Earnings Call: Q1 2020

May 14, 2020

Ladies and gentlemen, welcome to the Rockwall Report on the first quarter of 2020. Today, I am pleased to present CEO, Jens Viegelsen and CFO, Kimiya Anderson. For the first part of this call, all participants will be in a listen only mode and after will be a question and answer session. As a reminder, this conference call is being recorded. I will now turn the presentation over to your host. Please begin. Hello. Good morning, everybody. Welcome to the conference call regarding Rockwell International's results for the first quarter 2020. My name is Kimu Munnesen. I'm the CFO of Halper International Ness, as the presenter said, I'm Peter, our CEO of KinguSign. Insulet, you shall go through the presentation and then the time afterwards for questions. Before I hand over the words to Jens, I would like to notice the slide 2 regarding the forward looking statement. Please be aware that this presentation contains uncertainties. Now, we can go to the Slide 3 and the presentation. I keep all the words to UEMs. Okay. I hope you all see, slide 3 out there. Good morning to everyone. First, a little bit of an update, what happened with the COVID-nineteen in Q1. So we We're a little bit fortunate. We had, some people negotiating a deal in China early in the quarter. And obviously, we have our Chinese operations. So we got alert to to this potential situation quite early. And that meant that already in February, we actually put even a group management team member in quarantine on this way back from China. We also had people from 3 or 4 people that were in, in Ischkeler, right, in the Sorn, and they got Corona for several of those people, but we guaranteed we had guaranteed rules in place already when they get home. So 3 or 4 people never never brought it back to the office. Probably have both Germany and the certain Evoquel. And when I just hung up where we are Today, we have just a couple of handfuls of cases in the whole of the group, although we are more than five thousand people. So one observation with discipline management, distancing, daily, follow-up, we have the masks where we needed sanitizers. We have had all of that all the time. You can run business and you can run factories, but it should also be said that as the crisis spread and governments got into taking action, we also had 4 or 5 plants, shutdown not because of demand, but because of governmental intervention. Often that has settled after a couple of weeks and we've been allowed to to restart. So we saw, obviously, we had China, manufacturing shutdown for about a month in the quarter. It's not such a big market for us. We saw good development in the quarter all the fundamentals in place, to a stone wall, And maybe a little bit better than we expected, but then towards the 2 last weeks in the quarter, you saw the the actual spreading. No? At this stage, all factories run we take maintenance stops, but obviously in most places, we are not up and running as much as last year. You saw the April numbers. I come back to that. We are pushing, you know, trying to see what's good. With this. Yeah. Obviously, good to see how great our organization work at managing our people do really good job, but we have focused on customers all the time. And in some markets, we have even seen competitions on everyone home. Which has increased demand for us. And I so we have this, keep safe and deliver to our customers, and that has worked. In terms of now, opportunity of the crisis, we see talked about 1 or 2,000,000,000,000 on EU level stimulus packages, and we are pushing and arguing for that. You should put some of this into energy efficiency renovation. And while you restart the economy, I make a green restart, but you not only create jobs, but you make sure they are CO2 positive jobs that you put us in a better position. And there, a €1,000,000,000 invested in energy renovation will give, 20,000 drops, and that's one of the highest returns. And, certainly, for every, invested euro there is nothing that is more CO2 saving or efficient in terms of CO2 reduction than energy renovation. So that a potential upside, and, and we are working on that part. In terms of starting up and offices in the business. I'll give you an example. In Denmark, we're talking now from 2 meter social distance to one meter. We don't do that. The drop wall, because we worry that if you have one meter, it varies, it slips down to 0 meter. Because people want to be together now. So that means we maintain there is not an award for being the quickest here. We'd rather stay safe. So we take two meters. We also run the business. I mean, I obviously want to have everyone back in the office as soon as we can, but I don't want to risk the business. So we have, run it in there. We have 3 principal ways of running our offices. Pier 1, everyone at home. That has worked great, but it's not as sufficient. People collaborating. GEO 2, that's what we are in now, in some places where half the crew is at home, half in the office and everyone that feed their high risk personnel at home. And that means that we offload the public transport system we get a lot of space in the office so that we can make sure people keep the 2 meters. And and we will stay in gear too. Also in Denmark for a while until we see if there is a recall from the restart. So So that's working well. I hope you could do good. Next slide. And if you then look into Q1, in spite of China, and the last 2 weeks, the numbers are the best numbers we've had in Q1. Both the top line and the bottom line and the market. So so that's pleasing. And it doesn't matter how we are in a different situation, but I I thought many of the cards were in place to have a really, really good year, if you want to have gotten the pandemic now. And should also say that, we have seen a deflationary environment. We We score a bit from that. We've synced in the margins, and many of you make this comment. All the prices are concedaler, they haven't. We have increased prices, not so much. But, overall, prices are up And then in Q4 last year, we discussed the price development in Eastern Europe working hard to cut capacity and getting prices back up but overall across the business prices are slightly up. When you look at the corona impact of COVID-nineteen impact we see that the main, area where we pay attention on the top line is to get the money at all. It should be be on guarding very carefully overdue payments. And that has increased a little bit, but we have it in hand. And we take action, on that, if it's slipping away too much. But nothing to worry about. Cash flow normal seasonality. We always go negative in Q1 when we build the seasonal stock. We don't change our stock curves. Because of this year, we run it up to 2nd stock cards. So you see that seasonality plus on top of the CapEx. So actually, this Cash flow is pretty good, a little bit due to a grant. We got those. Okay. So Q1 to the next slide. Q1, if we looked into businesses, a small powerform effect, we had 2 months k. 2 months, 2 months of that. Obviously, not the high season for that business, but we have 2 months of that. And you saw that the System Division grew the flat insulation, but System Division grew, that's pretty much spread across all the businesses. Good development, but should be said that growth on its growing in the most in there, and that effect will probably see it strengthened because food, food production, that market doesn't go down when people stay at home, and it's more. Regional Sales Development In Q1, not so many markets. Just say when you're in Q1, not so many markets were dramatically impacted. You saw Italy obviously was early into this, and they have a solid negative number. They started off earlier on shutdown earlier. Spain and France have slight declines, but so from very positive development into negative territory and in UK, Nevelyn and some Denmark, all really good development, and I will say that Denmark has accelerated throughout. North America patching the US, Canada going up a bit split in Asia. We are below last year in China, but it's kind of recovering, and it's already on a good level. But some North America had had a good quarter in terms of top line. So then move on to April. As you don't have, you shouldn't expect us to give monthly numbers. But since we have suspended year end, we felt it in play, it was in place to give you the minus 20 I'm confident because you, I hope that benefits your thinking about the business. And We have seen a whole array of actions. I'll give an example. France was in a very high strong growth mode. And the approach to the lockdown and the corona situation was to shutdown at first building sites. It might not even have been the intention, but that happened and also the the outlets, the big box outlets, the building materials. So that went into very strong negative It's starting to open up now. While, for example, in Denmark, the effect was absolutely opposite, building sites were kept open. I think municipalities accelerated projects, and all the home office work, and some corners were turned into home office improvement projects. So we see solid double digit growth in Denmark. Canada had a similar pattern also. So it's interesting to see that it's very, very rare. And then you came up to very strong growth went into quite to see we had locked down where they also put the subsidiary scheme in place that almost awarded people from shutting down the businesses and the people who permanent guy. I don't think that scheme was ideal if you want to keep keep the economy going. So so that's the situation there, I'm sure I get some questions on what we think about the coming months. EBITDA good EBITDA development, good EBIT development, margin improvement on both counts and As I said, prices are higher compared to last year, but not so much, and costs are down. Number 9. If you look at the segments, good profitability in both And part of the improvement in insulation is due to a mix from you saw some heavy segment start flat roof, maybe slowed down a little bit and then the GBI like the mix, higher contribution margin mix, maybe shifting up, and that contributed some also apart from the cost situation. The bump on Q2 twenty nineteen or the hill there on systems that listed 10,000,000 the North American sector, not the biggest at the moment. So, you know, it has improved, that's good to see. Investment activities, high on the 2 main draws there are obviously Ransom in West Virginia and Noyberg, Guillermo Factory. So that's just been progressive. Been progressing. And then on the sustainability part, it's mainly the mosque project. Both Neuberg and Moss we have to shut down due to governmental rules, and we are now busy this is starting those projects up again. So we see some, some delays, but not dramatic in North America. We have been able to keep the site running. Okay. And the cash flow also includes the deductive payment for Paraphone. On the cash flow side, we reduced or we improved from a cash perspective, the change in net working capital. And so that contributed, and then we also got how much came in 20,000,000 19,000,000 from the Chinese, deal to move or rebuild the factory on a different side. That's not the whole deal, but that was the 1st installment and that came in the quarter. So that contributed. An update on the share buyback program. We set up to a maximum of $80,000,000 We have kept going with that and possibly the constraint will not be the 80,000,000, but, the number of shares if the share price stay like this, but it's it's progressing. And, I should also say that I get from journalist, you know, why don't you cancel the dividend? Why do you do the share buyback? And and my argument on this is We have a very solid balance sheet still. It's super solid. The dividend is, you know, we we have paid taxes for the profit. And the dividend already belonged to the shareholders, and I see it as quite serious to not pay out the dividend, A, because I think pension funds and also private people that the shareholders expect that they have the money and spend it in society. But it's also quite a serious matter to not, have the Rockwell Foundation that is roughly a quarter as I get roughly a quarter of our dividend. And that they don't have a budget because they do important things. So it's not only economic reasons, but we like to keep a steady policy and do that. And Since our balance sheet can do it, we are committed to do the share buyback. Sometimes it's a benefit to have a good balance sheet and and here we show to you that we just stick to our plan. We don't change. So you see. With that, I would like to, yeah, on the outlook, then not much to say about that. We gave you April And due to the turbulence in the market, very difficult to predict came in IP, but the country didn't make a sensible forecast. It is not dependent on hundreds of assumptions. So we, we, we suspended the forecast and we'll, as soon as we feed, we can make the forecast, we make it But at this stage, it's just too many variables and the question that we cannot predict. Over to questions. We kindly ask that you respect these instructions. And our first question is from Yves Umet from Exane BNP Paribas. Please go ahead. Your line is open. Good morning, gentlemen. Thank you for taking my questions. I hope you're well in safe I'll keep it to 2 to follow the instructions. So first question is on the EBIT margins. Q1 2020 was another very strong performance in what is normally a seasonal quarter. So I'm kind of keen to understand what were the drivers behind this And whether or not there's any timing impact of maybe lower maintenance in there And also how should we think about the D and A charges going forward with the new capacity? Any colors on price versus costs as well as ramp up costs and therefore, the kind of employee hiring that you did in the last few quarters. So how should we think about margins for the rest of the year? And then my second question is on the raw materials, cooking coal and gas now What was the EVP, but was that the first question? Yes. Okay. But, sir, it's a margin question, the first one. Yes. Do you want to go 1 by 1, maybe? Is that better for you? No, no, no, no, no, take the other question. Take the other question. Got it. All right. So, yeah, the second question is on the raw materials. Just trying to understand on the coking coal and gas station, which is quite substantial now. Can you help us to understand how much of your 1,000,000,000 production cost is energy in percentage terms, that would be really helpful. Thank you. So the second question I will hand to Kim, and I'll do the first. On the EBIT margin, what you saw in Q1, I don't think we highlighted that, but this Actually, the best Q1 we ever had, top line, bottom line. So you're right in that. And the margin is high. And I think what, and that's not under the most favorable conditions, but fundamentally what we saw, yes, logistics might have become a little bit troublesome towards the end of the quarter, but raw material costs were down. So we have a bit of a deflation, and we still managed to get the price slightly up. And that's the main reason. It wasn't really maintenance Then the question is where a shutdown, like, in, China, where would that show up? But but it's relatively small. It's one of one or 2 factories. So fundamentally, what we did, we kept, We had good productivity in the plants. We had good efficiency, not much waste. We did all scheduled maintenance. It was not less maintenance. And, and then, price minus cost that was a net positive. So that's the reason. Then we look at the margins over the quarter going forward. You'll you'll end up short term with the obviously a bit of a mix mix effect of it because what what goes down here might be for example, projects into CEO cruise ship applications, oil and gas might go down. Some of that business is low margins on high, so we need to look at it. But fundamentally, this seems to be going to a the lighter spectrum TBI business that go up with the higher margins. So you have, you really have some mix effects, but I'm not going to try to predict them. But I think over the coming quarters, you get into more of a volume you know, you get less top line that hits your margin and then we are working on adapting the cost situation to more the steady state run rate in the markets where we then start tuning the margins. And then of course, we use subsidy schemes or short term weak schemes in, we aim to do that in some countries in Q2, not then, Mark, for example, but in some other places, And there, again, there would be some effects for that to bolster the fact that we are not quick enough, and we don't have the intention to cause the overhead and fixed cost without knowing what number we should do for. So a little bit of a under absorption that we may or may not count, compensate with, with subsidy schemes. So we will not see you will see kind of a margin deterioration due to that middle is the top line. Thank you. Kim, number 2. No, but the Novomaterials has no big, big signs of this. 2 spent quite considerable amount on our cooking coal still, and we do also buy electricity. So yes, we will have a benefit as long as the prices are as they are compared to last year. But as you know, we've also said, we will simply buy forward only a quarter at the time. So we are just following the market trends. Okay. But sorry, how much is the overall energy been on the proportion of the production costs presentation terms, just so we can get a rough idea? No, but we not disclose that, but it is, if you combine both the cooking coal and the energy, it is a substantial part of our input cost. Okay. Thank you. And our next question is from Charles Almer from Nordea. Please go ahead. Your line is open. Thank you. Yeah. I will also only do two questions. The first question goes to the performance in April, is maybe you could give some flavor on how April went excluding the marks that were in a total stand still like, you know, Southern Europe, would that be possible to get that number? That would be the first question. We haven't given a bottom line number. So how auto sales But I think Claus, you have a little bit of flavor of it because we did mention, you know, North America and Northern Europe that was growing. And then we mentioned also where we are seeing a higher sort of negative development. So basically, if I could comment on the top line, not the bottom line. North America still doing okay. Canada doing better. And the US patchy. And, that in some places growing, some places not by state, by city high variability. And the question there is, and this is incredibly hard to predict, will Trump managed to restart the economy, but this will be slower, and we are waiting for a worst quarter, the worst is ahead. Or is the mandatory resource or kind of rescued before it goes down? Don't know. This is, my personal debt might be the it looks like you're assessing for quite some challenges, but I don't know, but we haven't seen anything. Then we look in Europe, you see that some countries are doing pretty okay. You know, I mentioned Denmark or Denmark verifying actually. Sweden is doing good. Russia, Tom, pretty okay too. Yeah. I must say even though we cutting some shift, but doing fine. France really, really down. They stopped everything. And that, we hope now that that should reopen Italy. Obviously, the extreme of the extremists, the really sharp everything. That's the only country where I had think we had a truck. We couldn't get in on the day we wanted. But Italy, so Italy can't get any worse. I would say, but that's really was extreme. Spain, somewhere in between better than France, but still still down. Germany, not catastrophic. And in Asia, I think China kind of keep this. So my we're going to discuss about the outlook forward, you can say China had this really deep dip and then from that steady up but not up on a 100% yet, but it's kind of just progressing up towards that point. So so I hope that is a bit of a flavor of how the market somewhere. Yes, sure. Thanks, James. Then maybe the impossible question, but I would try anyway. When do you think you will hit the trough quarter or trough month, would that be in May, June when the backlog has been delivered or is there any views, view on that one? I can just give an array of thoughts on it, and I'm not committing to any of them. I could say like this. If the rest of the world behaved like shine, then that model will be due to its divorce and then it gradually improve. And then there will be a provision in that, that during the downturn, there is a lack of building a approvals, maybe commercial projects, uncertainty and a more on pipeline impact, but also general commercial confidence issue that would come in. But that would be kind of a dip down. That's the Chinese model. Is that going to happen in Europe? Not sure. Is that going to happen in US, not sure? But that's one way of looking at it. So basically, we would have believed the whole world was a Chinese model. I probably think we would have been able to make some sort of forecast plus minus 5%. Because that looks very steady. But then you saw even a country like Singapore rent down, up, and then a little bit down again. And they are super scaled upon these type of things. So that's one aspect. But then you have the other if you have a potential pipeline vacuum and a shift hold, but then you have this, the green restart. We saw after the the finance crisis at France and Germany, they just 12 months. And then they were back in growth territory for us. Consequently reduction into renovation, housing, etcetera, to create jobs. And a €1,000,000,000 into energy renovation gives 20,000 jobs and it gives them quite quickly. And it goes into SMEs, 90% in companies with less than 10 employees. So great for jobs. And the best investment to solve CO2. And you are talking about €2,000,000,000,000 intostiminate, 2 annual budgets. And even if that's only one annual budget, it's still a whole lot of money if some of it goes into any of the renovation. And I think that's really the big question. You have the business cycle, recession threat and then you have the underlying trend for Stonewall is there, but will some of that stimulus go into energy renovation? And and I think that's the thing is big, big, the biggest single factor we are dealing with. And I simply can't predict. And as always, some countries will do it well, no matter what they will pull that off, but not every country. And then the EU will that happen broad based and actually get done. But we are working on the solution for it and we are promoting Sure. But you mentioned something like 5% to 10%. I missed what was that what was the reference to this 5% to 10% No. I'm saying that if the whole world behaves like China, what we have seen in China, Then we had we probably had something that was reasonably predictable, but these countries all do it differently. So Me and Kim, we don't feel we can make the forecast at least, you know, 5% to 10% accurate at this stage. Sure. That was my point. And our next question is from Lourdes Chielgaut from ABG. Please go ahead. Your line is open. Yes, hello, Jens and Kim. I'll take one question at a time for the two questions. First of all, I heard on the first question that you mentioned, Jens, this prices were slightly up during the quarter I see on page 3 in the Q1 report that they were under pressure. Could you give some details in regards to these price pressures that you were facing and perhaps also any flavor on sort of product competition, which there are prices raw material prices being domestic might be lower. Can you give some details there? Yes. So prices were under pressure, which means that we didn't when in some markets, people reacted with, reduced prices. And we have Poland as an example that started already last year. So we had pockets of that, but and that meant that we have we have lower price increases and we have stuck, but we have gone a little bit less. And we are working as we do cut capacity, keep the price, etcetera, and focus on payments. And the real battle grant has been that, but in this environment with the raw material going down, we kind of lowered our ambition for price increase a little bit to match the fact that we see on aggregate, probably a deflationary environment due to the crisis. So there's a pressure, but so far so good. So to confirm, you're not losing market share to other product competition, And then my second question is for the systems division. You mentioned that cordon performed very well, exposed to especially in North America and Russia and continues to do so. Could you give some details on Rock Fund in Europe, which got this new management in 2018 and then how that has been affected into April also? Yeah. Yeah. I, you know, we serve our customers all the time and not everyone was able to do that we, as far as I know, we were the only, tile suppliers, a rock from tile supplier that can deliver to every country all the time. And I don't think we should talk about gaining market share because we have the delivery capability, but I know for example, in one very big country, one supplier just went for a subsidy scheme, and we didn't see much of them, and we delivered the market. You know, we have seen some small cases like that. So I'm pretty sure that, in Q1 and and also it that they haven't lost market share. Okay. But also you can just look, allow us that competitors, there's nobody who's as any sort of significant growth in Q1. Yes. Yes. So that's on the market share. What was the other question now, Second question was on the quote that you called in the system. So, obviously, performed very well in I brought on it. Yeah. So Put the phone. Could you give some details on fun for that segment? Yes, just to say that the European performance has been very good. For Rockfon? Yes. Yes. Also in the Good growth, good development, good pricing. You know, it's all relative, but typically when you have a downturn like this, the rock form business is and they they can deliver off stock and those projects come at the very end of the process. So I will not go into the segment, but I can say the BrokForm business, together with the Broadham business, Broadham obviously have very special drivers, but Rockfon has a strong file. Very good. And our next question is from Christian Johansen from Danske Bank. Please go ahead. Your line is open. Thank you. So first question is regarding the dynamics in the markets where capacity is expanding. I mean, you have a competitor who's expanded in in both Poland and France as I recall it and you're also expanding in some markets. So can you just, I mean, obviously in the light of the volume decline, does that impact pricing or what is the reaction in these markets? I'm not quite sure. I don't think this crisis here hasn't people are worried about keeping their people safe. And, I don't think the main worry of and get the deliveries through get the PPE equipment in and some people haven't pulled that off. They have to shut because they couldn't. And so I haven't seen this yet. Turn into something, capacity driven price war or anything like that. People have reduced capacity. Multiple plants and that's the battery we have seen until now. Okay, fair enough. And then on these potential energy efficiency, renovation stimulus, have you seen anything concrete yet of or do you have any examples for markets which have already acted or is it still more of an hope that something will happen? I I would say best in class so far is probably Italy. It Italy, give a 110% just now. Tax, equal, equal. Oh, okay. 110 percent tax credit in Italy. So Italy have been quick on it. They had already good framework and they're expanding it and I think that will help to restart Italy. And then I don't know if you noticed on Monday, we were in a call with the entity minister on the farm minister, but Danmark is pushing the thought of this. And helping to make a green restart. And then we know also in the EU. But in terms of countries, I would say Italy is the earliest one out of the box. Okay. Now that's or Christian. Thanks. Next. And our next question is from Cedar Yifung from Morgan Stanley. Please go ahead. Your line is open. Thanks very much. Good morning. I've got two questions. Can you give us a high level breakdown on how we think about your costs from a fixed versus variable percentage? And secondly, can you give us a bit of color on how we think about ramp up costs for new assets and how these are phased over the next two quarters. Thank you. Thanks. Let me just take the ramp up cost, which we have dealt with before. We had already mentioned last year that the advance of costs both for our factory in Romania and also our factory in Germany. And of course, Romania went live last year. So they are just part of normal operating costs. And in Germany, we had we still have as the social included in the Q1 data, we still have a ramp up cost the 1st 3 months. And we'll also have a bit here in the second quarter. And then of course, we'll go live and it just becomes part of normal operating cost. So that was Can you give us a number? Can you quantify what the ramp up costs are in Germany out of interest? We had said last year, it was about 12,000,000 last year. That means 1,000,000 per month, and it's more, that's the same level this year. Okay. Thank you. And then high level fixed versus variable costs. I don't know if you would share how you see your cost mix. Sorry. It's it's it's I I I didn't have the number here, but it's part of our and I can I can do my you can also do your calculation just looking at our numbers? But it's, it's, it's, you know, we'll be disclosing the numbers. I think if you don't mind, I'll look at it afterwards because I don't have a calculator here to sit and do the calculation. And our next question is from Mikhail Peterson from SEB. Please go ahead. Your line is open. Hi. Thank you for taking my question. I have a question regarding your logistic costs to say these are up. Is the reason for this that due to the lockdown of some factories you have to produce somewhere else and then transport it a longer distance, or why is this? Yeah. It's a good question, Mikael. So we had the case, when we had one plant in Malaysia shut down, and then we took product, from Thailand into the market. But then when you end up in that that the market kind of semi go into lockdown, and you have under absorption, basically, because you get to quit logistic costs for that distant grounds in the under option effect of the 2 rigs. So you have a few of those But but it's not to be No. I also had to say the delivery cost was at the same amount as last year. So of course, there is a little bit of, of since extraordinary cost, we also had a bit of extra warehousing in Norway in connection to but it's the underlying cost, the actual cost of repo cost is the same as last year. I say like to give you a number. We managed the business to a stock curve, and we have 2 areas where we've added stock. And and we're talking about 6% extra stock globally because of that. And that's to meet to have, the product ready during the century in Norway. So we have prepared the products so that when we start to change the electrical melter that we will start here in the summer, and that goes until probably Q4 some time. We have extra there and then the same in Germany for the factory there. We also built a little bit of extra stock. And that, together, we took in a couple of percent. And that will draw some extra logistic costs, but in a way, that's part of the start up cost thinking. But, again, relatively marginal effects. Okay. Thank you. And then to my next question, this relates to your current utilization level. Since you're ramping up capacity and you're seeing flat sales in Q1 and I expect Q2 to be down, what kind of like mitigates mitigating actions are you doing to handle this low utilization, and is it simply just reducing shifts, right, from working 6 days a week to 25 days a week or what the examples can you give? So what I mean, obviously, you it would have been a better situation if it will have just continued with all the re adding capacity. The location of that capacity is still fine in midterm, but then you have this and you lose top line. So that's, of course, not ideal, but you never know that and we need the assets. We're going to need the assets. We're going to fill those factories. So typically what we do in that situation that we analyze the demand And then if you just fill up optimum and we do this, it's it's a quite sophisticated calculation done. And then we fill up the ships in the best, best total competitiveness manner, and then we switch off other assets or draw down a shape. So let's assume 5 shapes is, it's just running 24 by 7. And then 4 or 3, 2. And our plants are quite flexible down to 2, 3 ships. You can still have a very profitable bid. After that, you might choose to multiple the whole line and load up another line next door instead. And that's how we operate with that. And even if we have to go down quite a lot on volume and capacity in the factory, on the blue color side, the direct labor side, we typically can keep productivity high on the same level even when we produce it at the lower level. Depreciation stays. It is where it is. But so that we can do. And the challenge and the work that needs to be done then is, of course, when you know the level, you then need to adapt the fixed cost overhead personal expenses on the rest because our ambition, we don't believe subsidies will help us we don't count on that, we want to have a competitive business. So it means that if I have a market with one factory and a run rate that is 10% down, we will look into fixed costs, obviously external cost consultants and the labor side. And the labor side comes first because if if we don't produce, then, you know, we have we take actions on that. And there's a whole array of, ways of doing it in various by country. But fixed cost needs to be adapted to, if you sit in the market with a permanently lower top line. No, permanently in my language is 12 months or something like that. Okay. Thank you very much. And our next question is from Rajesh Chia from HSBC. Please go ahead. Your line is open. Thank you. Hi, good morning, Karam, for 2 questions, if I may. The first one is on now. April, 20% volume decline. If you could, give a little more flavor, by end markets or like residential nonresident and renovation. So, a little more flavor on that would be appreciated. And the second one is on, given that you have a very good balance, it's strength Would you have you seen any further opportunity in the market? Are you looking at it, if you can give a little more flavor or how you see the computer dynamics stepping out? So, obviously, we you're so powerful. We paid that now, and that was just before. And and we we keep looking. I mean, there's, I mean, great opportunity for us. And we have a couple of smaller things we look at. And if they come out now, we don't hesitate. So yes, we are looking, but nothing significant. Okay. And then on the segments, there hasn't been a segment shift yet. In the market because what has happened was Q1 was normal, and then happened a lockdown where kind of mostly stopped But there are a couple of trends worth noticing that could just be factors, so people see how they crystallize going forward. One is, First of the technical insulation into oil and gas, with this oil price, what will the oil and gas guys do? One could assume that that might lead to less maintenance and less new plants could be a possible trend. Cruise lines. It's not a huge segment, but it is a segment where people build cruise lines now. Between the compartments and the cruise line shift, Stoneword is a very popular product. I'm not saying we are dominant in that we have a very good market share there, other materials too. But so there are segments that are going to be impacted, and then new built and GBI and renovation. There, the, I think the big factor is that if energy of renovation comes, that's the sweet spot for Stonewall. That's the sweet spot for the. So if you shift over more from new build, Residential to renovation of renovation, there is small storm on that shift. On the other hand, in the commercial segment, Amazon Centers, not to Stonewall in that car factories, not to Stonewall, but then you have all the rest of the commercial business, where if the commercial and the office buildings go down, there are some segment there that have quite a lot of storm wood that we like to go after, and then that might decline. But so I don't think I think the overriding aspect here would be that If you see renovation come up, it's a good thing for stone wool. Another trend. Maybe one more trend. Energy renovation and external wall insulation. There you see, we see, especially in Germany, an increasing shift from plastic forms. To stonewall in the facade installation from the outside. That's also another trend, but that trend has been there for 4 or 5 years, and it seems to keep keep going. And our next question is from Fran Sawyer from Handelsbanken. Please go ahead. Your line is open. Thanks very much. I've got one question. And it relates to, you mentioned that April down 20 percent? And could you, how do you see the next few months on, is that, on that metric? And How does that play relative to your pricing strategy of raising prices and so on? I guess there you mentioned there was some in Q1, but the bigger quarters for that as I understand it is Q2 and Q3. So how will that unfold those 2 together? Yeah. So on the price we We have we have launched the price increases, and they're out there, and we are executing on them. But in some markets, you have had the traditional 2 price increases in the year. And now we focus on getting the price increases we have already launched and state of that in Q2 and Q3. Okay. So that's on the prices. And then on the on the volumes, we I I'm not going to give a forecast on on May June, but my observation is many countries come out to the lockdown. If they were to behave like China, you would expect a Q2 that is the worst, and then it will start to climb. And then you could say, would this start to climb in May or June already or in June, hard to predict. But but some sort of VEO use scenario there or not. But then again, you have a lot of dark horses in this. So I don't have a forecast for May or June, but you saw you saw how dramatic the impact from the first quarter average through April. How that was how sudden And I think in some, some markets, you will see also a sudden uptick when they open up, if they had like France shut down the building material out less than all the rest. When you open them, you're going to get to deliver again. So I don't keep a forecast and I can't promise that that's the worst month because you also have effects this year or working days, holidays. You also have countries that might say, okay. We have one holiday week this week, we shut the business for 6 days, yeah, because demand is low. And this can happen. I mean, as you know, in May June, you have a whole lot of this weekend. So lens themselves for if you need to take capacity out on the billing site or anywhere, you lend themselves to add a few extra work days. And we are dependent on work days to get to digress. And our next question is from Piafono from MainFirst. Please go ahead. Your line is open. Yes. Good morning. Thank you for taking my two questions. Number 1, you talk about, relative strength in Scandinavian markets, you mentioned Denmark here, and for obvious reasons. I just try to get a little bit better understanding what your exact exposure is to the Nordics at this point in time in terms of revenues. I mean, if I count your plans, It seems it's like a bit around 10% of your of your total group plans. Maybe you can give us a better indication here and the same for Germany. The second question relates to the U. S, it seems to me that the downward trend for the overall category mineral, thermal insulation pricing has started to come, the decline in pricing has started to come to an end. And as a matter of fact, the last month, I've seen they were up 3 or 4%. Is is that something you see as well? Yeah. So let's just start with the first one with Germany, Scandinavia and the Nordics. So, you know, Finn I'm doing fine, in spite of a very substantial lockdown, but not super growth. Sweden and Denmark growing, more way went into not a good situation. They stopped building sites and all sorts of things. So it varies. But then I keep my commenting on those Germans on that level. And the reason is that I don't have a single competitor. That give country data. We are the only ones, basically, but and therefore, I, for competitive reasons, I don't wanna going into the percentage of the regions and based on that. The Nordics is an important market. We take its areas. It's all markets, but it's obviously not our biggest markets now. And we always said that Germany and and France are heavy heavyweight together with the UK, but special, the first 2, and we keep it at that level. Then on the pricing in the U. S, and Canada, we have never declined gone down on prices. We have improved pricing quality straight through last year the year before and also Q1. Okay. Okay. Thank you. So there could be something maybe on glass full. But I shouldn't comment. I mean, I've obviously read what there is on that, but I think generally the pricing climate in the insulation categories the glass for stone wall has been all the mineral wall of the quality has been quite positive. And then there are many other building materials where you have seen now the patterns. And our last question is from Miguel Peterson from SEB. Please go ahead. Your line is open. Hi, thank you. I have a follow-up question. And previously, you mentioned that in some markets, your competitors were shutting down through subsidies and you being the only supplier of products Can you maybe clarify what market that's what that was? And then maybe also if would your growth would your growth have been at the same level in Q1 if your competitors have not would have been taking the subsidization shutting down the street. There's there's not nothing of this has, First of all, I I won't I mean, these are anecdotes. These are just small examples of the approach. We have an approach We don't put priority on subsidies and meeting requirements, but a focus on keeping our people safe and delivering to the customers. And I want every customer to know that. And that goes back to our purpose and our style of running business. And therefore I say it here, it doesn't have a material impact. But if you compare to competitors that have announced, you will see that we do pretty well on profitability and top line. So that was more a message about our culture and our approach to running business. Okay? Does that answer your question? Yeah, kind of, but you can't say what markets that you saw compared as shutting off. I don't receive subsidies? Okay. Thank you. Thanks. And there are no further audio questions. I will hand the bat back to the speakers for any final comments. Thank you very much. And thank you for participating today. Please be informed that on 29th May, we will have our next investor conference call with the topic on EAST. So you're welcome to participate. Thank you for joining the conference call today.