Earnings Call: Q2 2018

Aug 24, 2018

Stilient's call, and I'm here to gather the CEO, Jens Birkerson and CFO, Kim Yoni Anderson. First, Jens Birkerson will, as always, go through our presentation and give you a quick update. Afterwards, we will be ready to answer all your good questions. But before I hand over the words to Glyn Spears, I must ask if you notice the second slide, which is the forward looking statement. So please, as always, be aware that this presentation contains uncertainties. And then we can go to the next slide, that is Slide number 3. And I will hand over the work to Mr. Jens Biedersson. Thank you, thank you, Lianne. So I will immediately switch to Slide 4. We go to the quarter because I saw in your commentary, you have already isolated these quarters. So we'll just talk about Q2. So I think Q2 was relatively uneventful. Our crews out there did a great job of keeping the factories running. We have some issues. We ran out of 1 supplier. We ran out of again or compressor brokers of supplier. We have some battles there and ask when you operate tight, some of these, but nothing major uneventful top line grew nicely and good leverage on the bottom line up 43%. And I was thinking that having this slide in front of us, I go through all the main dimension of the of the business, as I saw it, and then we quickly go through the rest and then we go to the questions. So If we start with the market, we saw very good growth for the stone wall in almost all markets. So very few exceptions, for example, in hunger, we didn't grow double digits because the impact on capacity. It's still a very good growth. Denmark, we have to dig my issue, it's burdening us a bit. So that's not growing. The rest of the Nordics is double digit. Germany, France, German and tremendous growth, France, very, very good growth, Poland, and the list goes on. And why is that happening? Why are we seeing this, quite high growth? So first of all, in almost all market to have a positive construction environment. There is construction or renovation work going on. That's happening. That's certainly not double digit. It's not super booming, all over, but it's growing. It's growing. And Germany, for example, have high activity. So that's happening. But then In the segmentation, the money primarily flows into plastic insulation and plastic forms, and then glass wall and stonewall and the mix is a bit different. But of course, the plastic foam is the big segment. And we see an increase in the storm mode share. It's not dramatic changes, all over. But you see an increase away from plastic foams to stone wool. So stone wool is hot in that perspective and then certain segments you see the flow to a greater degree, for example, external wall insulation, where now in Q2, we are up to say 40% in in Germany. And I've said a number, you know, 3 years back, it was working. So that's going on. And then one would say, okay, so is that extra transition giving 17% growth for everyone. I don't think so. I think that we have taken the larger share of the extra demand because we have been able to deliver. And we've been very successful in getting the deliveries to the customers. And yes, We monitor lead times, and we have some areas where some could pull on flat roofs up to 8 weeks, hang there is very type of generally managed to solve it, and that means that we get the top line. If we then go to the capacity, I mean, if you look into delivering the forecast this year, we can do that. What happens on in 2020 2021? 2019 2020. Last time I said that we have with the forecast that we had at the time, room in 2019 for double digit top line. I can say that all the work we have done debottlenecking, the CapEx we already invested, SKU reduction, shorter maintenance stop, not during less maintenance, but during it quicker. And all the actions we are doing I can say that still holds with the top line. And we also done quite a bit of work on year 2020. And I also see what needs to be very clear here, I'm not giving an outlook 2019 2020. I'm just saying what capacity room do we have should the market continue to develop as it does. So that means in February, we've been covered outlook for next year. But come to the conclusion, but also in 2020, we can deliver double digit top line. But of course, if 2019 would be 35% and then I would eat in that part. But so it looks pretty good from that perspective. It's tight. Which requires an awful amount of work, but our teams out there are pretty good at it, and we have a good methodology. Should also be said that in 2020 when we look at capacity, very little in that plan comes, for example, from from the U. S. Factory. That really kicks in in 2021. But in that year, Germany should start to to come in. Poland comes in, Romania comes in and also some increases for the Ramform Rock and also the rail expansion that you will start to see a bit more of in 2020. So that's on the capacity. And I think that's good news. And the fact that the measure associated delivery times every week, by segment, delivery times has increased, but on average, we keep the customer supply. And what is the implication of that? On the P and L. They keep holding back on fixed cost. They have a fixed cost as a percentage of revenue improvement. We have to add shapes. We have to hire people. The productivity is increasing on all the categories. So that's good. We are still cutting costs and doing operational improvements. It's quite substantial money. We have been saving. And and it will continue this year and next year. That's progressing well. And so that covers more than inflation. From a contribution margin perspective, here you saw the kind of gross margin and contribution margin improved, we can see clearly that with the price and efficiency improvement we are doing within the sweet spots of the factories, say 300, 500 kilometers out per factory. You see the margins go up in the business. There's a higher factory productivity, cost absorption, better relation between cost and price. So there we are improving the business. And then we have the business where we are shipping for something Denmark into Germany We even took some product from Russia into Poland for a big project. On that business, we are paying a price on I mean, paying a price on the bottom line. It's not the same contribution margin. But the overriding rules still holds, which means that if we grow 10% on the top line, I feel reasonably comfortable with the Liberty 20% bottom line. So P and L feels sound, and we put very high priority on on getting product to the customers, at the fair price, not the predator price, but the fair price. So some of these logistic cost certain customers, we take the cost. And they say it's not your problem, not what that would take from a factory further way to stay within our frame agreements. So we worked that way. It's a mix of structures, depending on the market. And then on the price The year as we see it and the progress so far has gone well around 5% on price. Year over year. That's what we can see. And we also see inflation. It is there it's not getting it's not dramatically worse. It has increased a little bit, but it's not, you know, it is not the shock we had last year. So those were the main dimensions on capacity, capacity, the outlook, P and L market and price and why we are growing I will think proportionally faster than some others. If you go into the growth picture, page 1, slide 5, Schormark is doing very good. Insulation is doing good. All over. And systems, still not a dramatic growth in any way, But and it's too early. If you move on to Slide 6 and we compare H1 to Q2, you can see that on Slide 6, systems has slightly, slightly better growth percentage in Q2. And I think now the issues we have had on Rockford and also that the growth on business are starting to stabilizing. And I still need a couple of quarters proof point to see that that's coming around, but we can make a step a bit up above 5%. We have not seen it, but at least we see that the worsening factors that we have had are not worsening more and all the businesses, the other businesses are growing quite nicely. So the business is stable, but of course, it's not up on the insulation growth rate because you don't have the quite the same drivers in that business. Remember on to Slide 7. Here, most of all, it's maybe easier to say, but it didn't grow really well. And then we can cover some countries later. Singapore, not going well. Denmark, the shrunk, but the rest of the morning is really good. And generally, the whole Eastern Europe, Russia, not double digit, but high single digit. So very good development in Russia. They had their long winter. And when it started, it started well. So I see a good year in Russia. And then the whole, all the Eastern countries doing really well. France, Germany, exception on the good, Spain, Italy, and France just looks solid also. So those are on the markets. U. K. Up now in yes, more than 40% growth. And we have seen that now quarter after quarter. There hasn't been a ban on combustible insulation, anything on high rises, but we can see that the market perception that for certain buildings is better to pick stone wall. And that is there and it's happening and therefore we draw. And move on to Slide 8. Profitability, 43% up on the top line. That was 17. And you don't have big exchange rate effect on that numbers, both in actual and budget rates, it will look like that. Slightly lower growth from the bottom line, but Q1 is a short quarter and easier comparable. I'm happy with this for 3%. We have that. That looks fine. I think, yeah, not much to comment there. We move on to slide 9. We've taken quite a lot of action into the system. The way We have a new manager on board in Rockfon, and now it's up to prove in the common quarter that the system division EBIT margin gap to last year that that starts to close. So we have a much smaller gap, quarter on quarter in Q2 than we have in Q1. And carefully optimistic over the 2, 3 coming quarters that we should be able to get up on the levers we had previously. But it's up for us to prove them in the big picture of things. If we can get that 4% to 6% growth, in system duration and keep the margin on these levels. It's a good business. And then you're waiting for the growth on to come back on the real growth path, again, that will make a difference. But the businesses, it's in a good place. The problems we have, we have acted on and structurally adjusted for most places. Free cash flow slide 10 Here, the key parts of the investment falls on building cash we are again debt free, more debt free. And on quite happy to say that we have managed It's okay to increase net working capital now because to utilize and not freeze capacity we need to build stock. And we have paid a certain price to lift the stock level. We started to ramp up the factories already during the autumn. We won't have done that, we will not be able to deliver that we did in Q1 and Q2. So that's a good network and capital increase. It doesn't mean that we'll get less prepayment or that we are paying suppliers quicker. That's not what we are doing. This is pure inventory. And then to some extent, also it can hit between the quarters of where we invest a bit more, you know, the normal accounts between the core some time. But fundamentally, it's finished goods and then direct. Investment activities, that's ramping up. And the the deposits are increasing or progressing as expected. And we could say that we are impacted by inflation on some of the materials you buy and also, you know, steel imports, on some of the equipment of the ship between countries. But you know, we have, in our normal business, we are not really impacted by the import duties because less than 10 and across the border, and we are not in those categories as far as I know, I haven't seen the case yet, but But on the steel construction still and other things, we can have small impact. But again, that's probably an impact. So it doesn't impact us so much. Then we move to slide 12, the capacity. So these are projects that are coming online. And we have beds, Poland, Romania, but if everything works out, should start to kick in to a certain extent next year, Germany to a relatively large extent in 2020, U. S. Really getting ready end of 2020. And only starting to get serious volumes in the year after that. So this is what has been decided. What we see now with Neuver and the German expansion that project, we are trying to fast track. And that can offload some of the demand in in Germany and parts of France, but we are now getting to a point with the development in France and Spain, but the need more capacity for France. We are, we have identified case of land. We have not executed the deal yet, but the option to build in France is very, very tangible. And although we haven't executed, that's in the cards, so to say. We haven't decided to be able to plant yet as always. We will keep that up, but our ambition is keep our market share in France and not gonna lose market share in France, which if this market developed continuous will require more capacity and move that back. Let's move on to outlook. 13% to 15%. You upgraded that. The basis for that was that in the old GAAP of 7 to 10, midpoint 8.5. I was getting into two quarters with double that growth. And even though last year, we had the ramp up of the growth, we have basically 8% and 10% growth in and Q4 and lower numbers in the first half year. And we see the growth continues, but maybe to slightly lower level, the 2 year growth is the current assumption is going to be roughly the same. And it's slightly improving. And therefore, we are now on 13% to 15% there. Again, December effect winter effect after this summer could be anything. And therefore, we don't know exactly. We will have to see when we get there. Clearly so that the building activity is such a it would be good. There are many markets if they can work white part in December to finish all the products because the plans of some of these construction sites are not being met on So we see continued high activity the rest of the year, but weather is there. And the other factors, we have EBIT and investments, we haven't changed. Okay. That was my quick, quick overview. With that, I hand over to questions. Thank The first question comes from the line of Christian Johansen from Bank of Bank. Please go ahead. Yes, thank you. So my first question is around pricing. I think you mentioned 5% increase from prices that in Q2 or in the first half? Or is there any difference? And then what should we expect for the second half of twenty eighteen? Or what have you put into your guidance when surprises? I'm saying that it's around the 5% mark for the full year versus last year. And then I didn't comment how much it is yet. But what I see with what we have in the cards of around 5% over the year and slightly bigger effect in the second half we did start to increase the prices last year. So it's a little bit hard to because Q3 and Q4 you're starting to see a slight price effect loss. So I quite frankly don't have the precise number in my head because, of course, prices here are still a projection and loss to be barrel a bit in the second half. So around the 5% going forward, in this quarter. That's what I would call it. And then it will vary down up around 1%. If you do the final calculation, Okay. And then my second question is on the productivity improvement, which you also highlight how should I, 1st of all, can you in any way help us quantify how much are we talking about here for the first half? And would that be sort of an accelerating impact into the second half and twenty nineteen? Productivity improvement, it depends What do you refer to? Are you talking fixed cost productivity improvements? Are you talking output improvements? Which productivity? Anything that helps the bottom line essentially? The adding shifts and on fixed cost, white color, overhead productivity, that's improving. So that's improving. And then, of course, other costs absorption per factory, that's also improving because the output is going up. And even if you add shifts, a lot of the indirect things around it is getting better. And then our assumption here is then logistics for the out of sweet spot shipments is eating quite a lot. I'm not saying that logistics inflation, the oil prices are up a bit. There are some effect, but most of the kilometers we ship on average, and that's a negative effect. And then I summed all of that up back that minimum what we should achieve all my, you know, that my golden rule that bid those effects, we should have doubled the bottom line growth to the top line growth. So that's where I left it, and more details on that. And then of course, we have done that in our while, but that there could be quarters where we just deliver twice the top line growth on the bottom line because it's enough that you take an outage in one factory or something like that. And then you lose a little bit of added, but it should be That's kind of the threshold for me for a acceptable quarter. No. But that doesn't mean that one day we miss it in the quarter for certain reasons, but fundamentally, all the positivity effect factor should boil down to that at least twice the bottom line growth and the level we are now compared to the top line level. Okay, quite clear. Thank you. Sorry. I mean, maybe your model does but do you see we deliver on that level on that. Thanks, Krishna. Thank you. The next question comes from the line of Yvesh from Exane BNP Paribas. Please go ahead. Good morning. Thank you for taking my questions. The first one is regarding your recent presentations where you often talk about taking share from phone based insulation. But your growth rate also implies that you're taking market share from Glass wool. So I wanted to get a bit more color in terms of how the market share dynamics have been playing out between boots and stone wool. Yeah. I'm not so sure about that, because You have a lot of new construction in certain markets. And I think some of the market share, you see the extra growth is actually taken from Stonewall. And we are not taking it by them losing top line. We are taking it by taking the stone wool on top where they are sold out. So I cannot say, but the big factor is, is coming, I mean, the step up in growth rate, that's because I think plastic foam this transition to Stonewall, maybe also Glasswall, but mostly Stonewall is what I believe. And then in that segment, we take a lot it because we can deliver and we are relatively quick still to deliver. So that's how we see it. So And then the market share between glass wool and stone wool, we had the period last year where we were losing share, for example, in France, the gap between last fall and stone was too low. Cosango Bank now for very low on the glass wall. And we went up with the price also in the GBI. Developed on too big. We have to adjust, and now we are back. You also saw the granular business where glass will came in and now we have taken back, so that we're almost back to where we were before. So you have segments like that, but I would not say that on average that it's a move in the market where I can say that Stonewall is taking share from Glasswall. I won't say that. For example, in In, in Denmark, you might have another case where glass will perhaps is growing faster than a stone wall because the price differential might be a bit too big. So why are you so sure that Stonewall is taking share from the law school. No, it was more of a question than being an assertion. But then my, my reason is that I don't think that's, the battle. That's a mix issue between how much new build, flat roof, optics, more of that, and then we take from the flow over from the plastic that comes into will be take a higher share there. Again, the others are not losing volume there. Most of them fully loaded and And maybe sticking to the question, when we look at the U. S. Market, where glass wool is predominant, how do you see that playing out given that yourself and your competitor are also driving more stone wool penetration in that market. Is that working as expected? Yes, it's working as expected. We have had, we had, for example, last year, a setback with Home Depot in Canada, whether that took us out to the great many stores. And now we are in. Now we have the same thing happening in the U. S. Because dealers prices and that took in the now the supplier in a great many stores. So we see some back and forth on that, but fundamentally, the stone will turn, so few in relation to the whole market that I don't know if you can even call that share we are dealing with, but we feel our plant if we have 0.5% more of the market. I mean, no one will even notice So it's not it's an underlying growth, of course, of the Stonewall business, but the glass wall is also growing. At this stage because the U. S. Is so good. So it's not the drama between these two and both segments are growing at the moment. Okay. Thanks. Just a second question on the margin and earnings, which have, if we recovered quite significantly in Europe and the U. S, there's also been quite a very impressive execution of your strategy so far. So I just wanted to look a bit more on the long term. What is the group strategy? Would you consider entering new markets now through M And A? Or do you still want to focus predominantly on the execution of your CapEx strategy in your core markets? I am adjacent new markets if we can find, I'm quite constrained on building new plant capacity, as you could imagine, the engineering capacity data. So I'm not keen at the moment to step into Greenfield View Country. Building a new plan because that's the most difficult thing you can do. It is to add a line or building a country where you already know the country or you're selling So Romania, for example, it's not the scariest that relative to simplest step to do. But so my so we are looking And yes, we have things on the list that are new countries where we could acquire something, but we have not managed to bring one after film rock to a point where we can say that we get into the terms and agree a price. And by, but I have a couple of those in the pipeline that I'm working on. And if it takes me 1 year or 3 years or 10 years, or might never work out We have a few and I'm absolutely not against entering a new country. Obviously, I'm not keen, for example, I'm not gonna do an in the Middle East or Brazil or Australia. That's not high on my agenda, but if you can take another country nearby or that fits into our supply network in the wrong way. That that strategically fits very well without thinking. And if you are within striking distance, even if you are within 1005 on the kilometer from a market that we are already in. In these times, that means we might be able to take volume home that we are shipping to that country today. But I'm talking I'm not talking 5 or 10 such targets. I'm talking below five potential opportunities around, and none of them is mature, what they have now in the hand. Okay. Thank you very much. Thank you. Thank you. The next question comes from the line of Charles Elmer from Nordea. Please go ahead. Yeah, hi. Also a few questions from my side. The first question goes to your CapEx or your maintenance CapEx. Yes, we've seen or maybe it's Kim. We've seen CapEx for sense going up in the last couple of quarters. Is this just a quarterly variation or is there something structural going on due to the higher volumes, etcetera? Help you with the first question? No, it is mainly a quarterly variations. The planning schedules that are fitting in the strong indication that maintenance CapEx are going up? When did we put the environment of CapEx, does it come into? No, that comes into that could be a sense alluded to here. There could be a few 1,000,000 small on what we call sustainability investment as that we classify as maintenance CapEx, where it doesn't really give an increased output but we do this for sustainability reasons. And we are seeing a few of those, but it's in the single digit millions there could be an effect of 2,000,000 dollars, $3,000,000, but we should check those numbers. The next time we speak, we can say, but I would suspect that some of this energy efficiency, abatement filters that could be some of those that ended up in the maintenance CapEx spot that maybe increased a quarter with a couple of millions. But we need to check because that's really not capacity CapEx. And we do a little bit more of those cleanliness sustainability investments. I see in our strategy, and we are doing some more and we have it slightly, but we are not talking big money. Okay. Then just also the same question. You mentioned that France, you're considering adding capacity in France. Would that be a greenfield or can you spend the current facility? Considering the size of the country, we have done the logistics calculations for greenfield. And that's what we have our eyes on. Yeah. Because if If you look at our footprint, we feel there is a logic, a very strong logic for greenfield there. Okay. So, okay. Is that would be 100,000 average factory or small or big It's big. We are not decided on a factor. I should say that, but we are, as you know, with the new thinking, due to logistics, We do the business in our and then we define trigger points for when we actually start to dig. But we have done all of that. We have identified there. We want to be in We have identified the piece of land and considering if Macron and their kind of meeting the environment of goals, the climate goals continues, the most likely scenario. And I'm not saying that has been decided, but the most likely scenarios of full size line. Okay. And then just my final question, if we focus on the System Division, where, as you also mentioned, things are maybe not going as good as it is in the Insulation division. Is it more about, you know, lack of execution or do you also see a lack of ability to pass on the higher input costs or what is actually driving a lower EBIT despite top line growth? So we have increased prices also in the system division, but fundamentally, if you look at rock from rock panel, lots of those, lots of news. It's showing me really, really well. We have the U. S. Road on business. That one has declined, and we think that stabilizes when coming up. We haven't lost share. That's not what's happening. It has just declined. And then Rockford, we have the main Asian issue and also some organizational issues that we needed. We needed driving that business. So I would say it's 1 one macro effect on the market, where we have to adapt and regroup, we think, and the other was more or less self inflicted there. Okay. Thank you so much. Question comes from the line of Michael Peterson from Handels Banking Capital Markets. Please go ahead. Hey, everyone, and thank you for taking my questions. The first one is regarding the CapEx capacity increase is going to happen in 2019. The extension in waves in Poland, how much is that going to to your current capacity and then the same for Romania? Yes. So So Romania, I'm not giving the numbers, but what you know about Romania is that it's not the full size line. So you roughly know how much it will be, but not all of that will come next year, okay? What else did you have? You had mentioned Poland. Overland since we shut the line down, renovating it, it's a pretty big, pretty big action. I'm not quite a full size line, but Again, that's coming online next year and it gives a good between a big and a small and veins. And whales here, they're doubling the capacity, but the lots of that we have achieved with debottlenecking. So you could say that grades for the CapEx looks like a small line, but we are achieving, with all the actions we have already taken and ships and all the rest are not to full size line. But is coming in steps. And a bit of that we have already done, we have already managed to ramp up capacity in rails now we added a shift now earlier this summer. And that kind of you will see that effect, but that adds capacity to second half year, but it will also add next year because then we have the 1st year also with the same mining. So it's a mix of it. But between the small line and between the big and the small, that's the minor truths And then you have the spread between the years also. So it's a little bit difficult, because not any one of those start 1st January. Okay. Thank you for that. And then if you can give you an update on Sweden, now you're mentioning you're looking for expansion in France, but since you already bought a property in Sweden, will that be coming down first or? No, we are doing, double digit growth in Norway and Sweden. And that's going well. And I now manage expansion against engineering resources also. So, too early to say, but with the way France and Germany has gone Central Europe looks like a more buoyant market. The property market in Sweden is at the moment It's really growing. It took a bit of a beating in France and Germany, the storm will fundamentals fields a little bit more solid at the moment, but we haven't decided. As I said, we worked with options and then we pushed the button so that in the third year from what we pushed about when we would start to have an effect. All right. Thank you very much. Thank you. The next question comes from the line of Christian Johansen from Bank Please go ahead. Yes, thank you. Just had 2 follow-up questions. In the report, you mentioned a negative impact from product mix you just elaborate exactly what you are referring to? Yes. Basically, you have flat roof, very big, flat roof projects, and they get this project to have a lower contribution margin. They have still very good products for us. And here, we have this philosophy that if we have a customer for example, Volkswagen, they tend to use us. And in the choice between when you are tied to incapacity between selling the EBI or taking 20 grew, flat roof project that is that will skew it towards a worse mix, but it's still a good mix. It's just a nature of that many times going into flat roof that will then worsen the mix. Okay. Quickly. And then the second one was just on cost inflation. Whether you can elaborate a bit on your sort of most important costs of parameters. You obviously touched upon logistic, but more the other ones in terms of development and expectation for the remainder you? Relatively small increases on coal and energy, basically. Different energy forms, but not super dramatic. In some cases, we see it on plastics. In some cases, not. So you're talking not huge numbers, but a bit of an inflation. Nothing of the step changes we really threw last year. So it's all manageable from the perspective that reduction and efficiency improvement program we have. And the price inflation now it's there. We keep an eye on it. And we see it continues, but it's on a more gradual or the civilized level than we saw last year. So it's not massive numbers, but significant numbers that we obviously need to pass on to the customer. Sure. Okay. Thank you. Thank you. The next question comes from the line of Andrew Carlson from ABG. Please go ahead. Yeah. Hello. This is Andrew from ABG. My first question is a longer term perspective on the market and the drivers of, say, underlying growth. So again, you've previously stated that the market could grow 4%. And I'm trying to get a sense of how fast it's growing now and how fast can it potentially grow due to the fact that such as the revision of the EPPD, so the the energy performance directive that has been, you know, that has been revised during July and also say the whole fire safety theme, how much on top of the 4% could that add? Or where are we today? And what could the potential be in those 2 say, themes in the general market? Thank you. But there is a gradual transition of the section of the market from plastic to Stonewall. I think that's a long trend. And then this runway showed directives and the energy directors how much that will impact. We like to see it. But when you look for example in France, we've seen our growth in our business, you know, 5%, 10%. And if that's caused by the approach to the energy directive and the ambition to install it because they pledged aliens into that quite a large portion of installation, but we haven't seen any money yet. So it's hard to say what the percentage is. But the breaches there, but we haven't seen it, but we see a very good activity. So I don't know. It's too early time. We just say that It's in the right direction, but we haven't banked on it yet. The main driver has to say is we have capacity Stonewall is getting a little bit more. That's what we have banked on so far. And then we don't have an extra percentage yet because we want to see it penetrate deeper into the country. And turning to real money. Okay. Okay. And then going to Sorry, sorry about that. More clarity as it moves as we move forward, I think. Yes, it was just to get a sense of, say, the potential market growth given where we are in the cycle but moving down to say the operational leverage and the potential for your EBIT margin, if you could kind of give us a it's not a guidance, but an indication of what the potential is. So right now your restriction is in on and delivery costs, but that aside, what could the potential be? You're currently at 13% EBIT margin. Is it unrealistic to think that this business will go all the way to 20% longer term with, say, sufficient demand of growth underlying? I was trying to basically understand the dynamics there. Thank you. Yes. This is a good question. Did you answer my question? No, it's definitely something that that has been asked many times also because that, of course, is something I think what we're looking for is what are the things we are working on that still could have a leverage factor As we have earlier said that we're still working on, operational excellence programs that the stretch the next few years. And obviously, we are not doing this without having some kind of of that patient of risk, it will give some leverage also on the earning side. So that's definitely something that we are hoping for. Then you could say as we as we add capacity in some of these in my that we are, we are saying now UK, Poland, Romania, Germany, they are in the sweet spots. And of course, as well as capacity there, you ease up a bit on the logistic challenge that we're having. So that in itself would also give a leveraging factor I think that's what we're looking at the level of depreciation also on the EBIT margin. So I think it is like like this. So at the moment, we are working on, we have a cost and efficiency program running with quite some substantial numbers. We see that we should keep as long as this business cycle continues to keep raising prices, not predatory, but you know, appropriately regularly. And then we're adding for new capacity and we have more powerful assets because we don't fill them immediately. So that was a negative Yes, you mean to compensate inflation with price. So we have not outlined a path to drive at this stage the margin up. We kind of ourselves around the 13% as we guided and focus on on delivering the growth and then also get more experience what that means on logistics, and, and we are quite deep into that. But I would I would have to wait with same when we get to February because I mean, we give a margin guidance. And we have another 1.5 quarter of experience of this to see, and see what the market conditions are because also if we lose if the market slows down, then of course, we have the cost we need to compensate for under absorption and all the rest. So as I am, I am, I just see that there is definitely potential to take out cost of the business on the product investor productivity. So we have a quite substantial program for that, but then we have not yet translated that into new margin guidance. Okay. So just to sum it up, so there is potential for more assuming that the, say, that there's a cost reduction. There is definitely a room for more cost reductions and and we are working on that. Yeah. Okay. Okay. Fair enough. Thank you. Thank Okay. Okay. Thanks, Hassan. So I wish you all a good weekend and thanks for your time today. Thank you. That does conclude the conference call. Thank you all for attending. You may now disconnect your lines.