Earnings Call: Q3 2020

Nov 25, 2020

Welcome to the conference call regarding Rockwell International's results for the 1st 9 months of 2020. My name is Thomas Haber. I'm Director of Group Treasury and Investor Relations of Rocket International. I am here together with CEO, Jens Biegelsen and CFO, Kim Jong Unason. First, Jens Biegelsen will go through our presentation and give you an update on the results for the 1st 9 months and the Q3 of 2020. Afterwards, we will be ready to answer all your good questions. Before I hand over to Wursley and Peterson, I must ask you to notice Slide number 2, which is forward looking statements. Please be aware that this presentation contains uncertainties. Now we can go to the next slide, which is Slide number 3. Jens Steren, I will now hand over the words to you. Okay. Thank you. Good morning, everyone. So if we start Slide 3. So I would just like to say, I mean, more important is Q3. But year to date, when we look at that, I want to reflect a little bit on the guidance. So we are now year to date for 12.5 points. And we have the guidance of 12 to 13. So we just need to hang on to this. There's not so much left of the year, so we are well positioned there. And then the top line mid single digit growth with improving quarters. I'm sure also that this well in hand among the CapEx, those to reflect a little bit on that guidance, we took it below And I come back to the CapEx later. It has been quite a challenge to keep the investments going. In these times, we have had to go through all sorts of actions to get people to site and keep construction going. So we have suffered some delays due to that and also some increased cost for some of this. But nevertheless, the overall risk that we have is a bit less CapEx than we expect. If you then turn to Slide 4. We came in about 2% down like for like on the top line. And but there was a dramatic improvement of the top line compared to Q2, up 17%. Obviously, normally, another talk in that way. But in this case, we did because it was a good proof point for how we navigated Q2 and Q3 combined. When we got into Q2 and we saw the very rapid decline of the top line, we didn't take any rash actions. We took shifts off. We kept delivering. We kept people safe. Yes, we had the government, the lockdown was impacted, but we kept operating. And that helped us, of course, now when the business came back up, that we had the ability also to deliver 70% higher output. So that was good. And then on the margin, it's not very much less top line, but what we saw there, obviously, Travel and Entertainment is down. We kept working on factory improvements, cost reductions that we normally do every year. And then on top, we have kind of the natural hedge of energy prices and incoming materials that we have hedged very well because of other sectors, other industries where demand went very low and that also we benefited a bit from that on our price, income price. So that helps us to deliver really good margin. And in spite of the lower revenue, then we're flat EBIT. If we look at cash flow, nothing dramatic on it, but I would say I'm very happy with our organization's ability to keep making sure we get paid. We did that. And we haven't done any of this nonsense of holding back payments to small sub suppliers. So it's not our way of doing it. We don't believe that it's better for us to make their life difficult to get paid. We've been very diligent on paying on time to make sure that our soft suppliers don't crash because they have too difficult cash. No improvement due to that whatsoever, maybe rather the opposite. We go into Slide 5. And there, we basically can see that the insulation business is still down. It hasn't come up to the same extent, while they had quite a good development on the system division. So I think we can move on to Slide 6 instead. So what you see here is that the Insulation division is still down. And when you look across the countries, we have all different customs in different regions. And I will come back to countries, but we had double digit growth in some countries. For example, in the U. S, we have a U. S. Growth while Canada is still in decline. So it's very patchy and this is very different pattern. On the systems business, we see that Rockpanel, Rockform Europe and Broadam, They go through this relatively untouched. And then obviously, the business we have in that, let's say, in automotive suffers a bit more. We also have had regional differences in the Rockford, for example, North American Rockford have had a tougher market, just the way the market reacted. Part of that is explained by the overall U. S. Trend that residential absolute boom, while the commercial side of things is not moving. And that's the segment where North America ends. So we have big variance from that perspective. On the Insulation side also, many, many countries in region doing well, but there are some segments that are more challenged. If you look for example, a technical installation into oil and gas and marine, especially the oil and gas side, it is a challenge statement at the moment. Regional, Western Europe, I would say the further north you come in Europe, the better it is or with one exception, I would say. So the Nordics has performed well again, including Norway. It's not big growth. But despite extreme lockdown, somehow the business is holding up. Then we go into looking down also towards the corner of Romania. Russia is doing pretty okay. And the country that really stands out is Italy, where we have super growth due to the super bonus and the scheme being restarted. Germany, for us, quite challenged, not only from it's both a combination of competitive conditions with people fighting for volume in the heavy segments and also different price. So Germany is still a Spanish market. Russia doing okay. Romania, Hungary doing good. Poland, Czech, a bit slower in that area. The main currency effect is a bit too Polish, but the main effect is the ruble that was weakened quite a lot. If you look into Asia and North America, U. S. Doing well, India doing well. Canada is always a little bit more mellow and not reacting so quick down and up as the U. S, so still in the negative territory in Q3. And South Asia as a whole is quite challenged, Thailand, Malaysia, Singapore, Europe, have had quite an impact on construction due to lockdowns and very, very strong measures. China doing okay, but not really growing, not really growing, which might be a little bit of a surprise to us. We thought in the previous call that China was out of it and would keep growing, but haven't seen that. It's not a big business, so it's not a big impact overall, but would maybe a flaw if there would have been up in growth now. Okay. Slide 8, profitability. And what you see there, obviously, good recovery in both businesses. EBITDA is up in spite of the lower top line. And I mentioned those factors before. And the EBIT margin is up also. And we have due to that, some of our CapEx credits are a little bit delayed due to the challenges with the corona, also some depreciations haven't come in there. But in terms of cash more than the EBITDA, that's all good and healthy. Slide, what month is the next month? 9. 9. The insulation EBIT has come up. And there, you see also some of the material costs coming in. And travel and entertainment and all that, that obviously impact both the system division and the installation division. But we typically, during the year, very, very seldom changed transfer prices during the divisions. So that means that the under absorption, overall absorption and material changes during the year, in most cases, our system will be within the installation. And then systems score more on price and on overall volumes of their selling basically in relation to their costs. So good development on both sides. We are happy with that. But just so you know, when you have growth in systems, we don't get the same leverage because that shows up on the installation side. Investments activity, we haven't taken actions to slow anything down. We need the capacity in U. S. Beyond that, our forecast now is to start up somewhere around mid next year. Several 100 people on-site still. Has products as such on-site has progressed, but it has been a lot of challenges that people in and out of the U. S. Via transit countries and quarantines among waiting times. We also have the Norway and I project running where we are basically doing the project at the same time as the people is in some sort of quarantine and the hotel room are very restricted on time and sites. So challenging, but our crews doing well and making sure the progress. Free cash flow, really, I've commented on that already. Net working capital, fine. We haven't had any defaults and payments. And we are doing good with the some suppliers. And the share buyback is continuing. And we haven't gotten the debt either. Outlook, I have commented, nothing dramatic. It was expanded, restricted a little bit the balance a little bit, but we'll be in from above to better to be confident between 12% and 13%. Over to you for questions. Our first question comes from the line of Dave Rumhead from Exane BNP Paribas. Please go ahead. Your line is open. Good morning, gentlemen. And I hope you're all well. I heard a few coughing there. So I hope you're all safe and sound. Just a few questions for me. Firstly, I noticed in your report that you made some comments on competitive pressures in Europe. But equally speaking, when we look at your gross margin, I mean, they're up quite considerably. So doesn't really seem to imply that you've suffered from it. So I'm just trying to understand exactly what you're seeing and if you're concerned more on a forward looking view or whether these pressures were offset by lower raw material prices? So that's my first question. My second one is looking ahead and I'm not necessarily trying to get your outlook for 2021, but I think we're all seeing that your raw materials are not necessarily inflating. And the substitute materials, especially on the foam side, the industry has had to raise prices quite significantly. So looking ahead, is there any reason why you wouldn't be able to improve your margins even further ahead than maybe the high range of your guidance of 13% into next year? Thank you so much. Yes. Okay. Let's start with the competitive pressure and then the margins, I will hand over to Ken. So the net we have a slight positive net price improvement in Q3, and we have raw material starts. So from that perspective, the aggregate business is fine. What we have seen, though, is that with the recent trend, the river, for example, and U. S. Is outside of this. We don't the competitive pressures. We have a booming residential market in the U. S, and we are selling everything we are producing and prices are good. So but that's just an example. In the U. S, we have seen residential really take off and the commercial segment being stuck. So basically, people don't build more car factories. Yes, Amazon is still building, it's a big scale effect when they do it compared to the smaller player they've been factories about. So you see this skewing of the business towards a bit more residential. That's a trend there. If you then go back to Europe, we have and it varies. You have neighboring countries where one is really growing and one is declining. But if you look a little bit, my prediction, without giving a guidance or some observation, I suspect that we will have residential renovation, high rise, multi unit, single unit, But they will have a little bit more of a boost in this because the people staying in these houses want to invest in them instead of yourself, but it also focus on residential and residential energy efficiency. And then on the commercial side, and probably not hospitals, schools, that will be going on the same. But I think in normal commercial buildings, there might be a bit more pressure. And that's typically upselling flat roofs and sandwich panel with the material for sandwich panel. And to some respect, it may be also FX. But in that section of the heavy density products, where I foresee that we will see fewer big projects. We had a lot of big projects back in 2017, 2018. We saw a drop off with exception in Tesla and Amazon. But fewer but more and smaller projects and generally more hesitation. And then at the same time, when I look at that, I then see capacity increase in Russia from Norway and Poland from the Russian competitor. Knott have their French factory. We have Filer coming online 2020, they put some capacity in the market. We might have a start up next year in Hungary of a small competitor. And all of this is more suitable for that segment. And I think this combination means that we have seen some bidding from competitors that are quite low in these segments. And that's what I reflect in that. And we have seen some of it, and we are counteracting some of it, and some we haven't. But if this goes on, I would, of course, take action to preserve our market share in both segments, and that's what I'm reflecting. And should also say the other, in light of all this, stormwater material, you might see the hearings now, the Grenfell hearings in the UK, as a material, plastics is on fire and stonewallergrasswall is especially some of the most circular material. I still think we're going to see a drift over to Circular Natural Materials. So I'm very bullish on Stonewall's role and growth as such, but it has attracted my investment. And that comes at the same time where I see a little bit of a slowdown in the market and mid term, does the renovation wave impact the commercial sector equally quick when people sit and discuss whether we should have smaller offices? That's what I tried to capture with that statement. But and my message is that we would have to use our Norberg capacity and then protect our share. Over to you. Yes. And again, it's we did not talk obviously about 2021, but there's an exception on EBIT margin this year. This year, we had anticipated a higher level of depreciation at the start of the year. We had mainly the conversion of the oven in Norway and Moss was planned for early this year and also, of course, the completion of the factory in Neuburg. The Neuburg factory did not include any depreciation in Q3 and that is only going to take place from Q4. And similar to Moss factory due to corona situation has also been delayed. So there are some, you could say, some delayed, postponed depreciation from these assets that, of course, will have a full year impact next year. And next year as Jenssted, when the factory in West Virginia is completed mid next year, Of course, in the second half, you will see a higher level of depreciation next year. Then it's always a question whether the dynamics between, I think, a raw material benefit here, especially in the second half of this year, how long will that continue into the new year on one side? And then on the flip side is we have lower travel entertainment and also lower marketing activities and how will they rebound next year? On the other side, we know we have some initiatives to secure productivity in the year to come. So we'll have to weigh those things up in balance and give you our best view on that in February when we do the announcement of the annual report. That was it, Yves, from our side. That's really helpful. Maybe if I can just add a quick follow-up. Can you give us just an indication of how much extra D and A we should expect in 2021 just to have better understanding on modeling side? We have to be patient until February, but I mentioned the assets that is involved. Okay. Thank you. Thank you very much. Our next question comes from the line of Christian Johansen from Danske Bank. Please go ahead. Your line is open. Yes. Thank you. So first question is along the same line on cost and specifically your raw material cost, which as you mentioned, the inflation has been lower this year than what you originally expected. So is your fair assumption that as COVID-nineteen hopefully goes away that cost inflation will come up next year? And how does that play into the price pressure you're seeing, which does not seem COVID-nineteen related to the same degree? So should we expect price pressure to remain while cost inflation to go up next year? So that's the first question. The second question is regarding the EU tax taxonomy. So we saw on the graph that out on Friday that insulation products has been removed from the list. So just your view on why it has been removed? And secondly, what it means for your taxonomy eligibility? Okay. I'll take those, Christian. So first of all, we're going to we always have that in this call about next year. So last year, we sat here this time of the year. And if I would have said then that we would have COVID-nineteen hitting the top line for a portion of the year, that we would have all time higher stock price indices, that we would have the biggest forest fires in Australia and U. S. Ever, and we would have the highest number of hurricanes, tropical storms from the hurricane season. You would have said you are crazy, So we have just put ourselves disciplined ourselves, but we give the outlook when we get to February. And I'm really sorry about that. And your assumptions are probably as good as ours, but we just like to limit it to when we get there. And last year, February was too early because we didn't really know about COVID-nineteen in the brand. I mean, it dramatically changed the year. So I'm not going to comment that very much. Do you want to add something to the material prices? No, no. I think we have touched on it with the question for me. So again, let's wait until February because there are so many other moving things on the EBITDA. Then on the taxonomy, I mean, just again to recap for everyone around the world, the taxonomy that the EU is working on, that they have 6 categories. And the category there is one for circular economy, hasn't been worked out, and then there is one for climate mitigation and adaptation. That means saving the climate from the climate change. If you end up in that category, that will qualify investments in that product for good purpose and that cannot impact how much money is spent on your product when people spend your money and others. So that's just a bit of background. So if you start with the physics argument about this. So if you don't do installation of buildings, you cannot meet the Paris goal. So the physics of it is they can't say insulation will not play a role in this. So that's just the physics of it. But then when you get into this whole concept of I'm reading here from a sheet I have, the 2 delegated acts. The 2 delegated acts are a bunch of documents that describes this. What has happened in there is that insulation of a specific word has been taken out at this revision, but this included the whole area of installation is including as an industry and a sector. And so this is work in process. So what I when people then say, okay, so now we're going to take out the insulation, disqualify the Paris agreement, I will just offer some patients. We have people interpreting this. It is actually a good thing that is not mentioned. There is a tactic to that, but I will not go into the finer details. But fundamentally, I'm absolutely convinced that installation will be eligible, okay? Does that answer the question, Cristiano? Yes. That was quite clear, yes. Thank you. Our next question comes from the line of Claus Almer from Marea. Please go ahead. Your line is open. Thank you. Yes, also a question regarding the taxonomy situation. And Jens, you're right that insulation is still part of the draft paper. But I guess the change is that you are not to meet a certain absolute criteria, but now to prove you're superior to other technologies and giving Lambda is better for Foam. The fear is at least that stone will be challenged by this change of wording. Is that correctly understood? Yes. I'm not worried at all. I'm not the least worried. So insulation stacks up fantastically against other measures. In speed, windmills and solar also from CO2 reductions. It's super good investment from a CO2 equation. But then when you get into this, you have scope 1, 2 and 3. And what the embedded CO2 of the plastic industry is the whole airline industry, future depth of CO2. So when you start to go into the numbers and take account of circularity, we have the fire argument, longevity and how it works in real life, Stonewall stacks up excellently. And that is without legislation today. We are growing the share of the natural materials, glass wool and Stonewall already. And stone wool is attracting more investment because it works and it has to go. But when you go into this and you start to look into the melting technology of Stonewall, yes, you need a little bit of take care, but it lasts and it has a circularity to it. And you see that it's a winner. It doesn't mean it will win every project. It won't win every project. All materials are needed. Personally, I think that plastic form should not be in a house. We should use plastic for other things, but it is a big material too. And all of these will play a role, okay? Right. So the link between taxonomy and the green deal and maybe even the renovation wave, how do you see that? Is that a link at all? Yes. I think that there will be a link because there's such a big amount of money that you need to deploy whenever they start to deploy it. And therefore, I think that on the higher level, the bigger the money is, you need to allocate it by some categorization, and then it gets down to 100 of 1000 of small projects. So I think that the taxonomy somehow is linked. And it's good that people understand that if you invest here, it has the following benefits. And I'll give an example. The fact is still in a year, we have a factor 2 within the year of the CO2 reductions for the planet we do net of our production emissions. So the more we produce, the better. And I think many of those things will become clearer with some of these structures because you also look into the whole life cycle of the thing. Products, but at the end of life, emit as much as they emit when you produce them, that's going to be more visible as this progresses. Right. Okay. It's just coming back, sorry about all these detailed questions because now you talked about wind turbines and so on. But just looking insulation as such, giving the things you are saying, then isn't there a risk at least that all those money will be favored by form given the better Lambda status? No, no, no, I don't think so because you have I mean, you just have the hearings in all the high rises, schools, hospitals, you have fire regulation in many countries. Then you have the longevity of the product. And then you see now, for example, the Nordics, when you start to look into the circularity of the product, there is no circularity in that product. So I think it's actually going the other way. I think it's going the other way. Just continue, sorry. So you can achieve the installation of the building totally perfectly. You just need to make it a little bit quicker. I think the Lambda drag race, that was maybe 5, 6, 7 years back, It's not the case. You need to look at installed performance and the whole slate of benefits of the product. And that's one of the reasons why installed is growing. So I don't think this will come down to a simple one parameter, lambda rates. You need to look into installed lifetime, circularity and what it really does for the building. I totally agree on all of that. But now only talking about taxonomy and that seems to be quite single factor focused. And so if you only look at that one. Yes. And it's work in progress, incredibly complex structure and too early to say, will it hone in on one thing in the factory? I doubt it really. One. Okay. And then sorry, my second question, if that qualifies my second question, given this competitive landscape as mentioned in the report and there has also been a few questions regarding this. This is not a new message for Rockwell. So the situation you are mentioning in Q3, is that different from what you have talking about in the first half of this year? No. I've said all the time that when you look at first of all, we need more Stonewall because it's growing as a segment. And we like to at least keep our market That has been our message as the segment grows. And we have invested in that, and we have invested enough to keep the capacity share of the whole thing when you look into those investments. My message maybe here is that when you see the shift maybe over to residential and the type of assets that come on board, you see a regional and if that how long that is, it's hard to say because I don't know how the market year, and they are stopping to plan for that. And we have seen some price. But year, and they are starting to plan for that. And we have seen some price, but it's a regional issue. We are not talking about Russia, U. K, U. S. S. It's around Central Europe, Poland. That's where we see it. Okay. And then the heavy junction, Paul. And then you said you want to protect your share, which you message compared to past quarters, right? Yes. Yes. Yes. I think I always said that. I mean, with my pricing strategy, I've said that for 5 years. You said you want to be disciplined and you don't want to compete on price at any cost. And now you're protect your share. That's slightly different message than past quarters, I think. Is that correct? That's a different message, right? Ian? Yes. Different, just slightly different message maybe compared to slightly different situation. The assets are here now, or not all of them, they are coming. The plant in France has started up. There's 1 more coming in Poland, 1 in Hungary. And now we are there. And I have a market situation where in those segments, probably the demand is not growing as we had expected it, at least not now. So that's the situation we have. So in that respect, it's a different message because we are at a different point in time. But I think when we look at that expansion as a percentage capacity over, say, 4 or 5 years, I think all of that is needed. All of that turnover will be needed. Sure. Okay. Thank you so much. Thanks. I remind you that if you want to ask a question, you will have to press 1 on your telephone keypad. Our next question comes from the line of Brijesh Saya from HSBC. Please go ahead. Your line is open. Thank you. I have two questions as well. So the first one is on the end market. You are talking about a shift towards residential. Historically, you have been saying about a fifty-fifty end market exposure. Could you please tell us what's the current end market split looks like? Has that shifted materially towards residential? And in relation to that, when you talk about this market share and as well as the raw material price evolution, looking ahead into 2021, would you see a scenario like that played out in 2018 wherein you could gain market share from plastic form that was obviously at the backdrop of Glenfel and combination of this high MDI prices. Are you envisaging any such kind of scenario in 2021 where you could gain market share from the plastic from producers? And my second question is on the technical institution. You've been saying that the market is Yes. Let's take the first one because it was quite a lot of things in one question, I think, and then you can have the second one. This I know we talked about it before this. So where do our end markets where our products go into residential space, non residential. And we explained that many times. It is quite different region to region and market to market. But as Jens said, we do see sort of a general trend here in the COVID times that the commercial investments are maybe lower than they were before the COVID times, which could indicate that the nonresidential part will not grow as much as expected. But it's again very different region to region. So not something structurally different that we see. And then we cannot think about 2021. Right now, we're just thinking about closing the year and of course planning for the coming year. But again, let's come back to that in February when we make the first outlook for 2021. And now your second question. Okay. Thank you. Just on the technical insulation, could you remind us how big is that in proportion to your group sales? I'm very sorry, but we don't disclose that the individual business. I think you also talked about this. We don't sort of have not really talked about right now. What we are saying means the competitive situations, is mainly between stonewall players. But as you said, yes, there are certain markets like in U. K. Where I think the shift from other materials into stone wood is still taking place. And the UK government is recently talking about strengthening the protection of high rise buildings, lowering, you can say, the level from 18 meters to 11 meters, which of course would be a benefit for Stonewall being the only non combustible material that exists in the market. So those things in U. K. Specifically are still happening this shift here. Understood. Thank you. Our next question comes from the line of Lauri Sergard from ABG. Please go ahead. Your line is open. Super. Hi, Jens Kim and Thomas. I hope you're all doing well. A few questions from my side. The first one is in terms of Western Europe. I noticed that you don't mention France or the UK in either your statement or your presentation or your preliminary remarks. Could you just give a little bit of highlights there? Is it just completely flat relatively to last year? Or what's going on there? Yes. So did you only have one question, I ask one more question? On the France and UK. Yes. Okay. Perfect. No, France recovered quite well. It's flat flattish. And UK is already up and growing, but not dramatic. They're similar. But so they have come out quite nicely. I think U. K. As a market has probably not come back up to the same extent, but we are doing quite well there because we didn't go into furlough. We have been quoting during Q2, and we get some benefit out of that because we were working all the time. We never went into furlough. So I think that could be it's a little bit tricky to know what this market and what is just a the recovery and what are you doing? Are you doing better than the market aftermarket or the worst in these quarters because it's so dynamic? But I think in the UK, the U. K. Overall market has not required quite that much, but we get to work and got a couple of headspace of bids out during the downturn and now we have the benefit of that temporarily. Okay. Just a follow-up question in terms of, I mean, Knauf opening their factory in France. Well, it is open, but is product coming out of there? Is that what you're hearing? And also in terms of, let's say, the recovery well in France, the remark there being quite flattish performance is seeing we're seeing more, let's say, political motivation for insulation. This gives some momentum to perhaps commercialize on your plans on building a factory in France? And then sort of my just my second question in terms of depreciations, which you were talking about before, Kim, not that much extra performance here in Q3, not that much higher relatively to, let's say, Q2. And here you mentioned there's been some postponements of both your Nurburg and your Moss factories. Could you talk about maybe Q4? Will we see a quite a steep pickup there? And is that sort of the uncertainty or the question mark relative in terms of, let's say, your guidance increase on EBIT margin? Is it mainly a question mark regarding your depreciation that you're a little bit uncertain about? I will hand over the depreciation, but we are not uncertain about depreciation at all. I mean, we know Nordberg has started up, but the depreciation was starting in the next quarter after. So but if I take France and then the thing that talk about depreciation, France have a scheme, and it's a little bit uncertain what this €7,000,000,000 scheme means, and we have seen the rights certificate. So they have the scheme in play. And that is continuing now, but it's not the kind of boost that we have seen in Italy before and after corona. So Italy had added something. What we've seen from so far on the ground is that it was a good market, and now they are opening up, and it's kind of coming back up. But we haven't seen any effect or any additional measures. But as a market, we are positive about France because we put a focus on energy efficiency. The government have understood it. They've done all the maths. So I think we are quite bullish on France as a market. And then the question of a plant has to do when do we need it and then we have this between the countries. As you know, we have a piece of land. We have done a lot of engineering on that, applying for air permits and then the precise timing and all the rest is governed by a number of factors around also cleaning up and finishing the factories we have in progress now, the ones we are building. Depreciation. No, there's not so much now as to follow on depreciation. As Jens said, the preliminary forecast included both depreciation in Q3 from Moss and Neuwerk factory And that both of them have not commenced in Q3 and they will commence in Q4 with depreciation. Okay. Obviously, we have had quite nice weather the last 3 years. But are you anticipating maybe a cold winter in Europe, which naturally has some negative effects for Rafal? Is that perhaps We leave it as we always do. We know quite a lot, of course, about October November already. And then we leave a margin on Aero for December, as we always do. The last time we had a really bad December was in 2014, just a year before I started. So we don't predict that. But I mean, I feel we have ample margin here. Yes. And I think the uncertainty for the sempa is also I heard, for instance, the German government talking about having prolonged Christmas holiday. So it also depends on how the markets are reacting here over the holidays, whether they stop early to allow people to come back to before quarantine, before Patrick Christmas. There are many uncertainties in December, which we just had to keep it at the dealer. You could I mean, I think the governments have really understood that you can run the billing sites safely. So they know that. So we are not particularly worried about building site lockdowns and what they do like we saw in Malaysia for a very short period in Spain and France, governmental instructions will stop producing. That's very short period, but we have to do it. So I don't think that's really a factor. But it could, of course, be that the construction companies do one of these that we have seen a few times, stop X on the day and December and then start up between Christmas and New Year. It could happen. And we have never been very good at predicting that. Super. Thank you very much. Our next question comes from the line of Cedar Ekblom from Morgan Stanley. Please go ahead. Thanks, guys. I just got one follow-up question on some of the discussions that you've had on the comments that you've had on market share. Can you give us a little bit more color on you say that you see yourself increasing market share. Can you talk about whether you see that as Rockwall taking share from or foam roll taking foam insulation? Or is that a case of Okay. Okay. Or from your competitors, right, to understand where you see the puts and takes on market share? Thank you. Yes. So what I think is happening is that there is a drift from plastic foam over to mineral insulation, both glass wool and stonewall. What we see is coming over. So that's not Rockwall market share. That is the category type of share. And there you can see it, for example, what's happening in the U. K. That high rises will not be allowed to have combustible materials. Probably schools and hospitals will not be allowed to have it. And then you have other countries like in Germany now where when we look into ethics, external wall insulation, where in 2014, Stonewall had a share of about 14%, and now we are up at around 50%. So you see this slow, slow moving over from plastic foams into the mineral category and where stone wool comes in on circular and fire performance and on the equity and some other factors. So we see that drift all the time. And it might be the case that people on the foam industry stay different. But our view is firmly that, that segment is growing and that EPS, for example, has been in a decline for a while. Tier and curve probably doing reasonably well. But on the EPS side and some applications, we just see that it doesn't matter how they price. They kind of lose and people don't want the material anymore. And that's quite a big segment. So that's happening. Was there another question or share? Yes. So is there anything happening between Stonewall and Glasswool? And is there anything happening with your specific position within the Stonewall market that we need to think about when it comes to market share? Yes. I think in the stonewall market share, that's what I commented. There you see stonewall competition building new manufacturing facilities and I put in the heavy density where I want to protect my market share. I want to keep my market share defending. That's on that side. And then between Glaswhirl and Stonewall, you have this Glaswhirl typically is lower price, more indoor general building insulation. And there, you see some shifts in different markets, but there isn't a massive trend anywhere. It varies a little bit here and there by country. I would say, for example, in Denmark now, during the last we have seen a lot of good growth in stronghold into general building installation, for example. So there in the large segment, we have gotten a lot. If that is all market growth or if that's share gain, very hard to judge at this time. But no big new members, I see. Okay. Thanks very much. Our next question comes from the line of Salz Hayek from Handels Bank. Please go ahead. Your line is open. Thank you very much. You mentioned the point about the stowage capacity in Western Europe being expanded by your peers and you indicated that the addition will be absorbed over a period of 4, 5 years. Could you give us an idea of roughly what percentage expansion in stone wool in Western Europe is that you see being added this, I guess, it's over the next 12 months or so? I don't first of all, these are not my plans. I just have estimates. So I so we typically refrain from commenting the specifics. But what I saw, and I think I mentioned that, that when I look at it, a couple of percentage points CAGR is covered with expansion, and we expect the market to have that. So I don't want to comment the capacities of those plants because I quite frankly don't know exactly what they are and I don't know how much they can produce. But I know, of course, roughly where it is. But it is, of course, not massive, massive amounts. But the fact is that even if you bring in when you bring in a factory and people start to lower prices to get business, if the market is not quite supporting that, an instinct is often to lower the prices. But again, you brought plants in Poland, the one in France, small one in Hungary. Those are the ones we are aware of. Yes. Okay, understood. And second question regarding the implied guidance for the Q4. I made it something like €75,000,000 to €100,000,000 EBIT in the Q4. That's a wide range. In your language, I sort of detect an optimism that you will or a confidence that you will end up at the high end of the range. I was just wondering what are the swing factors that could justify such a wide range? So that's it. I mean there are 2 swing factors at the moment. It's the lockdowns, which I don't think is a big issue now. So I think it's December weather or building sites closing early, and they will not take a break. And we haven't been able to predict it. So therefore, I think our argument in previous years where we haven't narrowed our EBIT margin more has been the argument that after 2014, we have that impact. Of course, it was a lower EBIT generation, so December was relatively bigger. But we have just said, we refrain from narrowing the gap down too much and just leave it at that. But there is nothing in this that we have turned more of the mixed here pessimistic because we see more risks. It's just a normal situation we get to this time of the year that we still have that December month. That's what we want to reflect. We don't want to change and we don't want to go into more narrow guidance than we've done previous year this time of the year because the massive snowstorm could happen. What was December like last year in 2019? How would you describe that in this context? We didn't have any lockdown back then, but there was, of course, earlier or late close to our building side. We had a normal Q4 last year, normal Q4 and no massive snowstorm as far as I remember. But we don't comment the month. I guess the month we comment by exception is December with this hassle, the climate hassle or the shutdown hassle, but that gives us a normal Q4. Okay. Thank you very much. Our next question comes from the line of Jingtong Ouyang from OnDeFiel. Please go ahead. Your line is open. Good morning, gentlemen. Thank you for taking my question. My main question is actually on your CapEx for the next, say, couple of years because I understand that you want to transform into a way greener melting process and by using electricity. And you've got a couple of projects in the pipeline already from my understanding. So I'm just wondering, what is your CapEx budget for this transformation? And do you have some time line for the entire plan to roll out? And do you have any concerns that it might actually dilute your return on capital employed for the next couple of years? Okay. So we haven't we obviously have a plan, and we are working also some technologies. You might have seen now there is shift to biogas, what we do in January and Denmark, where the net effect is more than 70%, together with the Moss project, 70% through reduction in the Nordics and more than that in Denmark. So we have technologies we work on. So on the one hand, the technology keeps evolving. We are doing a lot of research. We have a lot of people working on that, and we are running full scale projects or pilots in our new technologies. So that's happening. Then you also have the development of the grids around in the Europe subsidies for CO2 schemes that can be really, really impactful. We can decide investment decisions. So we have kind of framed it that this technology we work on. This is where we're going to head, and we have goals for where we're going to head. And then at the moment, we have to kind of detail the planning for the next couple of years depending but this is kind of a moving environment where countries' subsidies, electrical connections, availability of biogas, all sorts of factors play in. But we haven't heard yet before, but we haven't yet said that we will do an Investor Day and go out and talk exactly how we do this and what the time line is and all the rest. We keep that in our But and then on the return on invested capital, I think our primary optimization in the business create a great return on Rockwell as a whole long term. And it might be that when you do this, you might have a lower return on invested capital in the books, but you might have a great return on your total shareholder development, your share price development. So we will look into that. But like I said, we are not obsessed with taking the term on invested capital down if it's needed, if it's the right thing to do on the business. That's just how Rockwall is. But of course, we like to keep profitability. We like to keep our market share. We like to be a really well run company. But we have not announced a multiyear plan, and we are still developing some of the technologies. And we're probably not going to say exactly how we do it, but we want to keep the options on our side. So we are flexible with the opportunities that come up. I see. So you're saying that you probably won't actually provide a guideline or a plan on how you're going to upgrade to TechSly to upgrade the technology? Yes. We don't give a long term guidance on that at this stage. Okay, great. And then another small follow-up question is on the competitive landscape of Salsa. Actually, we've to some firm producers and they've mentioned their concern on the, say, the market share for their products because they are seeing like a huge inflation on MDI prices. So I understand that even though you compete mainly with Stonewall producers, but overall, do you think that for example, 2021, you will have an edge over firm producers? Yes? Yes. We have seen the MDI come up and down. But I would say generally what we have seen mostly in peer and peer is that it's positioned us quite in the premium segment. So we have seen some times from the MDI drop that come down on projects. But I'm and it swings a bit between the years, but we haven't factored in that they would raise their prices a lot and lose massive share. I think the bigger trend is more the use of forms and the fire properties, and that's more the long term gain. And then we've seen over the years that this NDI goes up and down, it was down in 2,000 was it 'nineteen? It dropped? Yes, up. Yes. And then we saw lower bidding from Specialty Pier and Puer into flat roofs in some regions, for example, Poland. And we lost a few projects on that then, but that was why that happened, but people don't only choose some price. But maybe the market is swinging it, but we haven't factored in that we will gain more because of what they have a bit higher MBI Okay, great. Thank you. That's right. Our final question comes from the line of Michel Thiedesen from SEB. Please go ahead. Hi. Thank you for taking my final question. This is regarding the mix of insulation provided for the market. You're talking about the commercial being structuring a little bit. So the 1st 9 months of 2020 compared to 2029, Can you share a little bit thoughts about the mix of the revenue you're dedicated for like project business versus residential? No. Again, Michael, there's not a uniform ratio to that similar the end market segments. So it is quite market to market very different. Okay. Then maybe a small follow-up. As you know, we don't And just a small follow-up. As you know, we don't have a okay, come on. The tender activity for projects for, let's say, factories, I assume that is down compared to last year. Is that something that will affect the mix going into next year then? I talked about this as a general trend. And we have discussed with friends of our entrepreneurs, I don't know. And I simply think that in that segment, if you are not Amazon, you are not a logistics provider, you are not doing sanitizers and mouth protection masks. I think that new projects that we will see smaller projects and that will be the 3 projects that this will create a bit of a vacuum in the pipeline and those segments that you can see in, say, damaged panels maybe and cut roofs. That may well happen. I don't have any proof for that. I don't have the market report. I'm just looking a little bit at what's happening around them. I think that that sector is, in a way, they haven't come up with lots of new projects while they're sitting home in corona. But that's just an observation. But again, qualitative, quality points. All right. Thank you very much. Ladies and gentlemen, we will now close the Q and A session. I will now turn over to your host for final remarks. Thank you. And apologies to the analysts who wasn't able to ask questions during the session. I will follow-up with you guys afterwards. And please be informed that on the 14th December, the Rockwell Group will hold the next investor conference call dedicated to the ESP topics. And thank you for joining today's conference call.