Earnings Call: Q4 2020

Feb 24, 2021

Yes. Thank you. Good morning, everybody. Thank you for your time to participate in our call, Annual Report and Q4 data information. So we are happy to present today, first, the NKC tables result. And then later, Pavel, the CEO of Photonics, will present the photonics data. So we have here in the room as presented, Aline, my CFO, Basil and myself, and then I will start with the presentation. If we look at 2020, I think 2020, I would consider for NKT a successful year, a transition year. So if we look at orders received, we have €2,300,000,000 orders received, 5 major orders in Europe supporting the green transformation. And we expect that this trend on the green transformation in Europe, but also beyond Europe, will continue in North America and also in Asia. Our operational EBITDA in cable tripled from $15,000,000 to 57,000,000 So this is at the upper end of the guidance, also what we communicated to market earlier what we expect and we delivered as our expectation. MKS Telephonics have some challenges in the first half of the year. But later in Q3 and Q4, we have seen some positive signs and some organic growth also in Q4 and Pavel will come back to this in more details. We were able to reduce our debt level and We closed the year 2020 with minus 0.4x positive free cash flow development, and we have some to capital successful capital increases with around €260,000,000 on net proceeds. So all in all, I consider 2020 as a successful but a transition year. If we look at Q4, We improved our earnings in cable and all the 3 business clients contributed to the results. We have been also selected for 1 more offshore wind farm as the 3rd supplier with a value of more than EUR 250,000,000 and this is not yet in the backlog. We have delivered on solution on the backlog and executed as planned. We have seen some negative impact in application due to COVID-nineteen on demand side, not on the supply side, But earnings despite lower revenues have improved compared to the same quarter in 2019. In service and accessories, we improved also. Organic growth in Q4 was 1%. But overall, for the full year, as you can see on the diagram, we improved revenues by 15% And in absolute terms, from €15,000,000 to €57,000,000 as indicated earlier, and in a quarter from €1,000,000 to €9,000,000 Looking now on the internal business line solution. As mentioned before, we executed on the backlog and had an organic growth of 6%. And our vessel Victoria was busy with various activities like more ease and so on. Overall, execution in solution was as expected. Looking at the high voltage market, 2020, I would consider it was a good year for the entire cable industry, but also particular for NKT cables with 5 large orders, SEK 2,300,000,000 supporting the green transformation. And the total orders award in 2020 was around SEK 6,000,000,000 where we got a major share of it. Most of the projects, which have been awarded with DC Technology And all the 5 projects, what you see on the right side, where we see technology 4 with XLPE technology and one with MI, the Artica Crease project. For this year, we expected that we are busy with tender work and we expect volume to be awarded more than SEK3 1,000,000,000 less than last year of SEK6 1,000,000,000, but SEK6 1,000,000,000 last year was heavily impacted by the German corridor projects. And we are busy in all these areas. If you look at the order backlog, we have a record high order backlog of a little bit above SEK 3,000,000,000 relative to SEK 1,400,000,000 in 2019. And we are active in execution on offshore wind interconnectors and oil and gas in the various countries as listed here on the rights site. Looking at the next application, we have some Headwind on the demand side, where COVID-nineteen was impacted us. And you can see that our revenues have decreased compared to 2019 from $92,000,000 to $84,000,000 But despite of the decrease of the revenues, we could still improve the earnings from previous quarter in 2019 for minus 2.6 to 2.4. So the negative growth still we could compensate through to better mix, cost efficiency and production efficiency. So the weaker market was mainly Sweden and Denmark. And again, it was the demand side. We have successfully rolled out ERP system in Eastern Europe, and this will help us also further in the future on transparency and driving efficiency. In service and accessories, we have grown 11% and revenue 39,000,000 a good quarter in service. We have also completed repair jobs, Kagerak 1 and 2, which got interconnected between Denmark and Norway. And we have signed new service agreements, 1 with ELEA in Belgium and one with a lead grid for the northbound interconnector. Overall, we have improved the business in the growth in accessories mainly driven by Middle East and also in Scandinavia. So we are very active since years on our climate program. And we have now our first cable supplier in Europe signed up for a signed base target. And we will continue this journey in reducing our CO2 footprint, Emission, all our power cables are running on green energy, and we are looking now how we can further improve our consumption by, for example, switching to biofuel and working continues to drive our CO2 emission down, and we committed to 5% decrease year on year. So we're working on scope 1 and 2. Scope 1 is our own emission and scope 2 is from the supply what we are buying, for example, on electricity, but we work also with our suppliers on Scope 3, how we can cooperate with them and reduce this, but as this is a major part of the value chain if it comes to CO2 emission. So with this, I would like to conclude the cables part. Overall, good. And now I would give it to hand over to Pavel and he can give you some insights on the photonics side. Thank you, Alex. Good morning, everyone. Glad to come after a good presentation from Alex on the improved results and Cable doing fantastically. Hopefully, we will follow on that as we go along. So, KK Photonics, we continued the positive growth, organic growth in Q4 that we have seen the beginnings of in Q3, which shows a reversal in the fortunes of NKG Photonics. It comes really after a very challenging first half of the year. First two quarters were not good. We got hit pretty hard by COVID. But this trend has reversed. We see that reversal going into 2021 into the positive areas that we had been experiencing before and hopefully move forward in the same levels that we were pre pandemic. We had a very good positive development in our Medical and Life Sciences. Despite the pandemic, that has been moving quite nicely forward. It's also a nice business that the global trends in is moving in the right direction. In In our industrial market, which comprises a number of different industries, we see the challenges in Q4. We have done better, but there's still challenges and there's still challenges that going into 2021, again, mainly driven by COVID-nineteen. I'll go through it a little bit further in the next slide or so. The development in our Aerospace and Defense business was pretty much flat. And again, a little bit disappointing to be flat, but that's again because of many projects that moved basically being presented as being hit by COVID, so they were delayed. We hope and see those projects happening in 2021. The EBITDA in Q4, even at 16.4%, which is pretty good, was much lower than it was in the same period in 2019, which was about 28%. So we see that again hit by a number of different issues, mainly the cost base that we had. We have built the company on higher growth. There had been somewhat of a less favorable customer mix, And we've had temporary yield inefficiencies, which we have overcome at the moment, but they hit us hard in Q4. Okay. So if we move to the next slide in business development, we are on Slide 15 for everyone a moment. You can see that the part of the Medical and Life Sciences, that's the part that has been growing the best in our business at the moment. We've had solid growth. The solid growth continues with a number of different areas. Main applications is in ophthalmology, in medical devices are doing very well. Ophthalmology and things like cataract and various other procedures is moving really well and so is our bio imaging and microscopy. Again, despite COVID-nineteen pandemic, all those areas have done remarkably well. The industrial segment, as I said, has been the main pain that we've basically experienced. Going forward, we see that easing up as we had seen in Q4 and as we see now going into 2021. And finally, the aerospace and defense market have been relatively flat, as we've said. However, with our very large customers we see improvement going into 2021. And with that, I will pass over to Lina, our CFO. Thank you. Thank you very much. Yes. Taking us through the financials of the quarter and the year, Here on our income statement, the main element to pick up here is the revenue growth. And if we start by looking at the full year for cable, you see a very nice revenue growth of 15% for the full year, so good recovery. And staying with the recovery, even noting here that the Photonics, as Basil alluded to, is coming to Q4, Getting into a growth mode again. So with the stabilization of in Q3 and Q4, we're now into a better mode. Going into the operational EBITDA, of course, It's a good place to be to see that we're improving our operations EBITDA to the degree we do of a doubling compared to last year. This constitutes of both cables and photonics contributing positively in the quarter of Q4. And then looking into the further down the lines, I think stopping at the EBITDA for the year, the 49,000,000 And if you go further down, you'll see that we are getting to an additional of $75,000,000 for the full group or negative $75,000,000 And the main contributing factor is I would note also that our taxes is different compared to last year, very much related to the revenue recognition differences between IFRS and local tax accounting, but also the capitalization of deferred tax assets. So an improved operational performance definitely and revenue growth that it's a very nice thing on the year. If you turn to the next slide, going into a few of the highlights on the balance sheet. And on the working capital, I should say here that it's an unusual low yield for 2020. We came in very low already in 2019 and now it's To improving further. The next slide, a little bit more on that. But then down to the return on capital employed, which is improving also for the year, contributing from the improved earnings on the NKT. On the leverage level, we are at a very different place now compared to where we were earlier. And so the issuance of new shares and And development in the working capital takes us at a very good level. So the debt right now the leverage ratio at minus 0.4 times EBITDA. So flipping to this slide on working capital just to give you a few insights to this, it's very much related to the big backlog of the wins in 2020 that we saw and the prepayments. So I would also not expect this level to continue as you've seen before, there's a seasonality pattern to this also, Right. So in that sense, Q4 came out very nice for NKG. And then flipping to the cash flow statement where I would start at the bottom of the table here for Q4. So the net cash flow of $232,000,000 is very much, of course, impacted by the additions of new shares last year. And then going off further, you see improved earnings also coming into a positive cash flow for operations this year. And then you also should note here that now we are we have ramped up the activities around our investments. So our CapEx is increasing and you will see even more of that in 2021. If we then go to the next slide is our leverage ratio. And here you, of course, see the investment of sorry, not the investment, the impact of the issuance of the new shares. And right now to say, we had total available liquidity reserves of DKK536,000,000 in this year in 2020, and that consisted of cash of DKK 239,000,000 And ungrown credit facilities of €299,000,000 And just to note that, of course, 2021 is a year of big investments within the Within the cables business. So this will, of course, change our cash position looking at it. If you turn to the next slide, here we have the financial outlook for the year. We are reconfirming our guidance for the year on the cables, NKT, And of the €1,100,000,000 to €1,200,000,000 revenues and operational EBITDA margin of €80,000,000 to €110,000,000 So we expect to continue to grow and also certainly improve our operational performance. And when we look at Photonics, Just to remind you that, of course, 2020 has been the year of fluctuating performance. We still go in with some uncertainty For 2021, not knowing exactly how COVID will impact us, but despite we see a stabilization in 2020. And of course, in our guidance for the year, we believe that revenue growth of 0% to 10% And looking at the EBITDA margin at 3% to 7%. And noting on this that we have included restructuring costs of around $1,500,000 related to FTE's reductions in the business. So therefore, you see this level. But this will, of course, pan out into an improved performance going beyond 2021. That's our expectations. So if to close this presentation and also the questions on the key messages of 2020, It's a record high order intake and MKT is very well positioned within the global trend of the green transformation. So that's a very positive note on the events of 2020. We are improving our operational EBITDA more than tripling NKT performance, good contribution, strong contribution from all business lines. We are landing in the upper end of our guidance on EBITDA. And looking to Photonics are challenging 2020, but good to see the recovery in Q3 and Q4. And finally, also that we changed our whole capital structure and we now have a stronger balance sheet and a much lower debt level than the positive free cash flow contributing. So by that, We will leave it over to question and answers. Operator, we are ready to take question and answers, please. Thank you. We have a couple of questions lining up at the moment. Your first comes from the line of My first question is around Solutions margin in Q4. Can you maybe elaborate a little bit about the drivers of a weak margin and maybe confirm whether you've Any cost overruns on projects or maybe project delivery delays? And also, if the margin weakness is driven by just delivery of But by finalization of weaker margin projects from the backlog, how much of a headwind or for how long that headwind could continue in 2021? I mean, we executed the backlog and the revenue recognition is, of course, depends on the project which we execute just in this quarter. So we expect that the margin obviously will improve going forward in 2020 because otherwise we could therefore, we guided also on on values of SEK 80,000,000 to SEK 110,000,000 for next year. So it's a little bit weaker, you want to say so, the quarter, but in Q4, but overall, better than the year before. So there were we have no I mean, no major delays in projects. In some, we have, but not substantial. So yes. Okay. And just to confirm, you haven't had any Cost overruns in Q4? No, we have I mean, we have we don't comment on specific projects. Obviously, you have some projects where you improve the results and some where you may have some challenges, but no overruns, no major issues to report. Okay. Thank you very much. And my second question is also on Solutions margin. Could you maybe give us some color on how much better margins in the backlog 2021 and also thinking about your outlook for cables of SEK 80,000,000 to SEK 110,000,000. Could you maybe confirm whether with Current backlog, you have the lower end of that guidance already secured? I mean, with the orders which we are taking in And with a better demand and supply base, the margin situation improves also. And we have still some project with a weaker margin in the backlog, which we are phasing out. So we expect that this improves now in 2021. Okay. But I guess in terms of the group outlook, 82 the cable's outlook, could you confirm that the lower end of that Now this is already secured in your backlog. Yes. I mean, as we said, we were quite successful last year with SEK 2,300,000,000. This year, we expect the market of more than SEK 3,000,000,000 and we are active in all segments, interconnectors, offshore wind and oil and gas, and we expect to win our share of the orders which are out. So the timing of this large project can, of course, vary, but we expect to win some orders, and we also can take some orders, particular to improve the mix in the factory on the 3 core ACC cable side. Okay. Thank you. But I guess just to elaborate a bit more on your EBITDA outlook for 20 Q1, what are the major sort of swing factors determining whether you will end up in the lower or the higher end of your outlook? Yes, on the higher end, we need to execute the orders which we have in the backlog, flawless without any execution issues. And so what we need also to secure 1 or the other order as just mentioned, particular on the 3 core AC side to have a better mix in the factory. This will contribute towards the higher end. And then on application side, we have improved from $19,000,000 to $20,000,000 from around $0,000,000 EBITDA to $14,500,000 We plan continue this journey to further improve the result on the application side with higher factory output, more efficiency, cost consciousness and being more selective on orders. So this we need to continue. And then on the service and accessory side, we need to get some offshore repairs in 2021 and continue also our performance on the accessory side. So if that all ends up, then we will move towards the higher end and if not materialize, then it will be rather on the lower side. Okay, understood. Thank you very much. And my last question It's about your outlook for the market of SEK 3,000,000,000 in high voltage segments. I guess, could you maybe talk a little bit about the phasing of those projects? Are there Any bigger projects for you to win in Q1 or Q2? Or the phasing will be more H2 weighted this year? And also secondly, What are your underlying assumptions for interconnectors within that SEK 3,000,000,000 market estimates? And maybe you could name any particular projects you include in that estimate? Thank you. I mean, if you look at this year, there is in UK, the CFE down with where we're talking 9 to 12 gigawatts. So this will happen towards the end of the year or potentially could even slip in next year. That is a big event. Then we have several interconnectors, 3 interconnectors. And here it's difficult to predict really from the timing point of view. How they materialize because there are so many aspects which are relevant. And those projects are well known. I I can also mention them. It's NOI Connect, Quick Link and Nord Connect. These are the 3. So but exactly what is the timing and will one or the other even potentially move into the next year is difficult to say. Thank you very much. Thank you. Your next question today comes from the line of Claus Almer of Nordea. Please ask your Thank you. Yes, I will also have a few questions. The first will also go to the cable division. What about the pipeline outside Europe? Should we expect 1 or 2 or maybe even more projects outside Europe to be announced? That will be the first question. I mean, there's a project outside of Europe and North America, offshore wind and interconnectors. And we also attend on those projects. And there are also projects in Asia, which we are also active. So again, the same applies like for Europe. The timing can vary and when they will exactly happen. But we are on several of these projects. And do you need to make more performance bonds So those securities when you are active outside Europe or is that just a normal project for NKT? That's normal projects where you have your performance bond, your different bond. There's nothing specific where you have a higher bonding requirements in projects outside of Europe. Okay. And then as to pricing, in past calls, Alexander, you have mentioned a, let's just call it, a positive pricing Trent, is that still the case? Or maybe you can push some more color to how the pricing environment is at the moment? Yes, I can say overall, the utilization has increased in the cable industry, which is very positive for the whole industry. And we have a good success rate last year, so we can be more selective. And I guess also in the industry, the higher utilization logically will result in more discipline on pricing side. So I would confirm it, yes. That sounds good. And then a question regarding Photonics, Basil, in giving the guidance for 2021, even looking at the high end of the range on the EBITDA level, It is not that much higher in absolute terms at least than what we achieved in Q4 2020. So maybe you could put some more color to Why you are not more optimistic about the 2021 even at the high end of the guidance? Okay. Yes, thanks, Claus. I think If you look at Q4, Q4 is always our largest quarter. A lot of what we ship goes out in Q4, actually A lot of what we shipped goes out in December of Q4. And hence you saw the 16.4% EBITDA number. That is really, if you look at our past performance at the top end of every year. So Q4 is always a good year. So you can't really compare Q4 with the full year going forward. 2021 for us is a year that we are readjusting the company. We are looking at our Core business, there are some one offs that Lina mentioned in her talk that will affect us in 2021. What we're doing really is building the company for the type of growth and the type of EBITDA levels that we had before. So going into 'twenty 2, that's what we're building the company for in 2021. So you should see again the sort of double digit growth in top line and organic growth and you should see EBITDA levels starting to hit the 20 plus That we've always been forecasting in the past. You should see COVID has basically hit us and knocked us sideways and we're going back on the path by essentially concentrating on our core business and readjusting the company to do so. Right. So the reason why I mentioned Q4 is, I know you're always doing a great job in Q4. Hopefully, you will do the same in Q4 2021. But it seems like the 1st 3 quarters of the year Will not show a lot of profitability, if any. Is that the way we should think about 2021? No, I think what we're saying is we should be cautiously optimistic. So the business looks much better. And we are doing better and we're doing better in Q1. In fact, we're doing better in Q1 than we have in any other Q1 before. We still have COVID. And that's the wild card. That's the joker in the deck. I would be a very brave man, Claus, if I would sort of be highly optimistic considering that we should have 2 more quarters at least or maybe 3 more quarters of COVID. So I think that's the cautious optimism you see, but there was also conservatism there to move forward. Fair point. And then I'm sorry? I don't like to have a sheet on this one. That's a fair point. And about the order intake, I think you there was in the report The growth in the order intake between Q3 and Q4 has been quite substantial. Can you put some numbers or some more color to how the backlog Looks going into 2021, that will be my last question. We don't report on that in exact numbers Because it varies so much and we are in so many different industries and what gets pushed out gets pulled in and it will be just a mixed And you'll have some quarters very high and some quarters very low. So it's almost nonsensical to report on a quarterly level. All we can say is getting into the year, the business looks good. Our backlog looks good. It looks much better than the start of many years, but we're being cautiously optimistic. Okay. Thanks a lot, Persson. All right. Thanks, Lars. Thank you. Your next question today comes from the Christian Johansen of Danske Bank. Please ask your question. Yes, thank you. So two questions for me. First one is on And whether you can elaborate a bit on this minus 8% organic growth in Q4 and how it does relate The pandemic and also how it differentiates between low voltage and medium voltage. Thanks, Ian, for the question. Christian, first of all, on the COVID-nineteen side, we are fine on the manufacturing side and also on the supply chain. But we have seen really that some countries that the weaker demand like Sweden, UK also building wires to a certain extent. So it's difficult to predict how this will continue here or not continue in Q1. We despite the lower revenues and negative organic growth, we still could improve our earnings. So with our actions to improve the profitability, we are on track. And so, considering that if the demands come back, we assume that we will continue on the improvements. So we are not concerned on that side. But this is the part which is difficult to influence. Of course, we try to compensate with other countries, other customers, but that was limited possible in Q4. I understand. So just to clarify, so it's primarily the Low voltage segment and the construction demand, which is creating the headwind in Q4. Is that how we should understand? Yes, you can say. So it's building wires is one area. And then we see also a little bit the impact here that is not directed with COVID-nineteen on the utility side in Sweden with that's more a regulatory thing, but it's a lower demand. So And but it's we will see how that will continue or will not continue. It's too early to say. We are now just in February, mid February. So and I can also not comment on the Q1. Okay. Understood. Then second question is on MKT Photonics and the cost ramp up and the cost Adjustment. So in Q4, you say that you are increasing costs to prepare for future growth. And now you're also talking about some Redundancy costs. So, Patrick, can you maybe just elaborate a bit on how you balance this current challenge on your profitability versus What sounds like a firm expectation that once the world normalizes, the growth potential is there and you still need to ramp up. Okay. We did not increase costs in Q4. The costs had been there in The complete year. So we did not adjust the cost increasing in Q4. But we being a growth company In high-tech, we have looked forward and increased our cost base with the expectation as is prior to the pandemic that we will have higher growth. And hence, when the pandemic hit, it knocked us sideways or slightly backwards. But we've already built in the cost that we had. And so that affected us in the year. And obviously to adjust and to adjust to the change in business and to the new realities out there and the different sort of paths that our markets take. No, no, we're in a number of different markets. So each one is going at a different pace. To adjust to that and to adjust to the new reality and to keep the increase, we have to reorganize the company. And that is being done in Q1 going forward. And we see we should see obviously the one off costs that will hit us and we should see again going back to positive growth both on EBITDA and top line going forward. I mean, that's our, like I said, our cautious optimism looking forward. And where exactly is it that you are taking cost out? Can you be a bit more specific on that? It's everything. We are looking at working capital. We are looking at Headcount cost, we're looking at readjustment, the reorganization, looking at the priorities that change. So it's not one There's many, many levers in here. As I said before, we operate in completely different markets. So Some markets are not moving at all, some are moving backwards and some are actually doing exceedingly well. So we are concentrating and reconcentrating Our efforts both commercial, engineering, manufacturing on the core business and on where we're doing well. So there's not there wasn't one lever. There are many, many levers in there that we're using. That's understood. Very clear. That was all for me. Thank you. At the moment, we do have 3 more questions. Your next question comes from the line of Akash Gupta of JPMorgan. Please ask your question. Good morning, everybody, and thanks for your time. I have a few questions as well, and I'll ask one at a time. My first question is about Solutions business. So If you look at 2020 performance, then I would say that quarterly performance has been a bit volatile. And the question I have for you is that when we look at 2020 Can you comment on phasing of your backlog that how you expect H1 versus H2 on both revenues and margin? So 2021, I mean, the quarter is, I would say we have, in particular, in the first half, still Mi projects, Arctic Creek and Viking in it. So that should positively impact the quarter. And overall, it really depends on which project we have in the backlog in which we executed and what we will see. But we don't guide here now on Q1. So it's clear that solutions needs to pick up in order that we deliver in the guidance which we gave €80,000,000 to €110,000,000 Thank you. And my second question is on this offshore wind growth. So if you look at the forecast from 3rd party significant growth will be coming outside of Europe and we see some of your competitors are either working on or contemplating plan to have a manufacturing footprint outside of Europe. So maybe And on a 5 year view, do you have any such project lined up? And then the question is also like how much of this growth outside of Europe, can you address with your footprint, existing footprint in Europe? So at the moment, we are on the implementation phase of the expansion of the Calkrona and Cologne factory. And with this, we have good cover, And we can also serve out of Europe, North American market. And also, we can also deliver towards Asia. So at the moment, we have implemented investments, which are ongoing. Thank you. And Next question is on portfolio. I mean, if I look at applications business and size of that business compared to some of your other competitors in listed ones, where basically they use application equivalent business to generate cash flow and use that cash flow to fund growth in projects. And clearly, compared to these players, your Application business is quite subscale and you have a very big project business. So if we look at current portfolio and Yes. What's your thought on application business like how Code is that business? And let's say, if you get a good price, then could we see you might exit that business and become more of a pure play in solutions? No, we are not considering to it is application business. We are working here on improvements also on the cash side to generate positive cash flow from applications. We have some good improvement from 2019 to 2020 from 0 to 14.5 in EBITDA. So and we plan to continue this in 2021. So there's no plans to divest here anything. Thank you. And my final question is on medium term EBITDA margin target of 10% to 14%. And can you tell us a rough estimate of depreciation and amortization that would be in the medium term so we can back out operating margin implied by this EBITDA margin target. I think what how you can look at this, Kas, would be that we say that Before we started the big expansion, we were at an excess investment level of around $50,000,000 to $60,000,000 And now we are expanding the next Come here and then we will come back to normal level being a bigger company also. And then I think you probably have some metrics to get that into a depreciation level for the medium term that you can use. Thank you. Thank you, ladies and gentlemen. Your next question today comes from the line of Kasper Blum of ABG. Please ask your question. Thank you very much. My first question goes to the working capital. You mentioned, Enid, that Right now, it's probably at an unusually low level. Could you give any kind of flavor to how you expect it to develop during 2021, obviously, depending on order influence and prepayments, but still if you could get any kind of help to what the Setback we might see on the working capital side in 2021. 2nd question, following up a little bit on the previous one regarding CapEx. If you could just confirm that things are going as expected with the capacity expansions within the cable business. And also, if you could give any guidance to of the $150,000,000 of expansion expenses, how much have been consumed? How much do you expect to use more in 2021? And if any, how much in 2022? And then my third question to Basel. There was a deal in your space here earlier this year with Lumentum acquiring Coherent. Obviously, Coherent being a somewhat larger company than Photonics. But are there any read through that you sort of find relevant For Photonics in such a deal. Also when it comes to valuation here or is it something else than what you're involved in? Thank you. Okay. So three good questions. Thank you. So starting off with the capital position, I think you should take a note of, of course, that we say that Unusual, no. And it is due to a lot of wins. And the wins also in 2021 will be the major I think making the wind capsule development right. So I think you know by now that we are preferred supplier for one project. But besides that, everything depends. We are engaged in many centers across and this eventually the wins and the terms and conditions of those projects will define that. So I think not being a not giving any numbers, you should look a bit at the pattern of our history wise and then expectations to the wins. I think that's the closest I get to that for the Solutions business, which is the meter part. Then on the CapEx part, you're right, and we are expanding now the 2 factories in Cologne and Sweden. And it's a big project ongoing. We saw by in Q1 here that our CapEx level went up, and I think we really communicate and The major part of the investment is in 2021. So definitely, here you will see a high level And some of it also will pan into 2022 before we finish the Swedish factory. We're doing well on the expansions, Absolutely. And I think that's actually how you should think about the investment level of 2021 2022 we finalize. Yes. I think then over to Basil on the last question. Okay. I think it was somewhat of an open question. So Lumentum hasn't worked coherent. Lumentum put an offer in Coherent, which then got then Coherent got a better offer from MKS. And then they got a 3rd even better offer from 2.6. So what that tells you really is that the market is pretty hot in M and A in our industry. The multiples are very high. The 3, the multiples are very high. The companies that have announced results similar to what we have We've seen a return to favorable growth, especially in the second half of the year, and we see a positive growth in the industry in general in 2021. I would say a lot of them are saying the same as we did, that there's cautious optimism going forward. Obviously, there from the multiples that you see from the photonics companies, there is a lot of excitement in the market, And there's a lot of movement in M and A, and I think you'll see much more going forward. I'm not sure what you were trying to get as an answer from me on a part of I was basically looking to hear your view if you think that there is anything fundamentally different From a coherent to your business, that would suggest another type of multiple? Or if you would basically find that, that would also be A relevant multiple to look at if Photonics were to be taken over by someone else. Okay. Yes. Now I understand. Well, we're very similar what we do to Coherent. It's even though it's a much, Much larger company than us and has been going since 1966. So it's quite long in the 2000s. But we're very similar to Coherent. We're very similar to the Photonics side of MKS. We're very similar to what II VI do and probably more similar to companies like nLIGHT. So if you follow nLIGHT's sort of results and multiples, We're in that type of league. So I don't see us any different. As for multiples, we have not looked at that. This is we're part of MKT, so it's we don't look at the separate multiples for photonics as such. That's absolutely fair, Basel. Can you give any update to how things are progressing with your previous comments about Potentially divesting a non core part of the business. Yes, that's a small non core part of our business and we're still looking at The opportunity of divesting that. But is there also appetite in the current market environment? Is there appetite on that non call business? Yes, from business. Yes, absolutely. How are you receiving? Yes. It's not exactly totally in the photonics market as such. It's a side market. And as I said, One of the things that we do concentrate on going forward is our core business. And our core business is the business If you have to sort of look at it from a different point of view is the most successful. It's also the part that is the basically elicits the most excitement from the market. This is really non core to what we're doing at the moment. Okay. That's perfect. Thanks for that flavor, Basel, and thanks, Lide, for your answers also. Thank you. Thank you. Ladies and gentlemen, we do have one more question on the line. This comes from the line of Artem Tokorenko of Credit Suisse. Please ask the question. Your line is now open. Thank you very much for taking my follow-up. My first one is around the low margin projects in Solutions. You mentioned that Execution of those will continue in 2021. Could you maybe let us know when you expect to finalize all those projects? So I'm not sure what I talked about low margin. I said we had some in the past projects which are below average, and we are phasing them out. And as we get more project in with higher margin, this has a positive impact. So about here, I want to be more specific. All right. Thank you. My second question is around NKT Victoria. I think Your competitors have just recently delivered new ships. So I guess question to you, how do you see The competitive position of MKT Victoria in the current market and what's the likelihood that you will need to make new investments into maybe a newer boat In the space of the next 2 to 3 years? No. The NKT Victoria still a very new vessel and the state of the art vessel with a lot of features and which is absolutely suitable to deliver current projects. And so we are not planning any further investments on the vessel side. Also, you need to consider that if you would need more capacity, there's also 3rd party vessels on the market, which we could take in as on a subcontract basis for specific jobs. So there's several installers which have cable laying vessels, and we could reach out to them in case the Victoria would be occupied with certain jobs. So there's no need for with the current size and even with the size on the pension to go beyond and invest in a new vessel. Understood. Thank you. And my last question is about Industrial Markets in Photonics. Could you maybe talk a little bit about which specific areas of industrial markets are causing the weakness at the moment? And also considering that, as you mentioned, some of your peers have already started seeing relatively sharp recovery in Q4. What's your typical lag to maybe industrial production and those peers? Yes. So our industrial market is a basket of a number of different markets. The part of our industrial market that is Associated with the semiconductor industry is, for instance, doing very well for us. And it's also doing very well with our competitors and peers. So that market is advancing. Anything to do with quantum, whether it's quantum communications, quantum computing, cryptography, banking, etcetera, is doing very well. There's a lot of investment from different governments, especially China and the U. S. And now to a lesser extent in Europe in Quantum Technology. So anything to do with that is doing very well. The parts that are a little bit lagging behind is our R and D business, research and development with a number of different areas, mainly because of COVID, mainly because most institutions are still closed, most universities are closed, most research Establishments are still closed or working at a very reduced capacity. So a lot of market, which is also highly Profitable for us is slow and will continue being slow in Q1 and Q2 of this year because of COVID. So that's the lag. And I think if you sit and analyze our peers and competitors, you see that market there doing a little bit worse. The industrial manufacturing market, it really depends on geography. So our market in China was doing, for instance, really badly at the beginning of 2020. It's recovered nicely in the second half of twenty twenty, and it looks like it's recovering really well into 'twenty one. So China is going back to more positive growth. It's always been positive, but even more positive growth going forward. However, the industrial markets, anything to do with manufacturing, automotive Manufacturing, different kinds of manufacturing in Europe and in the U. S. Are lagging behind. And that again is Very much pandemic driven. It's very much driven by the economy and what will happen after the pandemic. So there is not one single market that we're in Industrial that it is just pointing in one way. It's a basket. Understood. Thank you very much. Thank you. It appears there are no further questions at this time. Please continue. So if there's no further questions, then I would like to thank you once more for participating in the call and for the good questions. Always appreciate it. Wish you all a good day and talk to you soon.