roughly 180,200,000,000 tonnes of cement production, 150 to 200 in the EU 28. What comes up is €90 per CO2 ton Taxation. Not to make it too complex, but fact is there is still up to the year 2025, quite a lot of And allowance for the cement producers not to have the taxation. And you see when you have that situation, what it means, The reduction in CO2 from 19.90 to 20.18 in that industry is only 10.5%. That's not enough to fulfill the fit for 55. And it's not enough to serve the purpose and to fight against that what we heard at the beginning of the week In the climate report, fact is that we, from 2025 on, get an additional on top CapEx opportunity to transform the industry more into less CO2. It means in reality That you have around DKK100 1,000,000,000 for the period 26 to 30 additional taxation in the industry. Of course, This is not all potential for us because a part of it, maybe the bigger part, will go to the end customers like you and me in higher cost for cement. But a big part of it goes into new technology. And that is where we play number 1. And that's the reason why we think mid term, this is a great business to be in. And with that, I would like to give to Roland, our CFO. Thank you, Thomas. And financial performance Continued to improve in Q2. We increased our order intake by 38%. Our revenue grew by 9% organically. Our gross margin increased and also our EBITA margin increased compared to the same quarter last year. In fact, our nominal EBITDA increased by 50% compared to the same quarter last year. All this is well supported by our business improvement activities from last year, including a 12% workforce reduction. If you look a little bit on our revenue, it increased 9% organically. On group level, we're maintaining a 61% Service share of total revenue. And if we look at the right hand side, Revenue is growing. We are not yet back to 2019 levels. But for the 4th consecutive quarter, we are Having a higher order intake than we have revenues, so positive book to bill and also continuously A good and healthy service share. If we look at our gross margin, It also improved in nominal term, well supported by the business improvement activities. Percentagewise, we're up compared to last year, and that goes for both Mining and Cement. They both benefit From the improvement activities, but also from a healthy service and aftermarket share, even though Cement had an element of reshaping cost Included in this. If you look at our SG and A, our SG and A cost is up In Q2 versus Q2 last year and also versus Q1 this year, It includes €40,000,000 of Teekay acquisition costs, and it also includes cement reshaping cost And certain other costs for our physical footprint optimization that also includes mining and has group impact. And if we adjust for the €40,000,000 our underlying SG and A ratio was 17.1 percent and And our underlying SG and A cost is in line with our planning. We expect another DKK60 1,000,000 in second half '21 related to the TK acquisition. So a total of DKK100 1,000,000 And SG and A cost for the year of 2021. If we look at our EBITA margin, that also went up compared to last year, Slightly down on Q1 as we also had expected it. And if we look at the right hand side and compare Q2 Last year, Q2 this year, our increase in revenue is yielding us a DKK56 1,000,000, an increase And gross margin from both industries is yielding €35,000,000 We have €74,000,000 of non recurring business improvement costs from last year. Then we have a smaller increase in SG and A. And more notably, we have the CHF 40,000,000 in acquisition costs from the Teekay deal. And then we have CHF42 million that has to do primarily reshaping costs in cement, but also other costs related To our physical footprint optimization, that will impact both mining and the group as such, And thereby ending up at €197,000,000 EBITDA in Q2 2021. If we look at our working capital, that performed strongly in Q2. A strong effort here by our organization, bringing our net working capital ratio below the magic 10% limit for us. 8.2 percent net working capital ratio is the lowest we have seen, the best we have seen for several years. If you look at the right hand side, inventories are largely flat. They are being steered and also a little bit thinking about A potential uptick in service and aftermarket. We or the organization have focused tremendously At creeping our trade receivables at Czech, our trade payables went up a little bit in a positive way, also And thereby, a Vipps starting to increase. We received a few prepayments from customers connected to the projects that was posted in Q2. And Thereby, our net working capital improves to $1,300,000,000 coming down from $1,678,000,000 in the previous quarter. So really well done on this one. And that leads us to a strong Cash flow for Q2, both the cash flow from operations, but also our free cash flow. And on the right hand side, we That composes of healthy EBITDA, cash earnings that converts to cash, Strongly supported by positive change in net working capital. And that leads to our cash flow from operations on group level to 407,000,000 We have CFFI or investments of $64,000,000 and thereafter free cash flow to the group of 443,000,000 So a strong outcome here for the quarter 2, and thanks to the organization for this one. That means that our capital structure is well in line with our targets. Our NIBD is being reduced to 1.1 €59,000,000,000 a leverage ratio of 1.0x. On this basis here, we're updating our guidance. Our initial guidance in 2021 was a revenue guidance of €15,500,000,000 to €17,000,000,000 We are narrowing that to €16,000,000,000 to €17,000,000,000 for the full year revenue 2021. And then we will maintain our EBITDA margin of 5% to 6%. And this will now include costs related to the acquisition of Krupp's mining business at around DKK100 1,000,000 for the full year, including as previously guided costs to reshaping the cement Business. And this guidance is obviously still subject to uncertain due to the pandemic around the world. And with that, back to Thomas. Thanks a lot, Roland. So, now we are there. The last slide, what I would like to show here in the total package As a detail is about our own in house performance. And we have since 2012 A fantastic performance improvement on safety. But this year, based on the COVID impact, restriction chain opening, Not only in our industry, we see in a lot of industries that actually safety got on a slight worsening path. We take, of course, mitigating actions, but we are at the moment on a 1.7. Actually, when we had, last year, a 1.0. This is not good, but I'm actually impressed about all the activities throughout our organization to improve that. If we highlight another thing, and there we are especially quite proud of the greenhouse gas emissions. We are now on 16,000 round. The target is 38 for the year. And this is already significant lower than the year before where we had not a lot of things happening based On COVID, so that's an outstanding top performance in our own sustainability part. So to summarize a little, strong cash flow, strong order intake, increase in revenue, Real good increase in EBITDA, unbelievable strong net working capital performance for the quarter 2. We announced the acquisition of Thyssenkrupp Mining And we updated slightly the guidance on the revenue line. With that, we would like to go for the Q and A. Thank The first question comes from the line of Christian Johansen from Danske Bank. Please go ahead. Your line is open. Thank you. I have three questions. I'll do them 1 by 1. So first one, On the restrictions to mine site, can you just give us an update on what the situation is as of today? Yes, I can. What we see is that we have in some areas of the world Actually, no restrictions any longer. Of course, tests to go on-site and so on, but customers demand us Not to send in too many people. What is the impact for us despite the fact that it's actually open? Normally, we send in 2, 3, 4 engineers To make due diligence to go around with the customer to look here and there what we can improve. That is, of course, on a low level at the moment. And that, of course, has an impact on order intake. Then we have on the other extreme side areas where Customers decided still to block the mine sites based on the risk not to get the COVID on their side Because they are very far away from residential areas and the capacity what they have on mindset would be totally overrun on the health side If the COVID outbreak would happen very quick. And we know that the delta variance gets very fast into a bigger group. So overall, we have a more stable picture. The miners are dealing, yeah, more professional with it. The government's still more professional with it, but still it has an impact on the order intake development because for stationary equipment, You have to be significant more on-site than for mobile equipment. Understood. Quite clear. Then my second question is on this DKK 100,000,000 in costs related to the First of all, the remaining €60,000,000 can you give any indication of how that will be split between Q3 and Q4. And also just to be completely clear, this is not part of the EUR 560,000,000 you are guiding in introgation Yes. So thank you for that one. So we estimate that the €60,000,000 will be split evenly between Q3 and Q4 this year. And a very little part of this is part of the integration course. Understood. Okay. And then looking into next year, should we, I mean, expect that EUR 30,000,000 Run rate continue then or No, that should not Or is there a decrease of the cost you have now? No, but there will clearly be cost next year. But this is very much subject to when we do closing and when proper integration can start. So that's too early to guess about. Okay, understood. And then my last question. You also Mentioned on the call that the Coop reported the other day for calendar Q2. Are you able to share any details on the financial performance of Teekay Mining for the first half of twenty twenty one? Yeah. We are only allowed to share that what they say themselves. And they had reporting yesterday. And on multiple occasions in the text, what they have on the webcast, you will find the result for Multitracks. And then, of course, comments like that the profitability, in the same year before In Multitrack was minus €249,000,000 and at the moment it's €35,000,000 And they highlight, beside, AST, of course, mining as a contributor in that improvement. And that goes well aligned with the comments what they have in, verbalized that they are quite satisfied with the Performance of the restructuring ongoing in mining and that they are ahead of plans. More, We can't share because we have here clear competition situation. So That's the situation. But if you want, you can go on the thyssenkrupp.com site And then they have on the section where they report on the so called summary for Q3 As well as, a year to date text, both texts are around 50 pages. There you find multiple comments Regarding mining, that it's part of the improvement. No, no, I understand and not Seeing those, I guess, obviously, what would be nice is to have some exact figures on the mining part. But maybe just to understand The reason you cannot share exact figures, is that due to competitive reasons? Or is this a deliberate choice from Pfizer Group that you Do not want to share that. We have at first, it has nothing to do what they want to share and what not. It's purely legal, binding based on competition. 2nd, if it comes to expectation, how we see, of course, we see that the business will come into a quite Significant better situation than it performed last year when we have the closing. Why we are confident about that is 2020 is the worst global economy year since 1945, and it hit all the companies. 2nd, They have a restructuring. What they what they themselves publicly say they are ahead of plan. And 3rd, when we take over that business, it's a carve out. So we will not enjoy all the head Headquarter structures, building structures, whatever they have in the corporate group, which is quite significant in large corporations as they are. We get a carved out business, restructured in their way, and that is what we get in. So the profitability, what we will enjoy when they come over, will be significant better. And the colleagues know that, that we expect that. I understand, Portillo. Thank you so much. That was all my questions. Thank you, Christian. Thank you. The next question comes from the line of Klas Alma from Nordea. Please go ahead. Your line is open. Thank you. Yes, a few questions from my side as well. The first question goes to you Thomas. You mentioned in the beginning that the mining Industry has a great outlook and a great demand. When do you think we will start to see this in your order intake? That will be the first question. Yes. Yes, I don't want to make it as a joke, but we have already A significant order intake growth, 32%, 32%. We have a growth in service. We have a growth in capital of 86%. We have an order backlog mainly driven by mining, Which is already on the level of the mid of 2019, which is pre COVID time. So I think it's obvious that The hit what the mining industry got, our industry, the supply industry got in the COVID, we are moving out step by step. So that is what we already see, an 86% capital growth quarter on quarter. Then what you will see more is, and we reported on that before, we can see what is in the pipeline. The Pipeline and mining looks good. It looks really good. We have a lot of engineering orders. We know that the peers have a lot of engineering orders. So the industry is definitely intact for that. The reason that it's not released In a bigger amount because only a few were awarded to all of the suppliers. The reason why it didn't happen is The miners in the boardroom look into managing the COVID, managing the fantastic cash flow, what they have, By pushing unbelievable hard to produce as much as possible. And of course, they look into what are the Coming sustainability regulations, they are where they have the mine sites. That altogether Gives opposite to that, that they create a lot of cash flow, positive cash flow, that they have a fantastic demand, high commodity prices. They are, yeah, not that ambitious now to go out and to place the big capex orders. But they will come. That's a given. Otherwise, they will be not able to supply that cash. They will be not able to serve the demand. They will be not able to serve an increasing demand based on infrastructure builds, no matter if it's out of U. S. Or China or anywhere else, Digitalization and Sustainability. We are not at the peak of the cycle. We are at the, Yes. In a very bumpy road in a growth cycle, but definitely more at the beginning than in the mid or at the end of that growth cycle. If you look at the situation after Q1, and I know 3 months period for a Long cycle industry like the mining sector is quite short. But do you see the mining Companies are getting closer to push the CapEx button or are they still considering and figuring out whether Commodity pricing will stay at the current level, etcetera, etcetera? The you will not see huge movements this year. That is what we see. The big capital releases, some will happen, but the majority in the years to come. That is clear. Based on the three reasons what I gave, it is not logical to believe That with the situation what we have, that they now out of the out of any pre morning all come with bigger with big CapEx orders. We don't see that coming. That's not the information that we have from them. Their wording is, guys, no hectic, no panic. Diefel Schmidt, You will get your orders. At the moment, we look into high production rates, managing the COVID, and we need some more clarity In some parts of the world on the regulations, what we have regarding water, tailing stamps and so on. And regarding the commodity, there is no belief on our side that we really see a Downward swing on the commodity prices, which is out of the normal. Sorry, Claus, you had another question. Yes, that's very fine. So a question for Roland. This Impressive growth in the profitability you saw in Q2, how much of this is mix And how much is maybe pricing? Yes. So the profitability we saw in Q2 It's driven by a few things. 1st of all, we still enjoy a healthy service and aftermarket share, and that applies both for mining and for cement. Secondly, our business improvement activities is kicking in, right? That means, for instance, on gross profit level, We are running at better capacity utilizations, right, in our operations. And that's driving profitability. So if we look at 2nd half, most of this will continue, but we will start deliver on the orders, especially in mining that we received last And that means that capital will be a larger part of our revenue and thereby Way down on the overall mining margin in second half. So that's how we think about it. Okay. That makes a lot of sense. And by the way, thank you so much for the more color on your guidance per tradition. That was all for me. Thanks a lot, Claus. Thank you. The next question comes from the line of Claus A couple of questions about the Cement division. Your backlog is now starting to point up. And based on some Fairly conservative assumptions about the order intake for second half. I guess that at the end of the year, you will have a backlog that will point out Lapointe up by about 10%. You are also starting to reshape the business and taking out cost. So I guess, outlook for 2022 is actually not that bad. Could you comment a little bit about that? Yes, we can comment on that. The good job what the whole organization does is, As you rightly said, with the profit improvement and on top of it, what we always highlight, the repositioning Out of the CO2 producing more into CO2 avoiding technology for the cement Industry, which cost money, which is part of the reshaping, which is quite significantly hanging in the figures, not only last year, this year too. So we said before in Q1 that we expect that Cement will be positive on the bottom line in 2022. And we stick with that. And of course, maybe we don't guide for 2022, I have to say that. But of course, with the order backlog, with the demand in green technology, we will have a year where we really can see, yes, The positive bottom line will come. And when you say positive bottom line, do you mean the EBITA or do you mean net profit? I mean the EBITA, but it's a fair question. Okay. And then Also, I guess that your quarter intake must have Accelerated during Q2. Could you just give us any indication on the exit run rate for order intake In Q2 or beginning of Q3, yes, does drive a feeling for where the world is right now? Yes. In the, of course, what you have at the end of Q2 is, you have in the big, in the northern hemisphere, quite a lot of vacation time. Not that we appreciate long vacation times, but it happens partly in the world. And that always has an impact, Which means that the towards the end of Q2, you have a slowdown in business activities. That's normal. That's absolutely standard. And then it will get speed again in the Q3 and then it hypes normally into Q4. So that's the normal regulation In the year, if we don't have too much disruption out of COVID and lockdowns and blockages of transport and so on, Then, we foresee that roughly the same behavior this year. By the way, that's as we already guided. And we think that with the guidance and the COVID guidance, what we had, we are actually spot on. Okay, excellent. Thank you very much. Thank you. The next question comes from the line of Robert Davies from Morgan Stanley. Please go ahead. Your line is open. Yes. Thanks for taking my question. My first one was just on your expectations within the mining part of the business for Brent, to the asset market coming into the second half of the year, are you getting any indications from clients that they are sort of going to give you a bit more side access? Should it accelerate through the second half? Are you expecting a sort of similar trajectory through H2 versus 2Q? I'm just trying to get Feel for whether there's sort of further momentum to come in that aftermarket business in mining specifically through the second half? Thank you. Yeah. What we see is on one side that we have customers really trying to limit Any downtime to produce as much as they can. And that has, of course, an effect that our service in maintenance and that they are now coming into very critical stages. And that's that was a little bit a new thing that Miners are going public with that and saying we have to do more on maintenance and replacement business, substitution business to keep the high production rates up. What people from outside maybe don't see so much, we have quite a lot of miners that produce over the 100% capacity what actually the plant should deliver. You can do that. You can do that especially with premium equipment. And we are always proud that you can run FLSmidth equipment quite higher than the norm capacity. But of course, you can't do that all the time. It's like a little bit in a car. You should not drive With a car more than 200 permanently that is not good for the engine. So it's similar with the mining industry. Anytime it will come significant more in the aftermarket. Do we see that for this year? No. We see as we guided it for Normal year with the outlook in mining. And when they take a breath by force Because they have to stop because it doesn't work any longer or they see a possibility to have some downtime, then you will see immediately quite a positive development In the stationary sector of the aftermarket in the industry, we see significant more differences In the order intake behavior between the stationary suppliers and the mobile suppliers, then we actually see Towards commodities regarding in the mining industry. And that is quite good for us because we know we always lag Behind in that what comes as growth versus the mobile ones where we're 16 years in. And then my follow-up question was just actually along a similar vein really around site access issues. I know you had I think it was early in 2020, you had quite a big order, over €3,000,000,000 on the OE side in mining. I'd just be curious to know, are you having trouble With sort of deliveries, installations and commissionings on some of these bigger pieces of equipment, I guess the crux of my question is really, are we likely to Sort of see kind of pressure on some of the delivery of sales numbers through 2021 2022 and then a sort of pickup from there Does the COVID restrictions ease or are you kind of circumnavigating some of those headwinds and with testing and isolation? Just kind of curious to get a bit more color. Thank you. Yes. It's actually the same picture as we had a quarter ago, 2 quarters or 3 quarters ago. There's not a big change. What does it mean in some areas? We know there are restrictions that is factored in in some other areas. And this is really then the hurtful one If things are happening out of the no information before, a lockdown, we are not allowed to cross the border, Or like this morning, for example, in China, one of the biggest, if not the biggest harbor shutdown based on one COVID case, That if we would have equipment there, what I don't know yet, that will have an effect. So and we know, to give a little bit what it means, If in China that harbor goes one day down, we see the effect in Europe actually 3 days delay and so on. We can calculate that. We have a very agile Supply chain and procurement organization, we track that. What we see today and what we saw up to now and what we expect up to the end of the year is Completely factored into the guidance. It comes really out as we profiled it. Thank you. And then maybe just one final one, just on you mentioned some of the bigger projects, the miners themselves are not necessarily pulling the trigger. But I guess it sounds like you've got some confidence that they're going to come through. Any idea around sort of timing? Are you expecting a sort of far away for these larger orders to come through in 2022? Is it sort of too dependent on COVID to make that prediction Could you wait until 'twenty three or even 'twenty four before bringing these on? Or would that be too late in terms of the supply demand balances your customers are talking about? Yes. We think that we know it side by side. If they would like to keep the production rates In that demand or in that level as they want, we know exactly where they have to do the investment and where they can delay it further. And that is openly discussed with the customer, and the customer knows that very well too. 2nd, the when we look into that, Based on the fact that we don't see a demand drop, we really don't see a demand drop. And I take now the infrastructure bill, which will have not an effect on us this year in U. S. But this is not only building materials. This is driving minerals too. This is driving significant minerals too. And it will create a situation that other countries will look into infrastructure too, Because there is then a competition who has in the future the best infrastructure. China did a lot with Silk Road, and now The U. S. Is coming. Let's see what Europe, Latin America, Southeast Asia is doing in that. So the demand for minerals, the commodity prices, we really don't foresee In that cycle, that it will significantly go down. If it goes up, yeah, maybe a little bit here and there, but we think the level where it is is a very healthy level. So the customers have the money. The issue what they have is the timing based on production rates today and That there is a clear regulation what is allowed with water treatment and so on. And when we look into that and then I'm done, What we quote, we always quote options to upgrade towards sustainability if there's any change happening. That's a stronghold of us in the market, And we will enforce that further. That's great. Thank you for taking my questions. Thank you, Robert. Thank you. The next question comes from the line of Magnus Kruber from UBS. Please go ahead. Your line is open. Hi, Thomas. Roland Weins here from UBS. A couple of questions from me. I think first, and apologies, it's slightly of a bookkeeping Natur, I think when you commented around the announcement of the Teeko acquisition, you talked about returning to profitability in 2024. Is that sort of the Teekay business asset stance with their restructuring? Or is that also including the PPA, net of PPA that is? So what we are saying is in 2024 is going to be the magic year in the sense that, that is Where Teekay standalone, if you will, that's not realistic to talk about, but if they were standing alone, would turn around. That's also the year where we will see full run rate effect of our synergies by year end. And if the question goes to whether there are PPA effects, yes, there will be some, But they will not most likely not be material, right, just by looking at the way and the enterprise value and so on. There will be some, but they are included in that. Okay. So that's sort of an all in with synergies, with PPA, with everything, all in? Yes. Perfect. Thank you so much. That's great. And then secondly, on the aftermarket opportunity in Teekay, I mean, I'm not sure to at which point you actually really start to going for growth in Efelschmidt's aftermarket business. But I I mean, I noticed you grow your aftermarket revenue by over 60% between 2011 2016. Is there anything fundamentally different in the Teekay Mining business would sort of stop you from doing the same with the Digi business? No. I can say more if you want, but no. Yes. Please say, do you have anything more to say on the Magnus, the when you look into it, of course, We had, in the business a big project business, which was creating very little aftermarket in these days. But the world changed. Aftermarket today is sustainable investments to here and there a little, upgrading, Getting digital solutions upgraded. And these big, how to say, non aftermarket driving projects. Western Companies, as we see it with the ones who disappear off the market and quite a lot disappeared in the last 5 to 10 years, It's not really for Western Premium Suppliers. We will transform that business into a clear product line, Aftermarket service business with dedicated project business, where we really can contribute the full potential of sustainability and digitalization. The same as we transformed the Alfred Schmidt business into it. So from that point of view, We don't see there anything different. No, that's good. That's very promising. And just one Final one, I think you opened the books a little bit about the reshaping costs now in the quarter. This level that we saw in Q2, shall we sort of Expect that to be a run rate going forward until we sort of meet the cost that was starting up late last year or No, what you should expect is slightly less in Q3 and then even less in Q4 and then we should be sort of Out of the mist in terms of talking about reshaping costs. So Q2 is expected to be the worst and less in Q3 and then even less in Q4 and then hopefully we're out of the mist. Got it. But that's sort of the cost That's just meetings of our Yes, we're talking about the costs. Yes. That's talking about the costs. Yes. Perfect. Thanks all. That's all for me. Thank you, Magnus. Thank you. The next question comes from the line of Christophe Sevign from Handelsbanken. Please go ahead. Your line is open. Yes. Thank you very much. Two questions from my side. First one also related to the Richard, it's Hans Van Den and Bridge. If you could also comment on how much negative impact was in the Q1 for that? Can you please repeat? The connection was slightly gone for a second. Can you hear me now? Yes. Okay, perfect. Sorry about that. Now First question is also related to the reshaping costs in the bridge. I appreciate that you gave us for the 2nd quarter, But can you perhaps say how much that was impacting Q1 as well? Yes, exactly. So what we said in Q1 is that There were reshaping costs in Q1. They were not that big. And Q2 and Q3 would be the heavy ones. And the way it plays out now is that a lot of it has been taken into Q2. So we will take less in Q3 And then even less in Q4. Now just referring to the bridge, the bridge is not only reshaping costs, it's reshaping costs, Well, also other stuff we do in consolidating our physical footprint and that has to do also with mining and the group's General activities and so on. So there's a few other things going on in our business. Okay. But you don't want to give out a number for Q1 because if I remember you didn't give anything in the bridge then, just trying to understand sort of the underlying Yes, I understand. Yes. Most of what you see in that bridge is cement, but the rest has to do with other stuff that we do and that we consider You know normal operational business. Okay, fair enough. Secondly, I'm sorry to give back to the mining pipeline again, but just want to understand a bit more what you're hearing from your Customers in terms of larger investments now. I mean, when you speak to the industry, if we look at sort of underlying Demand and not taking these sort of short term production focus into account is your customers becoming more and more willing That's Greg. We gave. I know the industry typically say that they don't mind or take investment decisions On short term mineral pricing, but then again, if you look at history, there's simply a correlation. What I'm trying to understand here is that Is the pipeline improving for every day? Do you have investor visibility and have a best looking pipeline than you had perhaps a quarter ago? Yes. At first, there are not these fast movements. That's, so on quarter on quarter, that's and the decisions of the miners regarding an investment It's actually commodity price has an impact, but it's more the commodity price what they foresee for the years to come. Because that defines the value of the deposit and then the possibility what they can invest. What we see is deep leading ore grades, More infrastructure costs because the sites are getting more remote and on top of it, higher sustainability measurements, which always cost money. Which always costs more money, minimum in the CapEx investment. So out of that, that is a little bit what they see and what they deal with. And I said that before, the amount of deposits we work in the future on are significant lower in the ore grade Than 5 years or 10 years ago, which means you have to process significant more material to get the same amount of Atecopper now copper out With more restrictions on water, tailings dam and so on, that all creates a higher cost To produce the commodity, which brings automatically a higher commodity price. And they price that in. And at the moment, they get, of course, big advantage With the high commodity prices and that is not all in yet. So and that money they give to shareholders back As well as looking into where to invest for the future, taking over deposits or junior miners And having future plans, engineering orders, what we got awarded quite a lot, to plan for expansions as well as green lines. So that is how the people work. And when you look into and it's actually available on Internet, You look into the cash cost, what they have versus the commodity price. It's one indicator you see why they can pay so much Dividend out. And second, you look into the CapEx investment versus production rates. And you will figure out this is one of the lowest, if not the lowest For a very, very, very long time. And when a miner says long time, 10 years is nothing. So that mixture, of course, is that why we know the investments come. Okay. Let me put it this way because I agree with you that The margin over the cost curve is looking great. And it's understandable why miners are focusing on getting as much out possible given what profitability is. But in your eyes, if you look at your pipeline for the coming years, now versus a quarter ago, As things improved or we sort of stayed at the same underlying demand level? Yeah. What we see between quarter 1 to quarter 2, it's the same situation. We don't see a change. It's still quite positive. That's the reason why we have in the outlook more or less the same wording as before. Thank you. We have one final question from Lars Hopholme from Carnegie. Please go ahead. Your line is open. Yes. Hi, guys. I just have a couple of small questions on Teekay Mining. So one question is, Now you are going to acquire potential closing around a year from now. And You are targeting synergies, which probably implies a couple of Teekay Mining employees who will eventually be without a job. What can you do to make sure the good staff is still around at the time of closing? Then the second question and that goes to the project portfolio you're taking over from Teekay Mining eventually And the performance right now, so I assume there are project provisions on these projects. And if the provision reversals that can, of course, boost reported earnings, but not cash flow. So I simply wonder what the cash flow situation is in that business. And I also wonder about its Capital intensity, I don't know if you can give some comments on that, maybe some comments on how net working capital intensive it is. That's all from my side. Yeah. Hey, Lars. So let me start with regarding the people. And, the good thing and that or bad thing, No matter how we take it, I was myself in such a situation. When you sit in a business where you know that a peer is taking you over, And in that case, it was an 18 months, 18, 19 months journey. Why ever? And this one, what we see here, it's a very complementary business, but we still have merger control filing all over. And in the industry, As you know, 12 months in a with a peer on peer acquisition situation is a realistic figure how long it takes from signing to closing. How to motivate the people? Yeah, I think alone, and that is what we see over the different social medias, As well as the discussions, what we were allowed to have with the different levels in the Group, of course, under Supervision of the Thyssenkrupp, setup and management setup was very, very positive on us. German companies like Danish culture. That is what you can see all over. We have actually in a German city like Rostock, a Dane being the Chief Mayor, as an example. So that's like Our way of talking with them, our way how we explain and what we want to do is engaging them a lot. Of course, it helps that The owner today doesn't want to have them any longer in the group. Then these people we are interested in, more than 3,000 minuteing people, And that's the big advantage. They know mining. They know what we do. They know what we want to do. And we get unbelievable, tremendous positive feedback from them. They are good people, and we will get good people. The motivation lies in it that we are transparent, like On this webcast, what we want to do, where we go, what we expect, like the profitability and so on. And that we clearly say You perform well. You have a great career. That's exactly how we take it. So our Fear or concern is actually not there because in the Thyssenkrupp mining setup Are quite a lot of good managers in it, a good management team driving it regarding restructuring and driving it for the long term too. That all convinced us. And as you know, we know the industry quite well. We know the guys from Thyssen Group forever. They know us forever. We are more than 100 years in the same industry. So out of that, yes, we know what they got us orders. They know what we got And so on and so on. And there I'm on the next thing regarding the projects. Of course, we come out of a time as we know it in our own order book, where large orders are actually not so many as they were, Let's say in the years before 201112. So that in itself lowers the order book on projects. And with that, we know projects have a higher risk than aftermarket business has then a lower risk profile. Then we know that the, that you need provisions in the projects. And of course, when we looked and negotiated with We required to utilize and to take our provision build up, our way of handling, our Way of seeing risk as the method to judge what they have in their project portfolio. And that explains a little bit why from non binding offer to signing, which is normally 2 to 3 months, It took actually close to 7 months. That is it. It's the risk mitigation, which was for us number one priority before anything else. And then to the net working capital and cash flow, Roland? Yes, that was elegant. Thomas, because we are a little limited in what we can say, right? But in generic terms, like Thomas says, A business with overweight in projects would be expected to have healthy working capital levels. And maybe a little more flavor. As you know, Lars, we spend a lot of time in the due diligence in order to say understanding The risks and provisions in the projects and also whether we agreed with that or not. And In the agreement you do with Sela, you can regulate issues coming up, things where you don't think warranty provisions or others Have been done probably and we are also transferring Renewing insurances on that portfolio so that resembles what we have in our own business. And all that It's stipulated in a share purchase agreement that we do between buyer and seller. So that's what we have done at Bonnetiset. Then we have, of course, taken over the portfolio and all the execution risks and risk going forward is on us. Understood. Thank you very much. Thank you, Lars. Thank you. We have one final question from Tommy Rylow from DNB. Please go ahead. Your line is open. Hello. This is Tommy from DNB. Thank you for taking my questions. Just firstly on the mining base order activity. In the Q1, you said that Base activity was around SEK 1,400,000,000 probably impacted by some pre buying activity, And that doubled from the previous year's Q1. Now it appears that the 2nd quarter base Activity was around €900,000,000 Just wondering how do you see that in a way drop? Was the Q1 Fully impacted by the pre buying, were you satisfied with the base activity in the second quarter? And do you think that this sort of SEK 900,000,000 is the representative for the mining base activity levels currently? Yes. At first, when you look into the base orders, we actually flagged in the quarter 1 reporting that the quarter 2 will be a little bit less active. So you have that movement. And the movement, if your 2 or 3 larger ones have in, can be then €100,000,000 €150,000,000 on top of it, or down. So that movement, what you see between that what you described is absolutely normal and not any it doesn't make the world better or worse. This is the normal level. You see that bumpy road. And when we look ahead, this replacement orders, of course, We act relatively quick. We can supply quick if it's standard equipment, and then it comes quick in. And it all depends then can we assess the site or not? Is it possible to transport and to assess the site? Then last thing, what I have is, there are quarters where you, I don't want to say lucky, but You get all the bookings in the quarter because you supplied it, you were able to supply and others other quarters drops out into the next. So from that point of view, absolute normal behavior, and we stick to the same message what we had regarding the base orders. It's a very healthy situation for base orders. It goes on. But of course, as we obviously, it's a bumpy road over the quarters. And then to the figure level what you have. Yes, you are roughly in the range where we should be, the €900,000,000,000, 1,100,000,000 and that range is Not too bad. But there is so much movement always in and out that we are actually not giving guidance on the base orders. That would be too detailed in that highly volatile business. Understand. Thank you. The second question is really to Roland. On tax rate, which was very high in the second quarter due to the reasons you mentioned, but Any guidance for the full year or the second half? Yes. So I think on tax, we are currently a little negative impacted as long as cement It's not profitable because cement is taxed in amongst others Denmark that are relatively low in corporate taxation. So the combination of the split between the two industries and also certain countries imposing fixed withholding taxes and so on, The expectation to the average tax percentage is that it will stay between 35% or 40% for the remainder of the year. Thank you very much. Do we have further questions? No, that's fine. Thank you very much. Thank you. Thank you. We have no further questions. So I will pass back for any closing comments. Okay. Thanks a lot. I would like Close down our announcement of the first half year in out of FLSmidth was, from our point of view, in more or less all dimensions, quite a good improvement, Definitely not only versus last year quarter 2 and we are especially proud of the performance on the order intake on the cash flow