Earnings Call: Q1 2021

May 19, 2021

Good morning, everybody. Thanks for taking the time and joining this Q1 report from NKT. Today, we have here with me as presenter, Jerome Rene, CFO and Per Bavio, who is CEO of NKT Photonics. So if you look at the highlights from the Q1 2021. I think we can say that we have a satisfactory start in 2021. Overall, we had an organic close of 21% in cables. And all three business lines contributed to this 21 percent positive results. The operational EBITDA tripled almost from last year, same quarter last year from $10,000,000 to $30,000,000 and we had a record high quarterly performance in service and accessories and also good performance in solutions. Very positive is also to mention that we have a good start in Photonics. Photonics is back on the growth path, mainly driven by industrial segment and the medical and life, and you will hear more from Brazil a little bit later. So it was the highest ever Q1 in revenues in Photonics, which is good to be back here. If you look at more a little bit more in detail the Q1 performance, as I mentioned, all the three business lines in cables proved revenues and earnings and contributed. In solution, we have different activities, produce different type of cables in our factories in Calkrona and Cologne and good utilization of the factory. In after the month sorry, quarterly closing, we got awarded the Drorol vest project for Equinor with €95,000,000 on market price, which is a nice order and also particular as it is an AC order. Further in applications, we continue on our turnaround and improved the performance. So from last year from $3,500,000 to $5,500,000 and also organic growth of 2%. Service and accessory, we had, as I mentioned earlier, the highest ever quarter supported by service repair jobs offshore, but also onshore and also several other activities. Overall, organic growth of 21%. And as you see here on the graph, Good growth from $240,000,000 to almost $300,000,000 in revenues from the metal price and operational EBITDA in round numbers from €10,000,000 to €13,000,000 EBITDA. If we go now to solutions, in the Q1, We have executed work on different projects, Dokabank A and B. Dokabank is the 1st DC offshore project in UK. We had worked on several other projects, Moray East, in Ostwind, which are 3 core AC project and on the Viking, which is an MI project, a good mixture of execution at different project types. Further, We have finalized the Vipanal Offshore Wind Farm in U. K. With deliveries of export cables and inter away cable. We used for installation for various activities, the NKT Victoria for the installation, but also for service activities like the LPA job for PripNet. So revenues went up to The $1,000,000 27 percent and $19,500,000 EBITDA, or from 4.2% to 12.1% comparing quarter last year with this quarter. If you look at the high voltage market this year, we have been awarded new orders on the onshore segment like the RTA frame agreement, but also various variation orders. And as I mentioned, after the quarter closing, We got awarded the table for coal from shore from Equinor, Troll West in Norway with the 95,000,000 approximately standard market price. Overall, in Q1, there were around €69,000,000 awarded, And we are continuing to be active on tenders around the world, meaning we are active in Asia, in Europe, but also we see more and more activities in the U. S. So last year was a good year for us in NKT with the project on the DC technology. Now we got the first order on AC, which is also good for the factory loading and mixed owner portfolio. If you look at our backlog, our backlog is €2,950,000,000 compared with historical figures very high. It's a little bit reduced by $120,000,000 compared to end of 2020, but still very high. And we are working on for the segment offshore wind interconnectors and oil and gas. And now we will add the Troll West as power from shore on top of that and see how the revenue backlog will be executed in the future. Applications, If we come to applications, also a good start in the year. We continue with our turnaround activities in applications. And one further activity with this vision would be take to move the building wires from Essness from Denmark to Poland and to concentrate the building wires in Poland. Also, It's worth to mention here that we implemented ERP system in Eastern Europe in the beginning of the year without issues I can conclude. Overall, satisfactory quarter 4 applications. And we continue with our actions to improve here further the profitability in applications. Coming then to service and accessories. Service and accessories, We have a good performance in service with various payer orders, offshore and onshore. One is, I mentioned, Britnet, the connection from UK and Netherlands. But also on the, let's call it, base business, we had a good development also on the service agreement. We did also quite well with accessories in Nordenham for mid-twelve accessories. And here also we make a footprint adjustment where we concentrate the high voltage accessories in Harlinghaus in Sweden and move it from Cologne to Harlinghaus. Overall, record high quarter, which is a nice start into the year. With this, I will hand over to Basel, and he gives you the details here of MKT Photonics. Thank you, Alex. And how do you follow-up with a great quarter from cable is to try and catch up on our side in Photonics. Q1 was a good quarter for us. We achieved the highest revenue, top line revenue in the history of MKT Photonics. And the Quarter started very satisfactory with us in both EBITDA growth and top line growth. Our organic growth was 26%, which is mainly driven by a broad based comeback in the industrial segment and all parts of the industrial segment were doing well. We also did well in the medical and life sciences segment where the growth continued from all the products that we launched in the middle and late 2020. With this higher revenue, our EBITDA has also increased. However, our earnings in Q1 were impacted by restructuring costs of $1,200,000 in the quarter. In the quarter as well, we recorded our highest ever order intake, which corresponded again to a 36% increase over the same quarter last year and it's mainly due to the improved market conditions, again, mainly in the industrial side. If we move to the next slide on our business development, We in Medical and Life Sciences continue to perform well in the segment and the main drivers here are our business in ophthalmology, which is increasing. We are getting more OEMs in that sector. And our OEMs in microscopy are also driven quite high with the changes in end of last year and into this quarter. In the Industrial segment, we saw a significant recovery in Q1 over 2020. However, the recovery in the research market is still a little bit weak and we expect that to performed better in the second half of the year. In Aerospace and Defense, The activity level is still very high, both in Europe and the U. S. And this segment is growing and we expect new orders and new growth in this sector. With this, it's the end of my segment and I'll pass it over to Lina. Thank you very much, Seifel. So to recap the business performance for the quarter in the income statement here on Slide 16, We improved revenue and operational EBITDA, both by MKT cables part and the photonics. On the MKT cables part, the 21% growth for the quarter was constituted of the underlying business performance, as Alex alluded to, On the Solutions business on 27%, the Applications business on 2% growth in revenues and the Service and Accessories with a very good start NKT to the year of 82%. And underlying also all business line in NKT cables improved earnings compared to last year. It is also good that Photonics is back on a growth note compared to last year. And cleaning for the redundancies Early this year for Photonics, we are also at a breakeven in terms of operational EBITDA. The cables part closing at the quarter with a $30,000,000 operational EBITDA, almost threefold this quarter last year. On the margin levels, I think noting that for the cables division, a quarter like this actually brings us up to the 10% margin level. So we have had good utilization amongst our factories and also the different cable technologies. On the Photonics, excluding the redundancies here, you The one off item is a small divestment of the plant in Sten Lille. It came in favorable here and then closing off with a positive net result for the quarter of 2021, slightly positive compared to last year. And a final note on the FTEs, you see also a part on the cable business that we have ramped up for the increasing activities on the Solutions business and the adjustment they made in Photonics. So turning the page MKT to the balance sheet highlights. And here, you can see that we came out of a very unusual low level on working When you go to then to the ROCE, the return on the capital employed, you also see the good or the improved performance on the earnings levels here panning into to an improvement on our ROCE compared to last year and even the end of 2020. On the net interest bearing debt and the leverage ratio, We closed 2020 with significant cash at hand, and we still have SEK 179,000,000 cash at hand close in Q1, Concluding, therefore, the NIBD at SEK31 1,000,000 were offset by the mortgage cost and the lease. So right now, the leverage ratio of 0.4x for the full company. Turning to the trend on working capital. As you know, the major fluctuations that we see over the years here is related to the Solutions business, timing of milestones and prepayments. We have had some very low levels of working capital in the Q4 of 2019 and even lower Q4 of 2020. So Q1 2021 came up somewhat due to Timing of milestone payments in solutions business, but also the seasonal buildup of working capital in applications preparing for the high season. Also what you see here in the working capital, particularly in the Q1 2021 is actually the value adjustment of our hedging instrument. A noncash effect, but it's corresponding to DKK 57,000,000 and it's corresponding adjusted on our equity. Turning to the cash flow highlights. So improved earnings were offset Still by the change in working capital, but also here note the CapEx level. So we are coming through with our investments activities in the solution factories in Carskona and Cologne. And you are seeing the pickup here in the Q1 of the year as you saw it also Q4 2020. It will continue this way in 2021 and also into 2021, so we Finalized the food program. So the net cash flow turned negative due to these returns for the quarter. Turning to the outlook for the year. NKT cables maintains the revenue outlook for the year euros 1,100,000,000 to €1,200,000,000 And on the operational EBITDA, the €80,000,000 to €110,000,000 Important to say here is that we do expect that the first half of the year would be a very solid one for MKT's part of it, due to the mix of projects we have in our factories and the Expected revenue generation. So second half is expected to be at at a lower level than what you will see in the first half. I'm sure we'll come back to this in the question session. And then for MKT Photonics, coming out of A much better Q1 with a high revenue level. We are now modifying slightly our guidance for the year, saying that we will end in the upper end of the range of 0% to 10% on the organic growth and similar on the EBITDA margin. There are uncertainties around COVID still, and Q1 was also impacted by this. So, we still to see vis a vis how this pans out. So turning to the last slide of the presentation, we capping that the organic revenue growth of 20% in MKT MKT. With all business line contributing, it's a highlight. It is also a highlight, of course, to see that operational EBITDA almost tripled and good contributions from all business lines. And then that the NKT Photonics has the highest ever Q1 revenue, so also in a better shape than in 2020. With that, we will turn over to questions. MKT. Your first question today comes from the line of Atem Tokarenko of Credit Suisse. Please go ahead. Your line is now open. Good morning, everyone. Thank you very much for taking my questions. I have 3, please. My first question is around solutions margin. Could you maybe talk a little bit about how should we think about sustainability of this high level of margins for the rest of the year? And maybe also I saw in the report that you've been finalizing some of the projects. If there were any positive provision releases, how much those contributed to the quarter, please? That's my first question. In general, as I stated also in earlier calls, with higher utilization in the industry margins to improve on the Fluent side. And we have a good execution, a good mix. It means in Q2, we need also good loading in the factory on the different machineries. This means a good income for machine and that helped. So, in terms of risk and continue, We have nothing extraordinary with the results. And how that will be going forward. Lieny mentioned that second half will be We get in the first half, the first half is stronger. That's also a dependence on the mix of Products we have in first half MI production from Viking, which will not be the case in the second half. On revenues. Too early to conclude, Ian. Okay, understood. Thank you. My second question is around the project Pipeline, you obviously talk about healthy tendering activity. Maybe I know you don't like talking about secular projects, but Some of your competitors talk very actively about EuroAsia and the TENAB projects potentially being awarded this next quarter. So what are your thoughts on those two projects? And maybe also on the U. K. CMD round, it increasingly looks like the cable awards actually will be Next year rather than this year on the CMTs, how much of a risk for you this is that it maybe takes a bit longer than people initially expected? That's my second question. Maja, starting with the U. S. U. K. CIB amount, as you said, rightfully, It will most probably flip into next year early next year. This is a delay of, let's say, A quarter is not the major delay as we have a good backlog. And So that's fine if it comes in Q1 or maybe Q1 or maybe in Q2. But overall, there are several projects as we work on it in Asia. I don't want to mention specific projects, interconnect us with different technology, but also on offshore wind and oil and gas in U. S. And activities. So that should be still more than $3,000,000,000 It can be even more if some of the other big semiconductors will be awarded. So we are busy here. Our people are busy in the tendering team. And I guess the whole industry is busy working on this project in the U. S, which is good for the new thing. Okay. Thank you very much. And my last question is around your comments in the report about potentially coming back to the strategic review of Photonics business, I guess you mentioned as COVID situation eases up, but also in other parts of the report, you mentioned that you expect this to happen, The COVID situation to ease in H2 this year. So I guess what's the internal timing you think about for that review process? And maybe a lateral question LKT. Obviously, your peers have been announcing capacity expansions in the U. S, but I think previously you've been saying that There are no immediate investment needs for you. So should Photonics be disposed in the next 24 months, How do you assess sort of the capital allocation on the back of that? Thank you. So the strategic review of It is, as we mentioned, slated to start, won't go back to Normal operations. So when the issues that have arisen from COVID and the sort of Outcome of COVID is over, then we will be able to look at photonics in a more holistic way and come up with a time line for 3 Components are worldwide. So even though we're doing very well, we're not out of the woods as such. And when we are, we will announce the strategic review. Nothing else has been done with regards To any allocations of capital or anything like that. Okay, understood. Thank you very much. Thank you. Your next question today comes from the line of Christian Johansen of Jadanske Bank. Please ask your question. Yes. Thank you. I would like to actually continue where we just left off. Maybe just Again, if you can repeat exactly what was the impact of COVID-nineteen in Q1 because to me, it doesn't really seem that there is much of an impact. Yes. I mean, there is an impact. Some of our businesses are doing exceptionally well and some are still affected by COVID. Some businesses have had a knock on effect Where they were weak in the last 2 quarters or last 4 quarters of 2020 and they're recovering in this year. So it also is you have to take into account Q1 is our smallest quarter. In general, it's MKT. It's a quarter that comes after what usually is our largest quarter. So it's hard to basically draw a Parallel out of it or a trajectory out of it at this stage. I think once you look at future quarters going into this year, That's when we can be able to make a better assessment of where we are at the moment. It's still somewhat difficult to make this assessment. And COVID has affected some things. It's obviously, we don't go down to what Parts, it's affected in our shipments and orders and everything else, but it has affected that. Okay. I understand. And is there any deterioration into Q2 from what you know now in terms of the COVID impact? Not that we see, no. Not at the moment. Okay. That's clear then. Then jumping to the cable business, Just want to confirm these smaller onshore and variation orders. So when I do the simple math of the change in backlog And deduct the revenue, I get that you have received roughly EUR 50,000,000 in standard metal prices in orders in Q1. Can you just confirm whether that level is correct? And also, can you comment on these smaller orders, whether that's sort of AC, DC? Is it MI, To PE or what have you got in? Yes. Your math is correct. We dropped another 20,000,000 on the backlog and we have the $50,000,000 on the new order. This is AC Onshore mainly. We have also been awarded the RPE frame agreement, but this is a call off that this was not in Q1. So it's mainly AC onshore, no DC, no MI. Dollars 50,000,000 would be rather small, very small. No, you can almost say not more at all for MI and the very small 3 core AC cable. So it's all onshore AC. Or in variation in one of the C cable, but then some smaller changes. Yes. Understood. LKT. And can you then comment on your opportunities to still get orders in which will make a difference on revenue for this year? Okay. We have these in and out orders and valuation orders, which can make a difference. We you have seen we have a high growth on service driven by offshore repair. So there's still opportunities on that side for improving the revenues in 2021. We have now also got the Troll, which has some contribution in 2021, which is good and will continue to contribute in 2022. So there are still some possibilities. Well, I was actually thinking more in line of the larger orders like the TRO orders. Are there any more orders similar to that, which could make a difference on this year? Large orders, it would be awarded there's always, let's say, preparation time on engineering, on type testing and so on. And any large order which would come in Q2 would have no significant impact POC based, very low number, if at all. So it would be effective in the start in 2022. Understood. And then my last question on the applications business, whether you can give a bit of flavor on low voltage And medium mulches separately. Specifically for medium mulches, you mentioned some challenges for your customers In Sweden, in Q4, whether that has sort of continued? And on lower, we're hearing building material companies talk about sort of growth acceleration towards the end of Q1 and continuing into April. So to what extent are you seeing a similar picture here? We had a lower demand in Q4. That's correct. And but now we see that the demand increased. It was a little bit a slow start in Sweden in Q1. But overall, We are seeing demand is increasing, and we could also We grow a little bit, 2%. And also despite that we had the ERP implementation in early Q1, which always has could have a certain impact. So we see Good demand also U. K. Is coming back on the demand side. France is coming back. So all okay, I would say, yes. So just to clarify, you say demand picked up during The quarter in Q1, is that what you're seeing? Yes, during the quarter, Q1. I mean, it varies a little bit from country to country. But overall, gave an increased demand, you can say, if you want to simplify it. Yes. I'd like to do that. Thank you very much. That was all for me. Thank you. Your next question today comes from the line of Akash Gupta of JPMorgan. Please ask your question. Yes. Hi, good morning, everybody. Thanks for your time. And I just have some follow ups of existing NKT. So you said you expect a sequential weaker second half versus first half in projects. And are there any projects out there and depending on whether you win those projects, could this still change? Or is it just too far or is it just Possible given the lead times you have in projects. That's question number 1. No, I mean, it depends. If we have some variation orders in Q2 with short cycle that could, of course, help to improve or any other. But if you look currently with the backlog what we have and What we have won on orders based off today's status situation, We will see a stronger first half and less stronger, let's call it like this, second half. MKT. And of course, we work on it to improve. And but you need to have also opportunities to improve the market must be there on short cycle business. Yes. And when you say second half is weaker, is it fair to say second half would You'll see some improvement year on year. I mean Q4 last year was pretty weak. So I'm just wondering whether It's fair to expect some year on year improvement in EBITDA in second half as well, not just like entire full year guidance. Of course, now we need to look at the Excel file. Let me see. I mean, compared to I have not now the breakdown. Overall, what we said is still valid that we intend to grow in average above 10%. That is our intention and that is valid for this year and the following year. So and that can give you some ideas. Yes. No, I just think important to stick with the outlook message somehow here, right? That is our expectations. Now you know Q1 and a little bit of an assumption base, I think you can go by that to get the quarter's notice. So we share that first half is better than second half, right? I don't think if we should jump through that, it will be better The struggle I have right now is that, I mean, if you look at in Q1, your EBITDA is up €20,000,000 year on year and you are guiding strong Q1st half, which means we should see good improvement in Q2 as well. And then if you look at the full year guidance, then you are implying Degrees of $23,000,000 to $53,000,000 improvement. And I think we are already at the lower end of the guidance range in terms of the improvement that we need to get there. So yes, I just wanted to know whether the guidance is conservative. And can we expect that you can do more than $110,000,000 in full year EBITDA? Or is it too early to talk about that? It's too early, I would say. And a modest second half growth, I think that's probably a fine way to simplify it. Thank you. And then Moving on to applications business. I mean, here you have seen a good margin rebound after a number of quarters when performance was below expectations. And was there anything unusual in Q1? Or shall we expect that this Q1 run rate of 5% to 6% margin to sustain going forward? There's nothing special in Q1 except that we executed on our plans to improve the business, and you can assume that this will continue. Thank you. And my final one is on depreciation for cables business. So you had $25,000,000 D and A charge in Q1. Shall we just annualize this number and think of like SEK 100,000,000 D and A for the year? Or any comment on that? Yes, yes, we can do that. Yes. That's more or less. Thank you. Your next question today comes from the line of Claus Almer of Nordea. Please ask your question. Your line is now open. Thank you. Yes, the first question goes to you, Basel. You mentioned that you saw this negative impact from Q1 in Q1 from COVID. Just have to say, if that's the case, then the underlying performance must be pretty impressive and promising for rest of the year. So maybe you could give some more color to what you see in the order intake, what types of clients Giving you orders. Hi, good morning, Claus. I thought you'll get back to me on that. Yes. What I said was COVID affected some of our business negatively, not all. So in some sectors, for instance, in the industrial sector, in manufacturing, for instance, in Europe, anything to do with automotive or Large scale manufacturing is still relatively affected by COVID. Also our research and development business, which is still a significant part of our revenue, it's about a third, is still relatively shut down because most establishments are still working on reduced hours or close completely. So these are the segments. They tend to be smaller segments and what we do are affected by COVID. And they're also less affected in Q1. Q1 is usually our smallest quarter. So these segments are usually contribute more to the other quarters. So what we're looking what we're saying here is that COVID still has an effect. And if it continues, for instance, having an effect on these sectors, it will affect the rest of the year. Okay. So and then you're changing the worrying about guidance to be in the upper end of the guidance range. What is the assumption behind that? Is that in that COVID will still be a headwind rest of the year or only Q2? Or yes, how should we think about that? So when we did the guidance for the year, we assumed that COVID will have effect in the first half of the year, And we will gradually return to normal business in the second half of the year. That's when we sort of basically formed our budgets for the year and the forecasts. And now you expect to be in the upper end of the range. So does that mean that the COVID-nineteen If it will be less than you initially thought? Or is that the same? Or where came this ending in terms of range? MKT? Again, what we were trying to say is you cannot take Q1 And multiply the effect or the increase times 4. It's that we own too many businesses and there's too much pull and pull From a lot of these different segments. So I expect obviously, we would be we anticipate to be at the top end of the range. Should this change, we will change guidance. Okay. Well, fair enough. Thanks, Pechel. Then coming back to the cable division. Then this seasonality between first half and the second half, maybe the sound was a little bit I couldn't really hear what you said. So can you explain again why is it that second half should really be that more Soft or on a weaker than the first half? Because I saw some of these low margin projects you had in the backlog was more to be delivered in the first half of the year. No, it has not so much to do with the margin. It has more to do with the mix. If you see in the presentation what we have executed in Q1, it's a mix of DC cable, DC extruded. It is 3 core AC and it's MI. And in the second half, we have a little bit less favorable mix in the production and the whole composition in simple terms and that makes it somewhat weaker. Sure. But isn't that correct that if you look at the specific projects That you're going to produce or deliver in the first half is some of the projects you took in where there was a little bit more pressure NKT. On the margins? Yes. You can say so. But if you execute them well, then we can still improved the result. Right. Okay. And the whole turnaround of the Application division, Is that behind you? Or is there still things to be done and thereby lifting your profitability? That's still to continue and still to expect to improve further. Okay. And then just my final question goes to the adding of new capacity. Maybe you could give an update on is everything on Schedule, is there anything we should be aware of? No, everything is on schedule. We continue in Cologne. With the factory expansion and also in Kolkona, we have just started to build the tower with the slip form. So, it goes for the next 2 months. So, in, let's say, May, June, early July, You will see 150 meter high building in Kolkrona, the 3rd highest building in Sweden. So this is all going to as planned. Okay. Thanks, Emmanuel. Well done, Q1. NKT. Thank you. We do have one more question online. This comes from Artem Tokarenko of Credit Suisse. Please go ahead. Your line is now open. Thank you very much for taking my follow-up. I have a couple. Firstly, on the H2 versus H1 message, May I just double check it's solution specific or doesn't relate to other divisions? And second part of this question, I think Initially, you've been talking more of a sequential improvement throughout the quarter. So I guess what has changed? Is it just the phasing Viking Link now being H1 weighted or has anything else changed? No. Viking, We are in H1. And sorry, what was your question, Things have changed around between the quarters. No, no, no. It has not changed around the quarters. I mean, we had a strong service quarter with the repair, but that is an accidental repair. We communicated also with Britneyt. So, this is something which you can plan for. It may happen or may not happen. So that was a good contribution in Q1, but also the underlying sustainable business in sales And there's nothing which has changed as such. I would say in solution, good utilization, good execution, service With the order of sustainable business, accessories are going well. We continue with the footprint changes, as mentioned, accessories and building wires, application, we are following our plan. So simply based on the mix, H2 is a little bit weaker than H1. Okay. But just apologies, but So that we understand. Does this primarily relate to solutions business? Or is this a comment across all three divisions in cables? It's related to solution and service. As a solution that gives a little bit different mix and service, We have a very strong Q1, and we are actually continuing on some of the So service accessories most likely Depends if there's a repair or not in H2 that we cannot predict. It should be also weaker than the first half. Okay. But just to double check on solutions, it's just a reflection of slightly different mix Phasing throughout the quarters. It's not like there are project delays or cost overruns or anything we need to be aware of. No, no. Okay. Perfect. And my 2 other questions. On U. S. On your competitors LKT. Spending or Prismian recently also announcing plans to potentially build some capacity in the U. S. And high voltage. In this sort of situation, do you now see this as a necessity for you to also come out with some U. S. Capacity build out plans in the next sort of 2 to 5 years. So how do you think about this? No. I mean, we adjust and Karl Clobla. I need to digest that and also deliver on the backlog. So for the time being, this is our plan what we have nothing further. Okay. Thank you. And my last question is around the scope for you to bid on large projects like Eurasia and TENNE, and I guess partly coming back to my previous question. From your standpoint, I guess, do you have Not production, but more like financial and management capabilities to absorb those projects. And what are your, I guess, conversations with customers Well, they are concerned that you already have one big project. And for that reason, it might be a bit too much of a risk for you to take to participate in stuff like Eurasia. No, I mean, we have taken in the past large project. We have just completed the Northland project. We took $1,500,000 on the corridor project. So we can take large orders Absolute and we have capabilities and no communications. And I mean there was also some concern last year whether we would be able to be successful in the corridor projects. And you have seen that because of about 1,500,000,000. So and there are several large projects, which are currently we are active from tender to connect large offshore wind. So yes, and we would not tender them if you would see that we have not a chance to be successful. Understood. Thank you very much. Thank you. We do have one more question on the line. This comes from NKT. Prabhamesh Sayagunka of Goldman Sachs. Please ask your question. Hi, good morning. Thank you for taking my question. I have two My first question was around NKT Victoria. Can you please help me understand the utilization of the vessel? And if You use the same vessel for installation as well as repair jobs? Or are you subcontracting other vessels for some of the other installations? And I'll ask my second question after this. So as you can in general see with our expansion and also with increasing turnkey jobs what we are taking in due to the realization of NKT Victoria will go up. And in Q1, we were busy with installation as well as repair job of MKT Victoria and particularly as you see at the treatment repair, which was in February in the channel where you can you have harsh weather conditions with 8 meter based, for example, you need the vessel like the Victoria to do a repair job. And in fact, we have 2 vessels there to do this repair job. It depends really on the type of repair what you have. If it is a repair of offshore, let's say, repair nearshore, then you may be able to do it with a barge or a third party vessel. You may need not a vessel like the MKT Victoria for smaller repairs. So Here we are flexible to use either our own assets or a third party vessels, what fits best for the job. Okay. Thank you. And my second question was around the margins for different type of repairs. So can you just help me understand how the margins vary? I mean, what are the factors that determine margins on the repair job? Is it the depth, the type of people where you are doing the repair or how urgent is it? Can you please help me understand the factors on this? No. I mean the margins on the repair jobs Varies, of course, depends on both repair job, but you can imagine that large repair is attractive, but still you need to be competitive as our competitors also repair and offer those repair jobs. So you need to be competitive for tenant in 2020. The bigger the job, you can also say the complex also, the higher the reward in terms of margin. Okay. Just to clarify, is there any difference between AC and DC repairs? I could not Is there any difference in that? Sorry, just wanted to check if there is any difference between the margins for AC and DC repair jobs? NKT. Okay. Thank you. Thank you. There are no further questions at this time. Yes, then if there are no further questions, then thanks a lot for your interest to call in. And thank you for your good questions. And Hope you will join also the Q2 session and then let's see how the result will be done. Thank you very much. Have a good day and talk to you soon.