Earnings Call: Q2 2020

Aug 21, 2020

Welcome to the conference call regarding Rockwell International's results for the first half year of twenty twenty. My name is Thomas Harter, I am Director of Group Treasury And Investor Relations of Rockwell International. I am here together with CEO, Yenspearson and CFO, Kim Johan Amazon. 1st, Yenspearson will go through our presentation and give you an update on the call. For the second quarter first half year of 2020. Afterwards, we will be ready to answer all your good questions. Before I hand over the words to Jenspearson, I must ask you to notice slide number 2, which is the forward looking statement. Please be aware that this presentation contains uncertainties. Now we can go to the next slide, which is slide number 3. James Peterson, I will now hand over the words to you. Yes, I've given a couple of inklings this morning, and it seems like, I don't know if it's in our building or generally, but we have had echo some problems during all of the calls, not big ones. So if you don't hear something I say, then don't be afraid to take it again at the end during the questions. And then also when you ask your questions, be on track to speak a little bit slow and clear because there's something in the air to life. So if we before we go into the standard, the standard presentation, let's call expand a little bit of the background to the quarter. First a week, half of Q1, we had a good January, February, had a good start in March and then Corona started to impact. They got through the quarter flat. We did give you the sales in April, around minus 20%. And what happened during the quarter was that you saw, the quarter speak declined minus 20 pretty poor April towards the end of April, they started to come around. And you also saw some of these, I wouldn't say, panic actions, but abrupt actions. So it happened in the first half of the quarter all building sites in France for shutdown. There were a couple of countries in Asia where factories were ordered to be shut down. And so we had more turbulence. And then just got more and more used to it. And we took the approach for this quarter. We had a couple of objectives. First, all with our financial perception, net debt free, we went into without any angst with out any worries. And we said we're going to be the rock. We're going to navigate this in a steady manner. We're going to keep, of course, paying the dividend and keep going on the buyback and we did do that. And we also said that in the choice between subsidies and deliver even a few banks to customers will be delivered to customers. So the numbers you see here we haven't got the governmental subsidy money in there. We have some very small amounts in some German speak countries, but fundamentally subsidies, it's not totally steered only focus on customers. And we were able to deliver, and then to keep our people safe. So there's a whole slate of actions in the factories for separate people, and they are very few cases across Rockwall. And then in the office, we have 3 gears to find for the company, gear 3 one in the office, get 2, half to crew home, half the crew in the office, and get one as one home. And we switched early into gear 1. And again, that has worked quite well. No technical glitches. Maybe this is third call in the last since March or something that I had a problem. So this has generally worked. We all I said that we will focus on doing a better job than we did last time in after the financial crisis. We saw that Barco maybe lost the most bottom line when the top line went down. And so we have actually prepared for this. We identified last year, we have worked on increasing agility and flexibility. At the same time, we have avoided actions to reduce everyone's salary. We did do a small salary increase. We see this as a glitch yes, it's a crisis, it creates at times, but we wanted to manage it as we normally would manage any drastic impact on demand. And so that's how we approach it. That means in terms of laying people off to conserve bottom line, we kind of have an ambition to preserve profitability, but not maximize profitability. And on pricing, we said, steady in the boat, keep the pricing. Okay. So if we then look at the numbers, what that resulted in, about 78% down, I'm on slide 3, 78% down on top line in the quarter, but more of course in Q2. Q1 otherwise would have been a growth quarter. EBIT, 11.2 percent down compared to last year but still double digit. And then on cash flow, we typically have this build up at the beginning of the year of net working capital in seasonal stock. And we manage that and then of course, trade receivables went since we didn't grow, we declined, and that helped the net working capital, kept a really big focus on over dues and haven't had really any deferrals. We aren't for a period of few industries and so forth delay but generally we have kept that in hand. We move to slide 4, Q2, first half, 5, 6 weeks of that quarter were the toughest April numbers you have made of similar and then it started to improve and stabilize. And you also saw that the drastic actions were less drastic in the country. So big variance of what happens in markets. And I don't normally go into just, but just to give you a flavor, start with North America, Canada keep you steady U. S. Up and down, mostly down. In the Nordics, you could see Denmark jumping into double did grow. And we actually have to step up capacity in Denmark. And then you have markets like Italy, there up everything. And, we were down there, you know, close to 100%. And we're also present left of activity. So you had a huge variability of what happened in the market. Across the board, if customers needed product, we delivered. And it didn't have logistics, problems on the income in the outgoing. We saw raw material prices go down. Obviously, no travel costs, no hirings, the other measures and we took out shifts wherever we needed and offloaded those costs. We also had good cost savings, more than cost savings through efficiencies. The factories run with very high degree of efficiency actually in the crisis has something our people. Move to Slide 5. And if you look at insulation of systems, systems got through it a little bit better and the reason for Of course, I would say, grow down obviously not affected by this. They kept growing throughout, but also rockfall the rock panel have done comparably well. So that's nice. And in the insulation segment, I mean, the countries that have a complete stop on in the past for a couple of weeks. Obviously, the impact, our conclusion is that we to the semi market share during this time period. Move on to Slide 6. And there you see actually that systems in the quarter set to deter costs they took down, downturn. It hit worse and bigger on the installation side as expected because they growth on that place in the mother market and some other segments too. Slide 7. Readiness sales to development, starting in North America, Asia and others. In Asia, we have quite a decline China came out a bit and then it went down again. So it has been flickering around, but it didn't come back a B. It kind of came up and then down and it has been. So it's not fully backed in China, which maybe surprised me a little bit not so big for us. And then you saw South Asia India taking very strong measures and saw the impact on the base and yes, U. S. Has struck the old herd quite up and down should also say though that the U. S. When you look into the construction sector, people are quite optimistic the measure is coming. So it hasn't been, you know, it has been a decline at times, but not big panic in the market. I hope people are quite optimistic about the future. Poland, Russia, Romania less so the slow on a bit. Russia had the cities and parts where they did complete lockdown also follow. The absence for the countries actually growing throughout Romania, even though the decline of not dramatic. And in Western Europe, you could see basically the most south you came in up, the more drastic the decline. So the Italy in France, once they shut, they're really shut. And then in the Nordic led by Denmark, you sold up up, Sweden continued. No way, no more drastic in the measures also on business side. We were allowed for most the part to continue our construction in Norway on the United Way Moss, but quite a few things to shut down in Norway. Germany, so in between quite heavily impacted by the measures and there are areas where operations, we had to take off shifts and adapt, but the market went down quite significantly. Profitability, of course, we didn't on the risk with the deep value chain, they have a new go down closer to the breakeven point it doesn't scale proportionally. We have costs that we continue to have, but largely, we are taking quite few actions without being overdramatic and preserved, quiet to help the margin and possible cash flow. I'm happy with the double digit margin in Q2, considering the top line decline. And it should be noted also with numbers up in 2 2019, we had a 1,000,000, one off for the legal settlement in the U. S. So the decline overall EBITDA was 2% to 3% compared to Slide 9. Some of the businesses in system based on preserve profitability. So the like for like EBIT margin in the system duration went from 15.3to12.4. And from 11 country to 8 in installation. So that's, I think, acceptable. That investment activities, our spirit has been to keep going. There may be push a little bit more on sustainability investments. And I would say a couple of investment passing going forward, but we decided to keep keep the projects we have and keep going. So more big change on that. Slide 11, cash flow, net working capital, very strict focus on not all the bidding stocks. So that has been done. We have control the stock reach yes, we normally do. And then on the net working capital, the $40,000,000 there that's did decline in the top line with the tried to receive because obviously, I'm a bit stuck together. We kept going the dividend payments. Obviously, we bought those shares at March on the safe harbor, of course, put on to much lower, lower rates in the sun and not. It doesn't track a little bit ahead of the program. And in spite of the performance that can be made money, we have invest the dividend and the share buyback. We are still net debt free at the end of Q2. On the outlook, Dan, we see basically We continue to be agile, be a verde for anything. We are restricted on costs demand management. We keep doing what we are doing now and what we have done in Q2. And when we look at the market, we feel relatively safe to say that it will be better in the second half in the first half. And you see some markets where there's steep improvements, for example, Italy, another market is more slow improvement, for example, UK, there is a pretty decline. Seems to be a slower recovery. That doesn't necessarily mean that even on the slow recovery because that's such a small market share stand on the change in regulation and increased depreciation of higher combustible insulation has kept going. So I think some of that potential as we see in our countries. And so back up, and that led us. If you move to Slide 14, that we could, in the annual report, we had the first guidance on the 5th February, and then we turn to standard periods there. But on EBIT, investments, we're just provide the previous guidance, and then we have lower the top line to mid single digit sales to And that's based on what the second half year is. It's a bit better than the first half year and month by month, obviously, what happens. But we expect the markets to improve them going forward. With that, I would like to hand over for questions. Thank you. Great. I hope you are there now. Yes. I am there. I'm just moving on to the question and answer session. Ladies and gentlemen. We will start We have our first question from Christian John Hansen from Danske Bank. May I remind you, please? We'll Two my two questions then. Firstly, in the project segment, what level of delays have you seen in projects and tenders or so on, which could potentially have an impact into next year? And the second question? Sure. 2nd question is regarding Action 5 by government in the countries where you're exposed on energy efficiency remuneration. I think last time you reported, you mentioned that there's a new program in Italy has has there been any other movement in any of your other markets? Okay. So what we have seen on the projects, I would say we saw, we saw a pause of 3 or 4, 5 weeks in a number of projects in the countries where stops. It's hard to say, but when France stopped for 5, 6 weeks, the project stopped, and now afterwards that is a catch up effect. So now those projects are going to accelerate So to pretty much say that the JV like the amount of lockdown that the billing flights were stopped. And that's all that happened. And then we haven't yet seen since there is a backlog of the projects, like, big, big projects, they have been bid and that has been that work has been kept going. And there's quite a big backlog in most markets probably stayed. I haven't seen that really change. My question is what will happen say next ye/ar or companies generating new projects that we've seen in 6 months. That is my question, Mark. But we haven't seen much to the stock, the projects, and probably lower activity and projects coming out for inquiry. And so I think people have just kept doing, and then it's the next round of investments that then is yet to be seen if there is a vacuum coming there and some guidance. And then on the government actions, I expand that into the whole EU thing now because so then you have that as a base. Because I think that's a topic. So you can now look at the EBITDA trend to 21 to 2027. It's another side, which is 1,800,000,000,000 Euro, 1,800,000,000,000. That is 60% higher roughly 60% higher than the previous fixed year budget, right? And it includes a number of things. First of all, it's had this recovery facility next generation year of 750,000,000. It also has a recovery and resilience facility of 1,000,000,000, about half of that is grant and half of that are in loans. And those that money needs to be deployed relatively quickly, and then it has more than budget delivery. But some whatever way you look at it, there is a good 7,000,000 dollars, $800,000,000 of increase of this for a green restart or something like that in the economy. I'll put that and this is our interpretation and we follow this tale about 40% is preserved for climate action and agree with the start. And there are also some elements in that being discussed, for example, the tax to finance the grant piece. This is all the answers with the potential tax on plastics on plastic payments. So that's massive amounts of money. And then let's see, for example, that you could have done their own thing. It's about the $2,000,000,000, $2,000,000,000 for restart and energy efficiency and some smaller amounts too. So that's a non New York countries. And then, of course, in the U. S, such big numbers that you come through the CF comes, but generally, it's a positive spirit in the U. S, but that monitor goes on by and with going to the construction sector. So I think that the awareness to get rental and then also there is a target on doubling the renovation rate. And by October, the membership countries should come back and tell the year how they want to do it and then there is a link between what they do on the Central Mining and bounce some overheads. So fundamentally, a lot of good things. But then if you look at another countries, we haven't seen anything in play, and I'm not sure that's the fee related thing, but you look at Italy, Italy is already in positive growth territory. Year to date after the horrible stop. Very quick up, they put a very strong, it's a 110% subsidy of energy efficiency generation. And we clearly see it in our business in activity and all the rest. And then if you look at a country like France, they are aware of the need for renovation, they have the right certificates seen and they'll be starting it. So we don't expect France in our segment to come back to be on a lower level. But then you have countries like the UK where, for example, the Hurlough they did was made in a way that it actually forced some companies that could have gone from business. We didn't do it. Been kept working. People got when on it, they actually before, so almost shut down the companies and that had a negative effect on the economy in the 1 say, maybe some drops. And so the yields are more hesitant, how we will do it. But in summary, when you look into next year and the outlook, We have seen some actions. We are pretty certain that countries like Denmark, France, Italy, Spain also have a ski, they will probably jump back in and be quite quick on it. They have simpler schemes to do, and then you have other countries where you can be more hesitant for the take longer time to link the money to the project. And so we follow this. It's hard to say, but there's clearly a positive push. And some of the money also have a shorter, that's before that. So you need to deploy some of these recovery funds before 2022 or 2023. Start before 2023, a large portion of some of this money needs to be committed to progress. Obviously, you can't execute all of it, but you have to commit it. So I think that we see activity. And then we see the whole variance of different governments there in the skill of doing schemes that you can deploy. It will lead in the way. Thank you. Our next question comes from Yaronis Bohmhead from Exane. Please go ahead. Good morning, gentlemen. Unfortunately, I missed the whole presentation. So Sorry about that. I'm not going to try and pinpoint some slides. I'll go straight to some Q And A. My first question is just on the general situation today. We are actually hearing that July August were relatively good months compared to 2019 and even compared to expectations during COVID-nineteen. And that has apparently led some restocking across the channels. Which is making the installation industry quite tight. It feels that this is especially the case in the U. S. Where price increases have been announced So I just wanted to understand if this situation is also relatively similar in Europe, and therefore, how should we think about pricecost and if that's going to remain supportive into H2, even after the new capacity, it is coming on stream. Second question, obviously, it's great to hear all these new investments towards renovation, but we are hardly hearing anything on the new housing side. So I just wanted to get an understanding of when you speak to the house builders and also to some of distributors, what are you seeing in kind of what is your let's say, views on base as we go towards 2021 and push the catch up effect, how do you think is, the new housing will trend like? Thank you so much. Yes. Okay. So on the price cost, I obviously had some capacities coming online. If you look at the announced increases over a 5 year period, maybe towards the current plans when I look at that, we're talking 3 percent CAGR capacity increase in the market. With all the announcement we have seen. If that happens, obviously, now this year, next year, there are some participants which we won. And you arrive from the U. S. Up there, first of all, the U. S. Is extremely patchy. You can have one state in a complete different mode than in others. So you can almost not talk about but to South, it's very different to New York City. And now afterwards, so we see everything from complete stances to building entire supply. But Generally, we have at least seen that Owens Corning, the last call announced the price increase of the to be the price increase also in the first half year. And we have a traditional speaking to that, we don't have to narrow some back off. So that's the U. S. Situation that we get is incredibly active. So I see how spin this has not been quite optimistic in the U. S. Also muted, but are we see the start and stop and wish to get the business going, but then again, it's too many people have enrollment, you can't run the factories, you can't run the building sites, you need to take care of the people. Otherwise, the economy doesn't work. So still a little bit of a great cloud for some optimism. And then we go into Europe. I think that since, short term, I mean, everyone have managed their capacity in the downturn, and short term, people are getting back on the progress and they want to finish them. So we see demand coming back and we see every week basically that now they have access back and then the question is there's no automated fee on 100% of last year or below our dollar, but it would be better than the first half year. And so I think that seems to be happening, but our general approach to price is to to stay steady in this segment on the price. Did I cover your questions for that? Thank you. Our next question comes from Michael Peterson from FCB. Please go ahead. Hi, thank you for taking my question. I wonder if you could give any flavor on the month of July. If you saw a pickup on June, I know that you mentioned that you saw that demand is rebounding strongly, but can you get any figures on that, or maybe try to explain what geographies are moving faster than the others? I mean, I don't I can't comment a month since we got back to the same EBIT modeling guidance and then as we had before and then we gave the top line guidance And you know what March, you know, that the first half of the quarter was quite down a lot. I can only say that it's not improving. But then in our business, you are probably better off looking at overall construction industry because they average things out, we can be impacted of ready July to 2 days short a month impacted to the holiday strategy this year in France. So just a couple of days, so we typically don't care too much about the month. But what I said in the guidance, the situation is improving and it's happening gradually, but that doesn't doesn't mean that you still don't have that you still have those work day variations between 1 year and the other. So we tend on we don't tend to look too much at the month, but it is improving. Okay. And then my second question, in relation to your staff costs, they're up year on year, but due to the highest decline in revenue. I wonder what is driving this, is it hiring for the people for the terminal expansion in the U. S. Factory or It's a mix of things. On the blue color side, they have been quite quite good at adapting to the capacity, which means increasing the sum and lowering the sum. So on that side, productivity has been kept. Then we are hiring, I mean, we started off, Noreberg, so that's full, you know, production stopped up. Stuffing up. And then I may have had also on the projects and just getting people into the U. S. For the projects the complications. So that's some of the fact that I should also say that our spirit for this quarter did do the other increase. Our spirit is to adapt in a sensible way by markets so that we keep raising white collar productivity, and we remain competitive, but we didn't put the requirement on ourselves to do that within the quarter. So that means that the level of adjustments we have done on the white cutter side, we don't do that based on a blip at the market stop and we haven't really gone off to subsidies. So that means that you see that effect, but then middle market, when you see the road, the market dial in, the target we have is to preserve productivity. Both in the office and on the shop floor. Thank you. Our next question comes from Riaz Sayer from HSBC. Please go ahead. Thank you. Good morning, gentlemen. I have two questions as well. First one is on Germany. We did see that, couple of other building material companies report a strong June as well, but you are kind of sounding like things are not as strong as others talk about If you can just draw a little more into whether any end market issue there, which you are testing and topic sort of yes or not, And the second one is on cost saving. If you can tell us whether you have done any kind of cost saving in H1 or any brought a plan to do, over the course of the year, but it's actually temporary in nature of the more of longer term formality. Okay. So I will not comment, Germany, in detail, but because of the Germany has not had to sharp the up, what is doing okay. And it's interesting to see when especially in our segment that the incentives for renovation on that is that's a huge amount of building permits, and there's a restart of now with incentives that they put in place, they have now a place to do any of the efficiency of renovation, we are driving that with our own employees. We are providing consulting and we already have quite a few employees of when we do it with their houses, So that is just starting now. But generally, Germany has managed the contract in for safety. And then I don't know which specific many material segments that have been growing, I can't comment that. But I do see that Germany traditional Germany is normally quick out of the crisis. And I don't think we have really seen it start yet, but last time in the financial crisis, France was a little bit quicker out and then Germany came and then they came up stronger year of that was basically back in our industry quite rough. So let's wait and keep on the floor in Germany. Costs will be done. I think they are now on we have driven operational efficiency and cost savings there. We have also savings on material. And then we power foundry, local managers looking into the productivity. And we have plans for that, but there is not a big central program. It's just to adapt to what the local market circumstances are and when we look at the market, we don't want that sit permanently with lower sales per rental, you want to keep slightly increased volatility, which means that there's some businesses where we are growing, we are hiring and obviously, we are reducing or, and of course, we have a hiring freeze. So we do it maybe a little bit slower than, some other company we do, but we do it sufficiently and we preserve a competitive environment. Our next question comes from Claus Amar from Nordea. Please go ahead. Thank you. Also a few questions from my side. Jens, the first question goes through how you are managing the business, giving the combination of a demand picture that is improving. As you also mentioned today, but also, I guess, still a lot of uncertainty about COVID-nineteen and a possible second wave. That will be the first question. Yes, yes. So I'll remind us to businesses. I mean, it's the same wholly element. We tried to run the pool system with a defined protected on philanthropy. We don't focus on subsidies. We focus on the customers. We we had inside sales in place, so we could move our feed sales force on. We could work more on digitalization, for example, during the customers didn't need so much attention to deploy those people to accelerate some of our digital initiatives, which means that we actually kept people that were not outselling in their work to prepare. Some other digital initiatives like e Commerce and Pay and CRM and other things. And we progress that quite a bit. So if we can accelerate the thing we need, we know we need during a crisis instead of letting people up to do that. Going forward, I want to set up the business so that we don't want to be optimized for a quarter. That's not how we manage. But I want to hit, so what we do now is that we have the other way match the match the demand of the products that we think ahead. And then that next year, whatever next year they throw at us, be well positioned to have good productivity and the right cost level by market. And that's how we see it. And that's a local, a couple of principles, we run-in fire grid, actually, last year, but the analysts back the financial perhaps 2078. So we have also changed some of the labor contracts the way we approach it, the idea is to be on the same productivity level and competitive in every market. And that's how the deal is. And therefore, I don't announce a big program or anything. This is just business as usual, that match the local operation of the local demand and make sure we can meet what really happens. Okay. So you say you are expected back to business as usual and not the let's just call it crisis. We had 3, 4 months ago. Is that why the way we should think about your day to day? Yes, I would say this, not business as usual principles. So that means all the principles we have here kept straight through. And I still have, you know, the office is still running in the air too, off the crew home, off the crew in the office. If you have a second wave in the country now, if the vaccine doesn't come or people don't use masks, then you might go into gear 1, but it's kind of normal management, the principle for how we manage the business and keep delivering. That's the same. And then the fundamental principle that we don't keep being competitive to keep our productivity and competitiveness. That's very important, but we don't optimize it for the quarter. We optimize it for the lever to see this dial in. And in some markets, you might have a negative impact on many of some market that could be growing, but it's just a normal recipe to hold back on resources and raise productivity. So it's not a matter. I'll just explain Yes, absolutely, Jens. And the second question goes through cost inflation. We have seen a number of cost like energy and so on is starting to increase again. How do you see this and how is that reflected in the guidance? It's covered in the guidance we have, but I think for the year, we see a decrease net over the year, but we haven't covered that in our forecast. Sure. Okay. But you see it is down on as for the full year, you will see a positive impact this year? Yes, that's correct. Okay. Thank you. Thanks. Thank you. Our next question comes from Frans Hoyer from Hansel Banken. Please go ahead. Thank you very much. Just if you could help me with your pricing, I think you said that you have continued your pricing tactics, increasing them gradually, maybe not so much. During, I guess, during the Q2, but you have stuck to that. Yes. Yes. Yes. So, what we did, also, we did in most markets and segment of price increase. It's rare, of course, you know, grow them as a different market to rock, foam, and kilo, etcetera. But we'll basically start to that and then on the project pricing. We are selective. We typically get to orders at the premium, but we are a bit more flexible, but we don't jump around too much. Remember last year, we had the price decline in the whole market in Poland. So we are trying to work back up. And then distribution segments where we have still demand, we have done an increase should also say in the middle of the crisis, our focus was not on announcing price increase or anything like that. Just keep the low risk keep taking care of the customers and help go ahead. So pretty much how we see the year. So now with the cost situation, the it's not for a price here. It's a challenge for this year that we should keep it steady and keep the price quality off. Thank you. And second question on the market precisely because you kept your factories open and you have kept being available providing availability to customers and so on unlike some of your peers, have you a sense of your market share progression during this period? And to what extent might that earn you some brownie points with customers that you can maybe hold on to some of that market share gain? Yes. I and you know, a market share gain on projects because you're only one quarter and responding. That's Maybe not the market share gain, but we have had a couple of markets where people haven't even responded to things priority, we have responded and that's going to be better, of course, to get their orders. So that's a very special circumstance. But And then on the distribution segment, we have also done other things. We have done product trainings. We have launched in a couple of markets e commerce because they were still sitting at their desks, and it was good time to do that. So we have kept working And now the NPS score is going to be incredibly hard to race it on the done 5 years ago. But we've gotten a lot of positive feedback from the customers. And that's pretty much. I mean, we are a supplier that want to have top top quality and a top technical support could be down to our a real supplier that can count on, and that goes to everyone that parts for us. And I I think at least I've got a lot of positive feedback and I've got to not got to sing and complain from a customer in the last 4 months that we have let them down. Sorry, I think that has been good. And then if you look on the system division side, there were capital segments there, where for quite a while, we were the only supplier in work that could deliver. There are no huge amounts, but if you have a product and you get to the interior ceiling, and that's the last bit to finish your project, even though it's only 150 square meters, it's natural to get out on the site and finished the snide list and we did that. So I can't see that we got negative points at least. I only have open positive. And anything around the bad detchers or anything like that developing in among your? Yes. So what you saw in some markets of people stopped paying for a while, you consider France and Spain, we were in dialogue with them. And it was just the way it happens. And then we kept the dialogue and I think we managed that we haven't had any defaults but for the last period in certain countries where people just stop paying invoices, we had cash, we didn't alter it, and then we reached the point where it was critical to customers. So pay. But this is this balance between do they really need the cash at the same time, our policy, so they should pay the profit by half? So but this has come through without, we haven't crashed anyone for it and we have gotten the cash out of clients. We are such by the invoice was maybe a few days late. Understood. Thank you very much. Okay. Thank you Thank you. Our last question comes from Lautrecht from ABG. Please go ahead. So the IEMs came in summer. Congratulations on the solid results, despite the volatility. I have two questions. The first one is in Germany. When we talk about the Nerve production line, on what date communicate when that should be up and running and how much can we expect to contribute to the second half I mean, it's quite a significant production line and it's a production line. We didn't have last year, obviously. Could you give some figures into that? So I can say it's up and running. It's up and running. We have started it And the idea now is that we will since it's a very cost competitive asset, we will and they have like a shortage of Germany. So it doesn't really change the capacity outlook. We have spare capacity in Germany now we get the new asset to have a lower cost position. And the way to use it is to bring in to use the new line Of course, now we have start up to try to beat directly that bring that up, but still debugging start, stop a good fix. It's all good, but it's the moment heating issues. But I think we will have a good start up and then we bring in the business to the 3 to 4, and then it just cut out capacity elsewhere, an extra shift in some other plants so that we optimize their geographic coverage. So that's what you're seeing. So you don't need to see it that we have this capacity and that's being the max capacity with demand and now the avenue asset to do that. And then of course, we hope German will come back in good, big stars, but it should add something on top. But Germany is not coming back up. I mean, to see how fast and to upload that topic. Just a quick follow-up. Did you this exercise that you're mentioning now? Did that contribute to the Q2? A little bit because we are when we take out, no, I mean, not really, because you start up higher in full shifts and all that. So probably the German plant has a negative impact from a cost perspective in Q2. And we thought about that came as sometimes using the numbers. So you see a negative impact in the quarter that we had planned and we expected But of course, when we take shifts off in Germany, when the market went down, we do that in the least profitable asset for the business. So they have what they must do. So I would say the plant is a negative in the quarter and then over time, it tends to be a positive But of course, we have the depreciation coming in. But from a cash perspective, it is very competitive asset. Okay, good. And then my second question is just on this EBIT you're guiding around 12%. Obviously, October, November, you previously communicated by your highest selling months. And I'm not sure, have you put your foot on the brake in terms of personnel? Cost during the first half? I mean, how are you prepared to handle sort of the higher selling months? What are your assumptions on those months? Do you have enough capacity? And in that regard, I see external costs are down 25% in the quarter. Obviously, not a lot of traveling going on maybe not a lot of marketing, but but can you operate your business So how do we set up the businesses? Of course, we have the other break on the hiring. So the hiring is we have a certain attrition We have a break on the hiring, but we hire. I mean, for example, we needed 3 more digital people for a particular implementation rather than using consultants, we find great people to hire them. So everyone, we hire. We look at And then, not an awful amount of traveling going on and that's going to continue. I mean, we do travel, but every travel is approved by quite high up in the system. And I travel myself, you know, about 3 demands, Connecticut and all the rest. And then on marketing, I would rather say to do a step up, we have adjusted competence of what we do. For example, we worked, we worked quite a lot now in renovation and how to deal with this and how to understand about this and that's marketing during that. So giving forecast in marketing. Just a simple person then. Yes. Yes. I mean, I've had the break on hirings. We only take really what we need. And then, of course, what is not seen, but actually in one market we can have a reduction and then they hire more people in the army than at least part even. But we are navigating that and every local business should be set up for the business. That's the principle. But are you prepared for October, November, or do you expect to hire more for those months if there's not a second wave? Yes, you know, on the blue color side, we have a whole range of flexibility schemes. So, in some places, we have tamper employees In other countries, you have an agreement with employees since years where they actually flex days between that time of the year and other times. So they can, if they go home 1 day a week, all of them, the longer work orders and then you catch it back. So we are quite equipped for delivering that, but There could be maybe one line somewhere that can't meet it, but that's not the spirit. We go into the distribution data to deliver all of that, of course. Thank you. Our final question comes from Manas Peria from Societe Generale. Please go ahead. Yes. Good morning. So I have this question. Can you please provide the split of building insulation demand in Europe by new build and renovation, at least on the market market site. And when I mean the market, I'm including all sort of is middle of a rule or it could be plastic. So can you provide the split? I mean, there's not one split for Europe. We don't provide the split. Obviously, we have a split by I mean, I never looked at the number for Europe. I looked at the since we have a local factory for the local market, and 90% of our business is not the export in our system division, but the rest is basically within the same customers on. So we look at it by country. We know it quite well, but I don't have a European script and we don't sit and kind of share this because we don't find you don't find much material readily available than we had people working on. So we tend to keep it for our size. Mhmm. But but I I have some update, like, because I have talked to some other people. So this is something like, 2 thirds will be new build and maybe 1 third or 40% could be renovation. So going by your presentation, you're reporting, you said like you have 50% split between new build and innovation. So just wanted to see why you have a higher percentage basically than the market. Is your sort of product in more usual innovation. Just just trying to see because the innovation wave will help, I mean, if you have a higher percentage. Yes, I think that varies widely by country. In the new build, we also have a big project impact, which is called flat roof. So therefore, some people might say that big boxes with a flat roof, yes, it's new build and you get quite different percentages. If you look into other commercial newbuilding and residential newbuilding So it depends a little bit how you define your discussion, but I'm moving it varies by country going forward, we love new build and we love renovation, both of them and as much as Yes. And also the second question is probably like maybe you have done some sort of analysis on what the payback of the insulation is by maybe like if you do only facade. So what is the payback if you do the interior wall by installation? So what is the payback maybe the basement or the roofing? So the payback could be quite different because you have an initial cost and then there is particular LGS savings or with respect to it of them, maybe the first half is more energy saving. So do you have a number for the payback for different elements of insulation in different parts of the building? No. We obviously have people that can calculate that. And it's there. It's a lot. So you need to look at the specific project, but I'm typically the payback for installation, I mean, from a CO2 perspective and planetary perspective, it's really short. But the economic payback, if energy prices are low and the investment, they're quite long, but it still makes locations to do it. And then, of course, when we get to the Tania and case, the payback for the government, obviously, you're doing people to work. They make their houses nicer and the payback for the people who own in their pockets when you have the government it becomes, yes, almost instant. When you get to nicely house and you don't pay for it. So it varies immensely. I mean, Germany, for example, you see that any of the renovation of residential houses typically slows down when the scheme is finished and then they wait until the next scheme comes. Where the payback gets better. But it's not one calculation and it's not average, but without subsidies and that it It is a longish payback to renovate the whole house in Minnesota. It's a big project. It's still a very good payback, although it's not in a year or 2. But if you come into, let's say you do technical insulation in a refinery, or a chemical plant, then you're talking paybacks of 3, 4, 5, 6, 7 months. It's that easy to see it. In the normal house, it's more a slower product. Yes, thanks. Maybe we should take. I mean, we messed up a tech messed up on us a little bit at the beginning. I think we take one more question Or is that fine? If there is one more question, we take that otherwise, we can hand over to Thomas here. Our next question comes from Pierre Sal from Barclays. Please go ahead. Basically, your EBIT margin guidance, is it the same as what it was at the beginning of the year with the cash flow volume growth outlook over the full year. So my question is on productivity savings and the cost structure in general, do you feel that you could be a little bit more demanding and then have more cost savings in the future and in the midterm, that's my main question. Yes. So basically what that forecast compared to the previous guidance is that we'll use a bit of top line We don't have anything dramatic happening on prices and then cost material costs, fixed costs, is being reduced, and that's basically the picture. So we include some costs, cost serving in that. But depending on how 2021, the outlook for that we will have an eye on what the cost level needs to be for next year. So that's a little bit of a factor, but I feel confident about delivering around that 5% this year with the actions we have in our parks. Okay. Pierre, did you have another question or what's that question? Yes, maybe if there's time, just on the raw material tailwind, just to help us understand the margin performance. Could you give a rough quantification of how much that was in the quarter? Tim, maybe you'll take that one, Tim. Kim, if you could please unmute the mic. Yes. And Peter, was it the moment sales categories? Sorry, I was just answering with Mike muted. The raw material tailwind overall that you had in your cost base in the quarter, if you could quantify it? Yes. Now, we I mean, you can you can look into, of course, our, our teachers in the accounts where you have broken up on the raw materials and production material costs. And you will see in the quarter there is, of course, some benefits and also in the half year. And as Ian said, even though Renev costs are starting to come, we do expect that the second half, we will still continue to have some benefits from the raw material cost in the second half, which has been incorporated in our outlook of the 12% EBIT margin. So with that I handled that was the last question. We have time for the 10 minutes or a few minutes over time, not 10 minutes. So over to you, Thomas. Thank you for joining today's conference call. I'm pleased to inform that on 18th September, the Rubber Group will hold the next Investor conference call dedicated to each team. I hope you all will participate. Thank you.