Welcome to NKT webcast covering the Q3 2016 that we just released a few hours back. My name is Michael Lyng, CEO of NKT Cables and Executive Director in NKT Holding. Today's presenters are unchanged compared to the last couple of times. I have with me today Jonas Persson, CEO of Nilfisk, and Basil Garabet, CEO of Photonics Group. The three of us will go through this report and discuss and present the development for the group. Then we will sum up with a Q&A in the end. Let's go to the agenda on slide four. We will first cover highlights, then we go into the different business units and end with the Q&A. On slide five, you can see the highlights for Q3, and we are pleased to report that we are very satisfied with the financial performance in all the different business lines.
Nilfisk showed very strong organic growth of 4%, 4% in Europe and 11% in Americas. On top of that, we are also able to improve EBITDA margins, and they are up 1.3%. Jonas will, of course, come back to this in more details. Also on the Accelerate+ strategy, we can report that we are developing as planned, but Jonas will discover this in more details when he is presenting. For the NKT Cables business, we are reporting an organic growth of 1% and the operational EBITDA margins are up with 3 percentage points. Of course, we are having slides here that are explaining the acquisitions of the ABB. That's not new, but let's come back to that a little bit later in the presentation. Basically, the filing of the competitive approval that we need there is according to plan.
We have seen the project business growing 10%, whereas the product business are more flattish, but I will explain that in more details later on. Also for Photonics, we are reporting performance as expected, and we have seen a very good order intake and thereby also good visibility into a very strong fourth quarter that we currently are executing on. To sum up for the group, an organic growth of 2% in third quarter as expected, and also operational EBITDA margin of 10.4% in line with the expectations. On the various elements of the balance sheet, we are also satisfied with performance. We see working capital continue to decline, and we also see a nice free cash flow, an improvement of EUR 28.2 million compared to last quarter.
Then last but not least, as you know, we did the accelerated book building in the beginning of October where we had the equity raise of just below 10%. When we come to outlook for 2016 full-year, we are revising that slightly. Margins here around 9.6%, up from previous guided 9.4%. On the other hand, we are seeing a little bit more negative growth now 2%-3%. As you can see, it's mainly in the NKT Cables business where we are adjusting the assumptions. We are taking the operational EBITDA margin up. We started the year guiding 8%-9%. Last quarter, we made that more specific around 9%, and here we are now guiding a range of 9%-9.3%, which is very good.
On the other hand, organic growth, we are now having a range of between 5% - 10% negative gross against previous guided around - 5% gross. The main reason for this is actually related to the China business. You know that we have divested the China business, but it has not yet been closed, so China is still part of our numbers and are impacting the numbers more negatively than expected, but the problem is solved going forward. This is more or less what is indicated also here on slide 6. For the group, it has the impact that we are taking guidance up a little bit from 9.4% to the now 9.6% and adjusting organic growth as just mentioned. Nilfisk unchanged compared to last report.
Here we are maintaining organic gross of the range of 1%- 3%, and also the operational EBITDA margin are unchanged, and the same goes for the Photonics business. Just a slide here that are similar to a slide that we presented beginning when we announced the split up of NKT Holding into two separate listed entities. On the back of being able to do the ABB high voltage cable acquisition, we are now having a NKT Cables business that can actually stand on their own in the market, and that is the main driver for being able to do this split. Nilfisk has, for a time, been a business that could potentially have stand-alone previously, but with the acquisition in NKT Cables, we can actually execute fully on this.
This is the future structure, one separate listed entity with the name Nilfisk, and you can see some financial data here based on 2015 actuals, and then the other half being NKT, consisting of NKT Cables and NKT Photonics. We are currently filing to the European competitive organization in Europe, and we expect to receive that approval in the beginning of 2017, first quarter 2017. After that, we can then move on with this split that most likely will require an AGM approval and will be executed in the spring of 2017. That is what is indicated on the timeline here with the Q3 report today, the annual report expected March 2017, and then the process as just described happening up till end of March. Going back to financial numbers here, the split of the organic growth, I have already touched on that. Margins up.
We are reporting an operational EBITDA of 47.4%, which is the 10.4% as mentioned before, and that is up from 8.4% and EUR 36.7 million in third quarter 2015. We do have a large chunk of one-off cost impacting this quarter, EUR 41.2 million, and they mainly relate to the divestments that we have been doing both in Nilfisk here with the EUR 9.1 million, but the large part being EUR 32.1 million in NKT Cables that are related to writedowns that we were forced to take in connection with the divestment of the Chinese operations. I will come back to that in the cable section. Working capital, as you can see, a nice improvement. We are now tying up 14.8% against 15.4% end of second quarter, and we see improvements both in Nilfisk but also in Cables with the numbers indicated here.
Operating activities cash flow, EUR 41.81 million, which is also up over third quarter last year, of course, as a result of better operational performance on top line and EBITDA, but also impacted by the working capital development just mentioned. It is important to say here that the cash flow is still impacted by the share buyback program that we did in the first two months of third quarter until we stopped it in connection with the announcement of the ABB transaction. All in all, a free cash flow of EUR 28.2 million, up from EUR 24.9 third quarter 2015. Last comment on this slide, the net interest-bearing debt amounts to EUR 174.6 million, also slightly down, and that is similar to a financial leverage of one times operational EBITDA.
Which is illustrated on this slide, where we are reporting operational EBITDA of trailing 12 months of EUR 180 million, similar to an EBITDA margin of 9.8%. The P&L here with a lot of more details, I will not go into a lot here because I have covered most of it, but just mentioning that the composition of revenue decline of EUR 4.3 million, but that is hugely impacted by significantly lower metal prices diluting EUR 23.2 million, but that is being partly offset by the acquisition impact, EUR 13.3 million, that we have been doing in Nilfisk, and to a less extent also in Photonics Group.
Then we are down to the 2% organic growth. On the margin side, the box two here, the increase of EUR 10.7 million, we can see that Nilfisk are up in the quarter from 9.3% last year to 10.6% that are impacting the numbers with EUR 5.4 million.
In the cable business, we see also an improve from 7.4% to now 10.4% in Q3, impacting the numbers with EUR 5.8 million. Last but not least, we also here are communicating on return capital employed last 12 months that are here at 10.5%, more or less in line with full-year 2015, and we should be able to see an improvement in fourth quarter on this line. With that, I have covered the financial part for the group, and I would like to hand over to Jonas to make a deep dive into the development in the Nilfisk business.
Thank you, Michael. Then I jump in. We start then with the growth. We had a nice growth, as Michael has already mentioned here, 4% in the quarter, and that gives us 2% year-to-date. Starting then with EMEA 4% growth, which very much indicates that we are continued to take market shares in EMEA. Most markets improving very well in the quarter, and we have, of course, still some struggle with the Middle East and the market situation there. But a good quarter for EMEA. Americas, also very strong quarter with 11%. It is mainly North America and U.S. floor care who is picking up. It is direct sales where we have had some good orders in the quarter, but we continue to have some nice order intake in Americas as well.
We are not yet out of the big issues we have had in Americas, but at least we see a pickup in the quarter. When it comes to APAC, minus 13% in the quarter, and this is mainly driven by outdoor in China, where we still struggle with municipalities sales in China due to the market situation. The underlying business in China and also in Asia is actually not so bad. It is some big orders from last year in outdoor where we are not able to repeat this year. Then we go on to the next page, improving gross margins, coming very much from pricing initiatives and also sourcing activities in the quarter. And we have a general gross margin improvements activities, which we also see the effect of in the quarter.
Overhead is still not where we want to be, but still stable and going in the right direction. Then going into the Accelerate+ and the saving program we have in that initiative. We have done a lot of activities here in Q3, and that gives us a run rate of EUR 5 million, and we also have a restructuring cost in the quarter with EUR 5 million, very much reflecting those numbers in the same quarter.
We believe that the things we have done will have an impact here for the full-year of EUR 1 million, and we will end up with restructuring costs between EUR 12 million- EUR 15 million in the year. We indicated last quarter that we will be EUR 20 million at the end of the year, but we will be coming a little bit lower than that when it comes to restructuring costs for the full-year.
But so far good progress, and we are running it according to plan, so no major thing to report here. A big thing for us in the quarter three was the Horizon program. This is a long strategic program for us where we are launching a whole new range of products to take away manual use of the machines, and this is a partnership together with Carnegie, who is the world leader when it comes to robotics. And this is, of course, extremely exciting for us. And we are first coming out with a machine that is very easy to use with also a completely new sensor program that is actually outstanding in the market, and there is no one that is even close to this. And we also have a Double Commander in the machine, so this makes us very unique in the market.
And we have also, when we launched this in ISSA show in Chicago, seen fantastic feedback from the market. So very exciting for us to launch this. And this is one of the first products coming out, Nilfisk Liberty SC50, and we will continue then to launch products in this segment. So very exciting for us. Then coming in to sum up the last page. So the highlights, we had a good growth in Q3, 4%. Margin is improving with the activities we are doing. We also see an improvement when it comes to working capital, and we have a good control of that, so that is going in the right direction.
And then, on top of that, we have some one-off costs where we have divested the Cyclone, and we have also taken some costs when it comes to other businesses, which gives a one-off cost of EUR 15.8 million in the quarter. But all in all, the running business in the quarter is doing very well. So over to Michael again.
Thank you, Jonas, and not least because you have been lying in your bed the last couple of days with a heavy flu, so thanks for making it possible to be here today. But let us continue with the ABB and the Cables business. The first slide here, just illustrating the logic behind the announced ABB transaction, and it is very clear that it is a fantastic opportunity for NKT Cables to move up in the value chain here. When you look at the different product range required for supplying state-of-the-art solutions to the utility players. With this transaction, we will move into a higher margin business. As illustrated today, we have 27% of our turnover being in the project business and 65% being in the more commoditized product business. But after acquisition, that will change into a more 50/50 structure.
And then on this slide, we should also bear in mind that the 6% APAC we have after this was announced, divested. Also, when you look at the operational EBITDA margin, and here they are indicated based on pro forma 15 numbers, we are looking at a business that will yield around EUR 148 million in EBITDA, and that should result in a margin of 11.4%. So the acquisition will give us full access to DC technology, direct current, being extremely important, of course, on the interconnect offshore market, but increasingly also moving onshore. Germany, for example, is looking to be a very attractive market for us in the years to come.
On top of this agreement of acquiring the ABB business, we have also entered into a cooperation agreement with the remaining part of ABB, where we will jointly go to market offering turnkey solutions to a number of different global customers. So as I mentioned before, we expect this finally to be approved and thereby we can close the deal during first quarter. The third quarter for NKT Cables have been extremely busy. After announcing the ABB transaction, we announced that we divested the Chinese operation. That has been a tough business to deal with for a number of years, where we have lost between EUR 5 million and EUR 10 million year after year. We have now finally been able to divest it.
We had to take an impairment charge, but for me it is more important that we can move forward into 2017 without this business, and without the negative impact that we have seen the last couple of years. Status here is that we are awaiting the Chinese government to approve the acquisition, and we expect that to happen very soon. We also announced that we are divesting one plant in Czech, one plant where we are producing wires for the automotive industry. It is actually a nice business, a nice performing business also that the last couple of years have yield operational EBITDA similar to what we have lost in China, so between EUR 5 million and EUR 10 million. It is not because of lack of performance in this business that we are divesting it.
It is because of the fact that this business are exposed to very large and few automotive customers, and if we were to stay in this segment, we would need to invest heavily into new generation of wires that are needed for the automotive sector. There we have concluded that we are better off focusing on the core of our business, being power cables to utilities and wholesalers. Here we expect to close the deal during first quarter 2017. Back to numbers and comments here on different market developments. If we start with the project business, we are reporting 10% organic growth after being negative in the first half of this year. I have to say that this is very much in line with the expectations.
This is a business where we have high visibility, so it should not be a surprise to anybody that we do need to see positive growth in this business in order to meet our full-year targets. On the offshore markets, we, a few day backs, reported the project win of the Borssele project, but I will come back to that on the next slide. The onshore market continues to be pretty challenging, although a flat development, but we actually don't see a lot of growth happening in that segment, of course, also impacting the margin level throughout the entire Europe. When we move into the product business, we are reporting minus 1% growth, and that is perhaps covering a little bit over the fact that we are satisfied with the performance that we see in this business in third quarter.
We have been able to maintain a profitability level similar to the last couple of quarters, and the - 1% should also be seen on the background of a very strong third quarter 2015 where we had the 10% growth. Nordic market continues to be okay. In particular in Sweden, we see a nice growth, whereas the Central European market is probably slowing down a little bit, also caused by the so-called photo year in Germany, where we, particularly in the utility segment of the German market, see a slowdown. Price discipline in this segment is extremely important for us. It is an area that we have worked on the last years, try to professionalize the way we do pricing in this segment. We will continue to have a high focus on a stable pricing environment in this segment in the quarters to come.
APAC, hugely negative, also caused by the fact that we have been the last couple of quarters in a situation where we actually didn't want to take a lot of orders because we were progressing in the divestment process that we were able to finally close in end of third quarter 2016. If we look at the margins, we see the margin pick-ups that we also expected, up from 8.2% the end of second quarter up to 9%, which is back to the level we ended at in 2015. Originally we guided a range of 8%- 9%, and actually we have seen better performance, in particular in our project execution.
We are able to end in the upper end of the range, 8%- 9%, and we are even adjusting that a little bit further and now guiding a range between 9% - 9.3%, despite the fact that we are taking top line down due to China, as mentioned before. But the reality is that taking top line down in China does actually not impact the bottom line, actually even maybe positive, if at all, and that is the underlying assumptions between the change here. If we look at the next slide, this is the slide we have used a couple of quarters here, just illustrating that we continue to see a good performance in our product business being the blue curve here. It has improved. It's probably fair to assume that now it will start to flatten out.
We have realized full-year impact from the DRIVE program, and now the challenge will be to maintain this level in the years to come. On the orange curve here, the project business, we have seen improvements after the decline expected second half 2015 and beginning of 2016. We have seen improvement the last couple of quarters as a result of good project execution. Then, coming back to the Borssele announcement that we had a few days back. We announced that we will get the Borssele Alpha or Borssele One and Two project. It has a contract value of EUR 77 million, and it is won in a consortium between VBMS and NKT, us supplying the cable and VBMS doing the installation.
A partner that we have worked with on a number of projects where we are very satisfied with the close cooperation and close interaction we have, working between a cable supplier and an installation company. It consists of 125 km of 220 kW offshore cables, and it provides full visibility for production in the offshore segment in 2018. What is also worth mentioning here is that part of it is also an option to deliver on the Borssele Beta project, the Borssele Three plus Four, that potentially will give visibility into 2019. Here we are talking about a project with more or less similar numbers as for the Borssele Alpha project. So a nice achievement that creates visibility and thereby also stability.
To sum up, a good quarter for NKT Cables, despite the -1% growth in the product business, with a lot of strategic achievements during the quarter, the acquisition of ABB, the divestment of China, the divestment of automotive. We continue to execute on our Excellence 2020 strategy. We will move into the new target operating organization that we have communicated on earlier. The last part of that puzzle in minus one level, was to get the COO on board, and here I am happy to announce that Dietmar Müller joined the team recently. He will now step fully into the role and thereby lead the transformation from being in a decentralized structure with the different production sites we have into a more centralized structure where we can start to benefit from better capacity planning across sites, more focused on quality, health and safety, et cetera.
All in all, support a more agile organization. Maybe last but not least, what is not mentioned here, we have had the supply quality issue that we communicated on in first quarter and also second quarter, and I am now happy to inform that we have finally closed it, and we do not expect that to have any negative impact on numbers for 2016. With that, I have concluded the Cables part of this presentation, and I can hand over to you, Basil, to take us through the development in the Photonics group.
Thank you, Michael. In Q3, we performed to and actually slightly increased our forecasts. The growth was -6%, but that is compared to a very strong Q3 in 2015, where the growth was 31%. In Imaging & Metrology, as expected, we performed with a pretty strong order intake that is at the highest historical levels that we have had so far. Imaging & Metrology is about 45% of our business today, and we see that keeping the same percentage going into Q4 and into 2017. In Sensing & Energy, that is the sector that we performed best in this quarter. We had strong growth right across all the segments, and we have announced an award for an offshore wind farm in the North Sea that helped or will help ourselves going forward.
In the Material Processing side, which is one of our growth areas that we are concentrating on, there was slight negative growth in the quarter, but, compared to the full-year, there is still positive year-to-date growth. If you move to the next slide, you can see that our revenue of EUR 10.8 million compares to 2015. The issue here is that we had Vytran as part of the company, so it is not an apples-for-apples comparison. But you can see the growth of the quarter of 31% is offset by the year-to-date growth of 4% of where we are at the moment.
The other highlight in here is we continue our upward trend of our operational EBITDA. For the quarter, the EBITDA was 0.9%. We also announced a new generation of our Koheras boosting lasers, which was launched for the scientific market, and high-precision metrology. Finally, announced that the integration of Fianium is still moving very well, and we're very pleased with the results. Thank you.
Thank you, Basil. With that, we have finalized our part of the presentation, and we are ready to move into the Q&A session. Operator, I would like to hand over to you.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad now. Please hold until we have the first question. Our first question comes from the line of Kristian Johansen from Danske Bank. Please go ahead. Your line is now open.
Yes, sir. Thank you. I'd like to start with a question for NKT Cables. Michael again mentioned that you will continue to focus on prices for the products business. We've also heard that you previously said that there's some of your competitors who sort of implemented a better price discipline as well. I mean, does the organic decline and the fact that if I look at the profitability graph, you show the increase in the graph you showed in Q2 is a bit more flattish here in the Q3 presentation. I mean, is price discipline vanishing a bit?
No, that's not what we see now. I think that the flattening out of the margin development illustrated on one of the slides are actually fully in line with the expectations, because it was mainly driven by full-year impact from DRIVE, et cetera. I think, if you look at the slide beginning of this year where we stipulated the development, it was also supposed to flatten out. The negative growth in the quarter, minus 1%, I think we should not put too much into it. The main reason is that we are seeing this on the back of a very strong third quarter last year. I also have to say that, we want to maintain a high level of price discipline within our parts of the organization. So, the top-line growth is not necessarily the key driver for us in this segment.
It is more a profitability level. So I'm still satisfied with the development in that segment.
Okay. That's very clear. I'd like to jump over to Nilfisk. Jonas, you mentioned you are taking market share in EMEA, but also in Americas, you are reporting 11% growth, and we have heard from one of your larger competitors that they had production issues in Q3. Are you taking market share in the U.S. as well?
Yes, of course, we do in the quarter, but since we have had challenges for so many quarters, it's a little bit too fast to say that for one quarter. What I mentioned was, I mean, with 4% in EMEA, we are continuously, for many, many quarters, taking market shares in EMEA. Of course, in the quarter itself, 11% is very, very strong, and of course, for the quarter itself isolated, yes, for sure, we are taking market share in Americas.
But we shouldn't expect that to continue for the coming quarters, is that?
I am sure that we will improve in Americas. This looks very good, but of course, we cannot expect growth of 11%. We have changed the management in Americas, and we have done a lot of changes, and I hope and believe that this will create a change in Americas, but it's too early to say, and it's too early to say hooray for the one quarter.
Fair enough. Then my last question is regarding this impairment you do for the cleaning and restoration business. Can you just elaborate a bit on what's driving this?
It is a business that is a little bit outside the core, and we see that it has not performed, so it is very much a turnaround, and therefore we have taken some cost for a goodwill, I would say, to take it down a little bit because it doesn't really reflect the business.
But is it something you would consider to divest?
Most probably, yes.
And how big a share of revenue is this?
It is a fairly small business, so it will have no big impact on the top line.
Okay, fair enough. Thank you. That was all for me.
Thank you. Our next question comes from the line of Casper Blom from ABG. Please go ahead. Your line is now open.
Thanks a lot. Three questions from my side also. Just as Kristian, I will try and take them one by one. First question probably to you, Michael. In Cables, you are sort of upping the stakes in high voltage and not least in the offshore wind area. We are seeing prices for offshore wind parks coming down rather quickly these days. Could you elaborate a little on how that may impact your profitability as a sub-supplier? For example, if you could talk a little bit about the profitability that you are seeing in Borssele versus, for example, the Hornsea, which was a project that was settled years ago. That is my first question, please.
I think you are right that there is a lot of focus on getting the price of renewable energy down, and I think it is something that all the different players in this industry need to take seriously and also jointly work on in order to achieve a lower level. We have seen the last year, or years, that by having a much closer cooperation with the different numbers or the different players in this industry, for example, on the installation side, but also with the customers in the design phase, we are creating situations and solutions that benefit the customers in the end to reduce investments. That does not necessarily mean that we see a dramatically different profitability level, because we can actually also optimize a lot within our part of the value chain if we have a closer cooperation altogether.
I think it is really about cooperating across the different part of the value chain. It is about moving into a situation where we start to use more standardized solutions so that we do not need every time we have a new project to start up the entire engineering development department, et cetera. By doing all this, I think we can also contribute positively to the development that are expected in this industry.
Okay. Just to clarify, you are not seeing a materially lower profitability on, for example, Borssele than you do on Hornsea?
No, I do not want to comment on profitability levels on a single project, but I can guarantee you that the profitability level that we see on the last project wins are supporting the strategic journey that we have laid out.
Good to hear. Then my second question for Jonas. In your guidance for Nilfisk, you are guiding for a 2016 operational EBITDA margin of 10% - 10.5%. When I try to do the implicit math for the margin then in the fourth quarter, it seems as if your low end of the guidance range would suggest a margin of around 7% in Q4 and a high end around 9%. That would be a decline compared to Q4 2015, even though the margin in Q4 2015 was down more than 3 percentage points year-on-year. What is holding that margin down in the fourth quarter?
We have a range when we say 10%- 10.5%, and right now we believe we will end up in the upper level of this.
Okay, but even in the upper end, we would still be looking at a small year-on-year decline in the margin.
Yes.
What is sort of the explanation behind that after when I was sort of seeing progress throughout 2016 on the margin side?
We see some big orders in quarter four that is actually picking up when it comes to private label, and that is actually diluting. It is a slightly mixed effect in quarter four.
Okay.
Then I think if I can also comment a little here. From many years of experience, fourth quarter in Nilfisk is always a little bit tricky, right? Because December can either be a normal month or sometimes you also see it being a very difficult month from a market perspective, and we also want to take that and build that into the guided range.
Okay. So you have left room for, how can you say, a little bit of disappointment.
For December, yes, we can say.
Okay. Then finally on Nilfisk, I note in your statement that you write that there are some single large orders in Americas supporting growth here in the fourth quarter. Should we view that sort of as an extraordinary thing, or would you say that you are sort of starting to get back into a growth mode where we could maybe expect sort of 3%-5% on a more steady state?
When it comes to Americas, we are much more indirect as we are in the rest of the world. What we see in Americas in Q3 is actually more orders in the direct, and that have a more character of single orders, and that is what we see in quarter three 2016. Of course, we believe and we want to grow in that segment, but of course, 11% is nothing that we believe that we will continue to be able to do. Hopefully, we will see continuously growth in the direct sector with these orders as well.
Okay. Thanks a lot, and congrats with getting back on track.
Thank you very much.
Thank you, and as another reminder, if you do wish to ask a question, please press zero one on your telephone keypad. Our next question comes from the line of Fasial Ahmad from SEB. Please go ahead, your line is now open.
Yeah. Hi, guys. This is Fasial Ahmad from SEB. A couple of questions from my side. Firstly, on Nilfisk and the very encouraging growth which you saw in Americas in Q3 2016. If we strip out the large orders which you built in Q3 2016, how does the growth look in the remainder of the business? That's my first question, please.
It's fairly flat, but you should also know that with this, the big part is the indirect, which is, of course, the underlying business there. So that is fairly flat in Americas.
What you're saying in Q4, that should be picking up, or is it additional large orders which will be supporting growth in Q4?
In Americas, we still see a nice order intake, but we should also know when we look at the overall growth from Nilfisk in Q4, we are comparing ourself with a very strong quarter last year. So I don't think we should have too high expectations on quarter four as a group.
Okay, that's very clear, Jonas. A question on cables. You commented briefly on the profitability levels. What about utilization? If you could comment on that, how would 2017 and 2018 utilization compare to each other?
I'm not sure I fully got the question, but utilization rate into 2017 and 2018?
Yes, please. If there are material differences between those two years on back of the latest order which you received.
No. If we look at 2016, 2017, 2018, then what we are reporting here is that we are fully booked for all the capacity that we can direct into offshore. So underlying here is the same kind of capacity utilization.
Okay. Very clear. One final question, to Jonas. you are mentioning that some of the initiatives from your cost-saving program will take longer. Which initiatives are those specifically, and does this move the needle materially in 2017 or is this maybe even later?
I am not sure, please, what you say will lower. What we said is that the restructuring cost is actually coming in lower than when we expected, because there have been a little bit different mix of the savings. We are very much on the plan what we should do when it comes to thing. I am not sure if I
I think the question was that some of the initiatives take a little bit longer to execute.
Yeah, but when it comes to the saving program, we are very much on the plan, and also the overall plan is very much on track. I would not say that it take longer time. For example, when we talk about the production footprint and so on, that is initiatives that we have planned to take longer time. We are very much following the plan so far. There is no delays in what we have said before.
But just to be completely clear, Jonas, I think you're stating explicitly that some of the initiatives have a longer implementation period than first anticipated. So you're saying that is not going to impact how cost savings come in? Is that correctly understood, and why is that exactly?
No, because there are some initiatives that will take longer time, but when it comes to the savings, the mix of the savings have changed a little bit as we planned from the beginning. So I don't see that there will be any delays in the saving program as such. No.
I think the way you should see it, Fasial, is that when we announced this plan a quarter back, it was a little bit early days compared to the level of details that we had. And we also indicated that, and we also indicated that we would like to come back with a more detailed explanations. And now we just have that. So there's no significant change. It's more or less a timing issue.
It's a timing and a mix, I would say. So, we will still end up with the same savings under the plan, but of course we have much more details exactly where they will come from today.
Timing of the savings, how much will be coming in 2017, 2018, and 2019 respectively?
We have not communicated that, so you need to stay to what we have communicated.
Okay, perfect. Okay, that is all from my side.
Thank you very much.
Thank you. Our next question comes from the line of [inaudible] . Please go ahead. Your line is now open.
Hi, good morning. I just had a couple questions. One is procedural on the sale of the Asian and automotive business. Can you give us just an aggregate what the impact on a run rate basis would be, just roughly on sales, EBIT, and CapEx? That's my first question.
No, I think we need to take that offline. That's a very detailed question. I think if you call up [inaudible] , he can elaborate a little bit further on that.
Okay.
You can see on the slide there, in the cable section, you can see how much of the top line that goes into China, and that is 6%, and that will basically move away, so to say. For the automotive businesses, it is around EUR 40 million -EUR 50 million top line wise.
Okay. With regards, maybe following one of the previous questions, in terms of capacity and capacity expansions potential into the future, especially when looking at your facilities and the one that comes from ABB. Can you, I don't know, give us a sense for how, if you were to spend capacity, how long would that take? What CapEx would it require, and when are you likely needing to make this decision?
Yeah, I can at least comment on it when it comes to the NKT Cables part of the business. Of course, we have a little bit less detailed information on the ABB side. On NKT Cable side, we have also earlier communicated that we could add approximately 40% more capacity in the Cologne plant where we produce the high voltage. We would be able to do that relatively fast, which means less than a year, and it would cost approximately EUR 35 million -EUR 40 million. So that is the opportunity we have there, and that goes back to the fact that when we designed the factory in Cologne, it was designed to absorb more capacity. So the entire infrastructure in the factory is ready to absorb more. It is a little bit the same situation in the ABB side.
There they have also, over the last couple of years, increased the capacity, and part of that has also been to prepare for the next move, so they could also relatively easy and fast increase capacity. I also have to say that this is not something that we expect to start up around the corner. Now we want to close the deal with ABB. We want to take it into our ownership structure. Then just by adding the two factories, we will be able to yield or to see a higher outflow, higher capacity, because we can plan much more efficient. That is the first step we want to take. That is actually also realizing part of the synergy potential of EUR 30 million, before we then move on adding capacity, of course, depending on where the market is.
Okay. Thank you. Last one, with regards to working capital progression, I was wondering, how much of it is maybe linked a little bit to the projects, has been operating on a lower notional, versus genuine intrinsic improvement in working capital, and how much farther do you think it can go in, I guess, in reducing or getting more efficient with working capital, especially obviously on the cable side?
On the cable side, we are currently at 10.5% working capital, and if you break that up, it consists of having around 15% working capital in the product business and then 0%-5% in the project business. The more project business we will get into the revenue composition, the lower working capital percentage we will be able to have. So moving forward, I actually expect it to continue to decline as a result of the changed product mix that I illustrated on slide 20, that we will see after the close of the ABB transaction. I expect that to improve. Then for the group, it is also impacted by a nice development of working capital in Nilfisk, where it has been taken down from just south of 20% to now below 19%.
There we probably also expect to be able to do it slightly better in the future.
Perfect. Thank you very much.
Thank you. As there appear to be no further questions, I return the conference to you.
Thank you, operator. Then we can close down this call, looking at the financial calendar, where we expect to be back March 1st with the annual report for 2016. So thank you all for listening in.