Earnings Call: Q4 2019

Feb 6, 2020

Welcome to the conference call regarding Rockwell International's Results for the full year of 2019. My name is Thomas Haller. I'm the operator of good Treasury and Investor Relations of Rockwell International. I'm here together with CEO, Jens Biegelsen and CFO, Kim Jong Anderson. 3rd, Jens Biegelsen will go through our presentation and give you an update on the results for the fourth quarter full year of 2019. Afterwards, we'll be ready to answer all your good questions. Before I hand over the word for Jens Davidson, I must ask you to know this 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. I'll now hand over the floor to you. Good morning, everyone. When we look at the last quarter, I, I regard it as quite uneventful. But if you look at the whole year and just start with some summing that up a little bit. We stepped into 2018. We had a broad based market growth. And we stepped into 2019 with some fear for global downturn, an expectation of a more volatile market environment. And, in spite of all that, we we came out with the with the revenue that is the highest ever and also an EBIT and EBITDA that is the highest ever. So we are very happy with that. And why am I happy with that? On the one On the one side, our teams have adapted capacity. We have worked on pricing, segment pricing. And for example, the whole East in Europe, we had a quite dramatic decline and we pulled down capacities, moved down shapes. And then we have had other markets like France where kind of the climate change or the energy efficiency drive from the government has created very significant growth And then one of our large market Germany, for example, is turning south due to lack of maybe economic activity and also lack of redaction on the political side on energy efficiency. So we had a really mix of things and very few markets played out as a steady state market continuing what it did the year before. And in spite of that, we delivered this very, very good margin. If we then look at some of the I'm not saying operational parameter, but some of things that we in the business care about, you look at, for example, lost time incident frequency where we gone from 3.5. This is a 3.5 over 2018 and up to 2.9. So we've improved safety. We did raise prices, but we kept our focus on customers. And for the 5th year in a row, our Net Promoter Score increase. So we increased it from 43 to almost 50, so very, very high level. I'm very happy with that the teams have kept working on it and for the 50 are now increased. It's just very hard to increase from this level, but we will have that bit on Also, some of the marketing and messaging around the product, we won, for example, the best B2B campaign for the 7th stone. I think that's very important because that frame stonewall as a unique material that is more than just thermal insulation. We set that framework, and we see that stone was a fiber system circular materially gaining ground, especially against the plastic farms. Again, we were one of 60 companies globally, that are included in the SCED investment portfolio of 60 companies. They're very proud of that. And in Norway, we won 1 of the highest environmental award for our project to reduce CO2. And modernize the mass factory. The drops here to a day to 5% emission outlook production. So a very good year. If you then look at the number for the year, think there is one on 2 aspects that stand out for the full year. First of all, that we continue this progression of the system division, double digit growth, grow down, I mean, good growth, good profitability development, And then also, the margin of the whole business, 13.5% And that was caused by business mix, more system division and the but also the fact that some of that big project business declined a little bit. We lost some business there, and then we have kind of a richer mix. So those factors together with that we controlled costs And for the slight easing of inflation, then to that 13.5%. So that's a very pleasing number. Let's move to slide 4. This is the quarter numbers. Nothing really to say about this other than that. It was a flat quarter. It wasn't dramatic in any way. We did stop production at year end. That's what we normally do. Previously ever did produce. So it's not the fact that it's slightly below 0.6 or slightly below this year, it doesn't really worry me. There's no trend change or anything in the quarter. Cash flow, obviously, free cash flow down compared to the previous year due to the investments that we successfully progressed so so that's a good thing. Moving to slide 5, sales growth, insulation business slightly or flat over the year and system double digit, great work in the System Division and especially growth on stood out with very high growth rates. I see that as an indication of you know, from, how to focus on or efficient, I would say, efficient food production is gaining ground. We also had very good growth in North America. And our retail business said rolled up. Also, the another item that stands out in System Division is that our acoustic business, the Rockform business in Europe had very good demand and we had good depreciation of our products. We're happy about that. And that's an improvement compared to 3, 4 years back now will be the 2nd year in role that we are progressing that business. And all the other businesses performed too. If you then look at insulation, What does that mean that the business came out flat? We have countries for installation. It's double digit up double digit down and flat. I mean, the whole mix of things. So the fact that it came out on the flat is more dependent on the mix of the countries where we saw their declining market activity and their growing market activity. So but again, we kept adapting the business, which kept working on the cost and the productivities. And in terms of factories, the insulation business produced everything we have, all products, also the system division products with few exceptions on the grid side. We also reached an all time high in operational throughput efficiency. It's a metric I don't public, but it stepped up in spite of several countries had declining business. And that's a group that good, good grade to my operational team. If you go into slides on to slide 6, don't really have anything to comment on that one. It's the same as it was before. No trend changes, a little bit change of seasonality of the business. The ethics and flatter of business decline at the end of the year. So that growth didn't show. And then the gold on business also drive a lot, but there are some other businesses that are not so strong at the end of the year. So absolutely normal Q4. We didn't have a big snow event or anything like that, but I will say due to the market condition in Europe, it took a more normal stop we didn't produce through Christmas on New Year because we felt we can shut down the factories and to maintenance growth instead. And by going to the regional sales development, Western Europe overall plus 0.2% no changes to the trends at all. It's the same as in every other quarter. In the Nordics, we have some markets some markets down, UK France continue and Germany is still stuck on quite a low level with maybe some signals, such as stabilizing. Let me move into Eastern Europe, broad based decline across all the markets, but Russia, behind, I guess, thanks to the sanctions. They have sorted out the economy, and it's no growth, steady market, the dependency on kind of oil and gas has been reduced and they do a really good job of keeping that economy going. It's not booming, but it's growing. So and we we do well in that. And then North American Asia, others, North America, good, double digit and then Asia, South Asia more unstable. It should be said that after the sanctions were eased a little, not the sanction, the trade dispute was eased. We saw quite a good Q4 in China, but obviously with the Corona business now, we're probably heading into the quarter, but that cannot be great. Again, China's not a huge market for us. We don't depend so much on that. Profitability in Q4, I already mentioned on Slide 8, the improved EBITDA, we improved the EBIT margin and we improved it in all businesses. So we are happy about that. Mix, country mix, business mix, cost, all of it work together to deliver that. Moved to the slide 9. What I'd like to see here in both businesses. In Q3, we have a little bit of a productivity gap. We had more inflation more difficult comparable to the previous year, but what you see in both businesses here is that the bottom line has increased with a greater percentage on the top line, especially system division, I mean, double double the bottom line profitability improvement on the double digit, almost double digit top line, 8%, 9%. Very good going, but installation has also done a good job. So fine. And here, this is happening in the middle of that we manage inventories, weekly, and we do capacity adjustment as the markets go up and down. If we have not stepped up on total inventory or anything in this, even though some markets slowdown, we've been quick to draw down. Investment activities, we hit our guidance around SEK 400,000,000, and the execution of the investment has been good, stable, what we expected. Please for that. Move on to Slide 11, latest development. Here, I don't know 10 or 15 years back. We acquired our first factory in China. We have since acquired another site, but the Guangzhou factory, And, we, we have had a very good business there, but, the areas around the factory has been resold And we have high rises just across the street coming closer and closer. So we were reaching a point where the the the revision is to, a, not having the factory quite across the street from high rises, and be that the land would be needed. And I would only say that, to compliment and the cooperation with the local Chinese government and also higher up the deal we have made to relocate the factor, which really means that we get a near full compensation to relocate the factory and build a new one and grade it. And we would do that about 100 kilometers away, but it has been a very, very good cooperation with the Chinese government. And we are now building the new factory will be updated and be the absolute best in China and environmental compliance, how to produce, stone volume in a very environmental friendly way. So that would be great. Then we also closed a transaction where we acquired the platform business primarily in Sweden. They supply in the Nordics, but there's more in fact in Sweden, a very good business. So that has been closed. Due to the Owens Corning still have a week or 2 before they announce, I cannot reveal the revenue of this acquisition, the rebate for them, but this It's not insignificant, but it's not huge. I mean, it's a sixty people business, but it's a healthy business. And we have already started integrating that in our loss from business. Free cash flow, I would basically say that everything hangs together. You see the net working capital ended up 9% instead of 7.49% is a normal level. 7.4% is a very low level. And the reason is basically that last year, December, we produced up through new years, which means the trade payables that we generate around paid. He ever took the normal stop, which means a lot of the trade payables are paid for year end. And that is the main difference between the 7.4% and the 9% to 7% to see there. So not no change. I mean, I will say the 9%, 10% net working capital is the normal year end level. Share buyback program. Basically, we propose a dividend for 22 Danish kroner share. You know that you multiply with the 1,000,000 share, you get about 1,000,000 in dividend. But as we have discussed with many of you, our equity ratio is around 80% and we have the cash surplus on the balance sheet also. So we have now added the next 12 months and after maximum EUR 80,000,000. That would then, if theory works at a EUR 1600 share price some 3.7 percent gain among the 800, so 3.3 dividend plus share buyback provided share buyback right. So it's a relatively sound return from those. And we don't make any promises about future, but we launched the program today and started and we get the weekly updates from the standard of work. Outlook for the full year, low single digit growth in local currency, Basically, what we are saying there is just because a new decade started and also new year, it doesn't mean that I feel it's any different to what it was last year, continued volatile market and I think the coronavirus underlined it. We can continue. I don't see a broad based uptake or across even though some markets looks more positive, others may be a bit more negative, but and with our very short backlog and the fact that we are below 9, 10% inventory. We don't know better than that. We see it continued about what we see. So so that's on the top line. And this midterm effect, green deal from the EU, whether talk about doubling or tripling the renovation rate, also to push, sustainable close to customer food, production and clean food production efficiency. And fire, fire resilience, urban fire resiliency to increase fire norms. Even though those factors speak midterm, we have not factored in much of that. We just assume that we continue to live in this kind of slightly positive growth mode. And we are agile and ready for that. If we come to the EBIT margin, here. I guess we are reaching a point. I mentioned my manager on EBIT, because that makes them accountable for their investments. Investments can be sustainability investment, growth investments and maintenance investments, but maybe from your perspective now, the focus moves a little bit up to EBITDA because in the EBIT now with the margin decline you see at 24,000,000 depreciation and it's a noncash item. And then we had a startup cost in Germany and Norway. And we also had the legal settlement we did in the U. S. Last year, but next, to Tossamerica margins slightly higher. But there now, it's pretty much the same. There are these 2 startup effects. And the legal case, apart from that, the underlying operational margins on EBITDA and EBIT is is the same unchanged as we go into the year. Thank you. 0 and then one on your phone keypad now in order to end the queue if you've not already. And after I announce, you just answered that question. If you find that question has been answered before it's returned to speak, just press 0 and then 2 to cancel. And there'll be a brief pause while the questions are being registered. First question is from the line of Laurence Skiedad at ABG. Please go ahead. Your line is open. Hello, Jens Kim and Thomas, thank you for taking my question. First of all, Jens, maybe continue where you left off the guidance of a low single digit go for 2020. You have some increased volume from new capacity coming in in 2020, which you didn't have last year. And I guess, which you can correct me on, you're still aiming for these 1% to 3% price increases. So given these two factors, I guess that my question is, what's implicit underlying decline of your existing factory footprint. Can you give any flavor to this magnitude? Sorry, I'm just going to unmute the speaker line. So the speaker line is unmuted. So please can you reply to the question now? Okay. Apparently, I was muted, so I I restart. So underlying between price increases, and volumes and new factories. We don't disclose those details, but fundamentally on the capacity, we want to have capacity buffer so that we can cope with, say, 3 years growth in most places, 3, 4, 5 years growth. That we have time to invest because we believe the business and the mid term has a higher growth potential than that we indicate now. But we don't see those factors kick into this year. But then when you look at the capacity increases, they are not that dramatic in our big factor footprint. So we would use the capacity increases we have now to to optimize our logistics. And then also when you look, say, Romania and Germany and the business in France, we need capacity there. So it's not it's it's not bad. And then we can drop some more expensive shift. Thank you for that. And also may we go on to the EBIT margin here. You mentioned it's sort of the same level as 2019 adjusted for for, for a couple of things, the new factories in Neuerburg and Moss, along with, I guess, the legal case. And you also discussed the EBITDA margin. Can we give some flavor on the EBITDA impact? So these you you mentioned startup cost and depreciation. What's the start up cost here? Okay. You can give any flavor to the magnitude. Yeah. I know it's King here. Very broad. You know, we had the, approximately 1,000,000 gain in 2019, which is just shy of a 0.5 percentage points. That's also a comparable number for 2019. For 2020, we're going to have, as Vince mentioned, about just shy of one percentage points from added depreciation that comes from both from notebook and Romania, but also other factories that we started off in U. K. And Poland. So that's about 1 percentage points. And then you have or just shy of that. And then you have you know, between, yeah, not not up to 0.5, but you know, you have a Approximately 0 point 3 year 0.4 on various start up costs in and change the one lost. So in simple terms, you have the depreciation. It's fully visible. You have the legal claim that we won fully visible And then you have a tens of percentages up and down, which is just business unusual. But yes, we do start to factories and we are building up staff for the North American factory that will start the year after, but that's kind of normal operational variance plus minus half a percent on things we do. So and there, we don't go into that. But all the big items have already been disclosed in the numbers in the back. That was extremely clear. Thank you. And then my last questions, you mentioned, I believe, is in Q3 that you took out some lines and time in the Norway and the Roomont in Holland. And here we see there's some strong operational leverage here in Q4 with delivery costs down 14% year on year. Can you give some flavor here on taking our time? Yeah. Yeah. I don't think I said in Q3, but the but it's right. We discussed the example that when it was used as examples, I said, we are not taking product from Trondheim to Germany anymore. It was just an example of how have what type of business because you asked about why did the leasing cost not increase as much, extra warehousing and the long shipping. And that's, of course, that you might be doing it also now. We want to produce those smashes, which can as close to the factory and we just continue to do that. And then the individual items generally Southern Germany has been a very good market due to all economic activity and we have capacity to meet that now. And but the specific details of each factory, we don't call into those. But those are examples of unusual cases that we have during the peak when we shift from Northern Norway down to Germany and maybe even Poland in our policy that we will keep customers whole. And of course, now we are back to this normal that in country for a country or vast majority of business is is within a custom stall. Okay. Super. Thank you very much. Okay. So the net question is from the line of Robert Whitworth. So, Robert, Please go ahead. My first question, I just wanted to know, could you help us to understand how your margin guidance compares between insulation and systems? And, I guess, what level of normalized margin do you expect in the system division? Thank you. We don't guide margin on that level. And it's also quite dependent on the transfer pricing between the businesses, which is not the market based pricing. So we don't guide it. We step into the year and then we report backwards on it. But obviously, we have, the way you transfer price between the business, we have a steady machinery for ultra calculated tax compliant machinery. And that is on the end, but we don't guide on that. And it's also should also be said that all the businesses involved are could they are all very healthy businesses, but the margin is also different. Between the system division business. And we don't want to go into all that where it's the higher margin versus the lower margin. Understood. Thank you. That's okay. So turning to another topic then. Is is the ETFs phase 4 a concern for you? Given, obviously, the manufacturing process is very capital intensive. No, no, no, it's not a big concern. So we fundamentally have we foresee that we will increase our sustainability investments, but it's not to optimize the trading scheme, it is to make our footprint more efficient, reduce the CO2 emissions like they did in Norway. And we have a whole program for that. And we will talk about that more as we progress with those investments, but we are working on the technologies for years And we are also ramping up investments. It's not dramatic, but we will need to invest more on sustainability And then hopefully, we never get into the the having having to pay for CO2, but But if we don't, we don't see it as a big if we do, we don't see it as a big issue because we are driving it at the core reducing the CO2 emissions. Great. Thank you. Okay. So the next question is from the line You have answered. So, Christian, please go ahead. Your line is now open. It's a question from Dan here. First question is just, I mean, you described this improved operational efficiency in Q4 and to me and correct me if I'm wrong. It seems like there is an improvement in the last quarter versus previous quarters. And therefore my question is, how sticky is this, is this something you can take with you into 2020? Yeah. I mean, I I would say the business is set up, now for the current run rates in the markets. We went through that pain, I will say Q2, Q3. And sometimes you have if you draw down a shift, you might see the capacity to go down, but you might be a bit later with getting the cost out due to delays in the process of reducing the share. So I think at the moment, we are quite stable in the setup. You saw a quite a steady state Q4. Does that mean that if you're right that that growth is going to be low single digits, you should be able to to run your production more efficiently in 2020 than what you did in 2019? In a way, the factors is that will be less efficient because we are ramping up people Romania is fully up in terms of people. But in Southern German, in New York, we are hiring in the shifts. And then We're also starting to train the people for the North American faculty. So that consulates the Novologize, but, underlyingly, we continue to be efficient But we're thinking every year, we aim for a couple of percentage point productivity improvement across our factories and cost savings we try every year, and we aim for the same this year. So our goal is obviously not to be less efficient. But then there could be things on the raw material cost side that could change the quarters over the year. And as you know, we don't hedge. We just go with it. And you saw some of that in Q4, And but that will go at the moment, I guess, our, outlook is that we have only marginal inflation this year. But that could change. You have a storm in Australia or you have something and something happened. But at the moment, it looks like limited inflation and therefore, continued high efficiency systems that we're expecting. Okay. That's quite clear. And then just on prices, is what you assume in your 2020 guidance the usual 1% to 3% from from price? Yeah. Yeah. And that exactly. The point is, I put the high value to doing an annual price increase. And then some years, we aim for more and some for less, but that's kind of the standard strategy I want to apply. And I want to do that this year too, and we have it now price increases in many cases. But of course, we do this by segment. This is the aggregate I want to achieve And we have some markets where on projects. The prices might be a little bit lower, but we are not, we don't want You did that from our strategy. Okay. So so just to understand the around 12% would then imply that at the 12% assumption that roughly 2% from price. Is that how to think about it? No, I won't think about it. It's similar to what we did last year. We have extra cost. We did changes. We agile. All of this cost money. So in the top of things, He want to deliver around that. And some of the changes compared to the previous year are the mathematical, the depreciation and when we need to hire 110 people to run factory at 114 people, the bigger piece. But the rest we just kind of work, reduce costs, some costs go up, and we just work to productivity and aim to have an underlying maintain profitability, taking all the products together. Okay. All right. Then my last question is on the investment in sustainability, how much of the million you are guiding for this year relates to sustainability in can you elaborate exactly what they are besides the conversion of the Norwegian factory? We haven't come to conclusion that we should do that yet. And properly, we start to talk a bit more about specific cases when we do it. So that you understand why we will probably also in our sustainability report here in March throw some light on some of those cases. Read that report, and then we take it one at a time. But but the only thing I want to say, it is increasing. And some of those investments, it's not going to have a dramatic effect of this year. A lot of what we invested, but it is an increase in saving water, saving CO2 getting more efficient, getting cleaner. We do review that and it also has to do with our existing own building stock we'll be putting some CapEx into renovation. So it's a collection of that to just driving at the guitar. All right. I will wait for more details. Then just before I finish it on, the new factory you're sitting over in China, the one moving, I guess, will what melting technology will you use for that? Yes. We will go We would go electrical, local electrical for that. We wanna test up technology, although is relatively small factory. So so it's a good good test of a small melter, but it should be said that from a pure green perspective with the current real supply and that they are of China. Another technology in the next 10 years will probably be cleaner because the grid is not clean yet. But we are working on getting clean electricity, but how quickly that will happen is showing up in that area. We don't know yet, but we are going coming back. All right. Thank you. Okay. So the next question is from the line Your line is now open. I have two questions. The first one is on the CapEx. You're guiding for 1,000,000 for 2020. How do you split that into maintenance and growth CapEx? And it relates to the to that, I mean, understand last year, maintenance CapEx of the 130,000,000. And what kind of run rate would you expect that to be in the in the near near term, the maintenance CapEx? So that that's my first question. Yeah. We've been we we don't provide that thesis, but you can see we have Do we have it here? Maybe you'll take this. Yeah. We we we account for it as we move through the year. So I don't slide 10 in the deck. You you you see the maintenance and we will we will do the same time now, but it's a similar level, but I'm also We purchased Cindia, we have previously disclosed that we have a maintenance but it's around CHF 80,000,000 to CHF 100,000,000 per year. So you can sort of see that if you add them up, it's slightly higher than CHF 100,000,000 that's what the end is referring to us, lease sustainability investments. So there is a difference there, but there is also another aspect of that. And that is in 2018, we were a little bit lower on on maintenance for a while. So we did a bit of extra early 2019. But again, sustainability investments are sitting in the maintenance part here. Okay. Okay. Understood. Thank you, both. May I please just to elaborate on that, I get your point. The maintenance CapEx is moving up and which is all understood because of higher sustainable investment as well. So I'm trying to think through beyond this current CapEx cycle, right now, previously, we are running, 2 years of high CapEx, expands in CapEx. Now moving beyond 2020, assuming this CapEx are getting over in 2020, then, then, are we kind of getting to a new normal, the maintenance CapEx will be higher, but nowhere near to those big big numbers we have seen in 2018 2019. Yeah. We we what what I can refer to them, we don't comment CapEx forward, but, in year's 2018 years on your report, page 20, you have a study of the trend 10 years trendled CapEx backward where we said there have been about 11. We make some comments on that, but fundamentally, We don't guide to CapEx in 2021, but we are trying to get to now. I believe in the business, the growth perspective of the business, and we want to have a capacity buffer so that we have time within the investment to take greenfield decisions. And I feel we are getting closer to that point now. So 2021 will depend on 2022 will depend on how that mid term and the green deal and increased renovation investments are playing out. We postponed the decisions as long as we can. What I can say now is that with the investments we have done not to yes, in a row, we have a bit of a capacity buffer. That's exactly it. Also previous, as you know, we have not announced any capacity new capacity projects. So you'll have to wait to see during the year here. And the newest, which is the latest one, will be very end of the year. No. It means the CapEx will sort of We'll flow this year. So that's in the forecast. Thank you. That's clear. And probably the next question is on your pricing strategy. Understand 1 to 3 is the broad range, which we are aiming each year. Just to put you a bit on that, how hard how that has played out last year in terms of, are you able to achieve the lower end of that one person last year? I I don't comment on that, but, you know, the base assumption, a couple of percentage points, some years, a bit better, some years a bit were such a goal. And we did absolutely okay last year. And we kept the price, we would have dropped prices at the end of the year. You would have seen it in the margins. So we have a good execution on the strategy And we have the same strategy this year, even though there's some regions to see a tougher climate. Okay. And and probably my last one is on Eastern Europe. You mentioned in Q3 that there is a destocking event, which to the, numbers and, obviously, the cells as well. But but have have things changed there, or is there any signs of stabilization in q4 that has the kind of inventory levels which you would love to have kind of normalized? We saw the worst of the Eastern Europe combination of a market slowdown and destocking in Q2, Q3. And now we need to follow it, but for sure it's over 6 months typically disputers with destock when the market steps to different levels. So we will follow that now moving forward, but what happened in Q2 and Q3 and the destocking that aggravates the situation, I think they have that behind us. Okay. Thank you. And just one, if I may, is on the, competition, pressure in Eastern Europe time you talked about Poland is the market. Any of the market we are kind of seeing and intensity coming because of lower volumes in the market? I think we mentioned, I mean, that's quite public that the Poland capacity increases. There is another market Ukraine we don't have manufacturing there, but they're they're 2 stormable players. So the bomb has expanded a lot and and and you have all the capacity in that market, it's not a big impact for us, but the the case is there. Alright. Thank you very much. Okay. So the next question is from the line of Tobias Weimer at Morgan Stanley. So please go ahead, Tobias. Your line is open. Just before to clarify, I misunderstood the last question. I thought it was only Eastern Europe. We also have the startup of the competitors factory in France last year this year or this year, probably, that will come into the market. That's also an increase competitive pressure. So you have Poland, we saw Ukraine, that doesn't so much impact us on the well known factory in France. So just to clarify. I mean, sir, I don't thought you said on the Eastern Europe. What you said in the end, the plant in France, I guess, you're referring to the Krausz plant. Is it running already or? Yeah. It it is running. We don't see much of it, but we believe it's running. Okay, okay. Fair enough. Okay. So my question, I guess the first one, again, on the CapEx. I'm really trying to understand what's happening with the investments because initially you guided for 1,000,000 and 1,000,000, then it was 1,000,000 my impression was that some of the spending came a little bit earlier and I was expecting a little bit of a decline for 2020 now for 2020, you're guiding again for 1,000,000, which seems quite a bit above what in terms of expecting. What is the reason for this? And when can we expect the normalization again? Because now in 2020, it seems like it's going to be the 2nd year where basically, we will have 0 free cash flow. So what's the reason for the higher CapEx in that will it normalize? But to be said, you have not met our guidelines from last year in our annual report is 'twenty, where we do say that we have 2 these 2 common years with a higher CapEx ratio compared to the average. That is quite clear. The capacity expenses we have already announced very clearly, And the reason why the CapEx is slightly higher this year is that, yes, we have accelerated some of the, but we also had new investments coming in. Some we have not announced because it is not a new thing to the market, but the CapEx ratio is going to be higher this year. And it was last year, which is due to these announced capacity expansions. 2019 was still 20% higher, more than 20% higher than what you have guided at the beginning of the year, which was the 330,000,000. So I guess that was the level that I would say most than I was expected for many times. Right? Yeah. To be sent in, you should again, because since the UK expansion was not part of the first announcement. So I can go through each quarter to explain to you what we have announced more. But during the year, we approved certain investments. And then of course, then we just update this. I don't think that's necessary, something different from what we have guided. And I think we it more or less the level that we expected in the Q3 announcement. And the guidance for 2020, I hope it's not a surprise for me. That is clearly described in our mid term plan. Okay, fair enough. And just on this big project in West Virginia, I thought I think you were guiding initially for 2020 and now the annual report says 2021, are there any obstacles or any reason for the delay? No. What what what we're doing is we we are a little bit deal. I've read it, but with the capacity needs we have and the work we are doing, we are starting that one off. It's on track. It's progressing. And we're hiring people to train them, but we see that we need to start that one up next year. And that's what we have scheduled to do now. So it's just an adjustment of the schedule. This is not because something dramatic has happened. It's just operational planning. Okay. And that's also not any sort of major risks because there's obviously a lot of protests going on in in West Virginia. Do you think that's the risk from that? No, we don't see that. Okay. Fair enough. And then also on the capacity, which is coming in now in in Germany, obviously, in the first half of the year and then in Poland, you had the second line running as well. Are you scared a little bit if the capacity is coming into some of the markets, which are currently weaker because obviously you talked about Germany being weak and serving volatile for next year? And Eastern Europe, obviously, we have also seen sort of 10 percentage volume decline. So now in next year, in those regions, you have more capacity and you're having a higher cost base, but volumes are declining. Does this concern you at all? When you build plants, that takes 2, 3 years to build. I said it a few times, you will lap you will land on you will never land perfectly. You might sometimes you might not. We are not the least worried about the need for the factories. And then the market conditions means that the timing is not absolutely perfect. It never will be. Fundamentally what's happening in the demand for downward. We are not worried at all. We have been undersupplied in many of these regions a long, long time and be it as a fair view of that where stormwater is needed. But it's never perfect. There is no optimum because if if it lost, we would have to move the factories around several times a year. Adaptive and reshapes, balance between them. And we also have overlapping footprints. When you get to a certain, scale, but it's like a number of factors. You can move shifts and loading with the market between the footprint. I mean, even more in Southern Germany, so it's really fine. Okay, fair enough. And then the last question I wanted to ask is on the installation margins. Obviously in Q4 that was mentioned earlier, the margin was very strongly improved 110 basis points year on year. That was despite the sort of midtizing or digit volume decline in the quarter. So I just wonder, was there anything particular that helped you you mentioned the energy costs have failed, but for anything else in B, maybe there was something in 4Q 'eighteen. It's simply the comparison days was easier maybe not everyone wants to wear off this and that helped you or is there anything like that? Country mix, product mix with the less heavy product mix, less projects, and then inflationary pressures and productivities. So it's a mix of all those. But for example, is in Europe a little bit less And we have discussed that before slightly lower cost margins. And this those are the mix factors that impacted So it's all all the things working together as to Mike about tomorrow. But also to be this year, last year in 8 the year before in 2018, we talked extensively about the extra specific cost we had. So warehousing to service the market where we had high growth And of course, we don't have those in Q4. In Q4, we had the agents that we are able to maintain a decent pricing throughout the Q4 and then combined with lower input costs, as we have also explained and the footprint closer to the customer and productivity improvements and product mix. Not all of them fully, but all contribute to something. Okay. That makes sense. But it was indeed also the fact that Q4 'eighteen was particularly weak quarter because I think most analysts sort of looked at Q4 'eighteen as a base and there was basically significantly lower than Q3. And the question is this is the seasonality that Q4 is always much lower than Q3 or was Q4 'eighteen very weak? Oh, yes. Q4, we don't make. I mean, Q4 is Q4 with Christmas. Depending on the weather, when the building side close, Q4 is not a representative quarter in this business. Okay. That that that makes sense. Alright. Thank you very much. Okay. So the next question is from the line of Mikael Peterson, from, SEB. Please go ahead, Michael. Your line is now. Open. Hi. Thank you for taking my question. I have a question regarding, North America, Asia, and others. In Q4, you grew 4.5%. How much is that from the system division? And if it was mainly from the system division, was what brand, what's the main contributors? So it's it's it's the level we don't comment, Michael, It's, sorry about that. We're not disclosed to that level of granularity. Okay. And then on to my I can make one comment, and that's not the surprising comment. Obviously, what happened in South Asia after the trade dispute from that, and that we are being quite open with. It has been slower in Asia last year. And then North America has been doing really well in some segment lesser and all the same, but the aggregate worked out to something. Very nice. So I would say South Asia Asia has been the main issue in North America. Okay. Thank you. And then maybe if I can ask regarding your utilization level, I know you do not comment on it, but if you assume that you increase your capacity by, let's say, 10% in 2020 and you have, around 2 to 3% growth that will affect utilization level negatively. How are you dealing with this, in for, for example, say Eastern Europe, where you'd have seen the highest decline? Yeah. So how we did with it? I mean, we we run, I mean, in our language. Full forecast running 24x7 is 5 ships. The good thing with the Stonewall is If you run Monday to Friday, it's still a very, very efficient plant. So what we do is we just take off shifts and Yes. Quite used to do this on the factories to set up that on the flight flexible on it. Okay. Thank you. And then maybe if I could pull up on that, what utilization level would you say is the most preferable for a factory? It's that's kind of an evening discussion about philosophy between being an industrialist and being a market leader and earning the most money. I mean, if I could be a guy with one factory and I run at 7 by 24, no marketing, no nothing. Obviously, I want to have a full factory. But if you have responsibility for that, the category can grow all time, for example, in the U. S. Have not run out and you need to deliver the customers, you definitely don't want to be on 100 utilization because that doesn't work in the long run for the industry. So you need spare capacity to do good in this game long term. And it's not a big problem to have spare capacity on profitability either. Even though, of course, if you run at the absolute maximum capacity of an asset, then you have it all in the sweet spot, methematically that gives higher margin. But typically, when you own that capacity utilization, you have longer shipping. So it's kind of counteract. And there isn't a single simple answer to that question, but we need to have a little capacity buffer. Jorge, thank you. I'm what I'm what I'm trying to aim at, getting an answer to here is, as was a question before q4 'nineteen seems to be very strong. And I'm just trying to find out if if this was, of course, due to a better mix or if it was like the sweet spot utilization, of the particular factory setup that you have now, or if it's, maybe something else by me or If you look historically, this Q Four is probably the best you've ever had or at least my my my my mother says it's just that I'm just trying to find out what exactly made this quarter this great. But for this all, it's country mix, it's product mix, because some few are big projects. It's also inflationary. And then it's good productivity and a lot of shipments within the sweet spot of each factory. So it's all of those factors that all pitched in a little bit each And you may be right. I haven't checked. Probably it is the best quarter, but I haven't checked it. I must admit it. It's the best Q4 ever. I I don't know, actually, but it's a good, it's a good quarter. Okay. Thank you very much. And, no, well done. Okay. Thank you very much. See see many of you tomorrow. Yeah. Thank you. Have a good day. This is now concluded today's call. So thank you all very much for attending, and you can now disconnect your lines.