Earnings Call: Q3 2020

Nov 10, 2020

Warm welcome here from our site in Munich. We hope that you and your families are all well. Together with me in the office is Matthias Kruntler, our CEO as well as our CFO, Christian Schulz and the usual suspects from the legal, finance, communications, treasury and IR department. As you are all aware, we signed on November 7 a definitive merger agreement with Navistar, and therefore, we will use today's call also to give some insight into the transaction. And afterwards, we provide you with a brief update on how Traden did during the 1st 9 months of 2020 as most important KPIs were pre released on October 21, and we also notified you about our market outlook for fiscal year 2020 on October 28. Matthias will kick off the conference call with all around Navistar transaction continued by Christian, who will guide us through the results section. In the interest of time, today's quarterly section is a little bit shortened and shorter than normal in the main deck, but you have all the information which we regularly provide in the backup of this presentation. After the presentation, we will host a question and answer session on both topics, on the Navistar merger agreement assignment as well as on the 9 months results. And before I hand over to Matthias, just a couple of housekeeping items. First of all, we hope you have seen all the material for today's call, which is the press release as well as the interim statement and the IR presentation. If not, you will find them all on our Trade and IR website. And I also should make you aware of the disclaimer, which you will find on Page 2 in the presentation, and we will not go to read this disclaimer. With that, I hand over to Matthias for the first couple of slides. Thanks a lot, Rolf. A warm welcome from my side. We are happy that on last Saturday, we reached a definitive merger agreement with Navy Star. The deal accelerates our global champion strategy by creating a global leader across key truck markets. Consequently, we, the Traden management team, are very much convinced that a combination of Traden and NavyStar will create sustainable value for our clients as well as for our shareholders. I'm now on Slide 4, where we provide a transaction overview with the respective key facts. NavyStar ranks currently as the number 4 manufacturer in the U. S. With a revenue of USD 11,250,000,000 in their respective fiscal year 2019 and a wide range distribution network with more than 1200 dealers in the NAFTA region. The acquisition rationale will be elaborated in the next section, but the key points are access to the NAFTA profit pool deliver on our global champion strategy leverage Powertrain components, in particular, the command based engine across brands to generate significant cost savings over the years to come and achieve a well balanced and global footprint with complementary regions. We will acquire all outstanding common shares for $44.50 in cash as a 1 step merger with full support of Navystar's 2 largest shareholders. This reflects an equity purchase price of about USD 3,700,000,000 Financing of the transaction will be provided by Volkswagen. The loan for the purchase price totals 3,300,000,000 and has a tenure of 30 months. Trading intends to refinance the bridge via the capital market, and we are not ruling out refinancing instrument. We think there is significant more value in trading, and it will materialize with the execution of the MIME restructuring plan, the opportunities arising from the Navy Star transaction and the strength of the Scania brand. Our current share price is not reflecting this yet. Creighton is committed to maintain a solid investment grade rating post transaction. Last, closing is expected mid of 2021 and subject to regulatory approvals and customary closing conditions, including Navystar's shareholder approval. I'm now on Slide 5. Traden has been in a strategic alliance with Navystar for almost 4 years already when we acquired 16.6% stake in Navystar. The key objectives of the collaboration were access to the North American market, establishing a procurement venture and a technology cooperation for joint powertrain and future technologies. With the full acquisition, we are now in the position to fully capitalize on the incremental synergy potential. This brings me to Page 6. If only in North America with focus on trucks and buses above 16 tons. It would be able to deploy technology trade and can provide. It would be a company which we can work with easily. As we can see on this slide, all 4 acquisition rationales perfectly underline the wish, and it will come true. NavyStar is the perfect fit for percent. Further, we deliver on our Global Champions strategy with this transaction and will use our strong market position to further create value and sustainability established straightened in the 1st row of global truck makers. Page 9. By leveraging powertrain components across our brands, we can generate significant cost savings over the years to come as the powertrain stays for a significant amount of the manufacturing cost of a a volume. Just as a refresher, the powertrain stays for almost 65% of the total manufacturing cost of a truck. As we target for CBE to achieve an 80% commonality level and avoid that each brand develop its own engine, the consequence is clear. Leverage cost synergies throughout the group. From 2025 onwards, over 50% of our heavy duty trucks will be propelled by this engine. Brings me to Page 10. Last, with the acquisition of Navystar, we as straightened will achieve a well balanced and global footprint. That means we will generate a significant share of our future revenues in the NAFTA region and balance our total revenue, which so far was largely sourced from Europe and South America. Further, trading can then serve 3 key truck market regions, which all have distinct cycles. 2016 U. S. Downturn, Western Europe continued to grow. Serving all three regions will permit to smooth out the cycle margin. The distinct brand performance, the new truck lines, the key powertrain packages and future technologies should all help achieving these goal. Page 12. Looking back, there have been a few milestones along the way since put our focus on the successful integration. Brings me to Page 13, and this leads me to my last slide of this section, status and next steps. The Naviosa AGM is expected to vote on the deal in Q1 2021. The transaction is The delisting of Navystar is envisaged to take place shortly after closing. Overall, the deal is a great opportunity for our company and our stakeholders. I'm very happy and proud to run this further with the management team. But Baby Star will not be our sole focus until the rest of the year. Three other topics are of utmost importance. With a new family member, we will focus to retain and even further develop our trade and holding with dedicated value adding services for the brands. We want to reach an agreement with our unions on the necessary restructuring at With that, I hand over to Christian. Christian, please. Thank you very much, Matthias, and also a warm welcome from my side. In the beginning, let me make some remarks on the current situation we are facing. We are still in an unprecedented situation because of the COVID-nineteen pandemic. We saw a significant decline in demand and supply chain disruptions in the Q2. A substantial part of production part restart our production, including supply chains at the very end of April and saw the positive direction in May, starting continuing into the Q3. Also, October confirms the positive trend seen lately, but we remain cautious given current rise of infection rates as everyone in our industry wants more focused and are still focusing on managing cost reduction and established measures to safeguard our liquidity. The economic outlook Q3 have been released. Still, the contraction for 2020 is expected to be much worse than it was at the financial crisis in 2,008 This is why we still stay alerted and focused. For 2021, the IMF is forecasting a noticeable increase for all major regions. Clearly, the economic downtrend triggered commercial vehicles markets globally to contract significantly. With only the Q4 outstanding, most third party research foresees a decline of the truck market in Europe of -30 to -35 and -10 to -20 for Brazil, all and much better than what was seen last quarter. Looking at all regions around the globe and having several shutdowns in mind, there is still a high level of uncertainty for weeks months to come. On Page 15, incoming orders declined by 14% to 145,933 units in 9 months. All figures were negatively impacted by COVID 19 pandemic, but the positive trend seen end of Q2 continued in the Q3. Unit sales were down by minus 29 percent to 127,660 units in the 1st 9 months, same here as on the order front. We saw the positive trend set in May continuing into Q3. Trade and Group sales revenues decreased by minus 21% and fell less than unit sales, thanks to our aftersales Operating profit in the 1st 9 months still negative at minus €58,000,000 driven by the €382,000,000 loss in the 2nd quarter, but with a catch up in Q3 with EUR 162 positive. Adjusted operating profit is down to minus EUR 9,000,000 close to breakeven. That means 9 months adjusted return on sales was slightly negative at minus 0.1%. Last, net cash flow in Industrial Business was at minus 148 versus €2,323,000,000 1 year ago. Please have in mind last year's investing cash flow was supported by the sale of Power Engineering with EUR 1,978,000,000. Excluding this, the swing year over year was positive EUR 4.93 generation of +199,000,000 in 3rd quarter. The net cash flow in the light of COVID-nineteen looks acceptable. Other topics to mention, I will run through some topics in a minute. For your reference, we listed them all down here. Page number 16 leads me to the next slide, which is showing the development of our unit sales and incoming orders. Overall, vehicle utilization in most regions, especially in the long haulage truck business, saw a continuation of the positive development since May. The market recovery went faster than expected. With close to 50,000 units sold, we are still not on the pattern we saw in the years 2018, 2019. But as it can be seen on the right side, the gap to previous year's level narrowed significantly. Looking at the year over year change on the right, we see that unit sales are following the incoming order momentum, which was strong in Q3. Book to bill ratios were well above 1 for Industrial Business throughout the Q3. All in all, the graph suggests the V shaped momentum in the Q3, but we still have to be careful as we all see the pandemic the performance in the Q4. As seen in slide before, we see a noticeable market recovery in combination with increasing incoming orders. These were up 19% year over year in Q3. Very impressive is Ghana with a book to bill ratio of 1.5 in the 3rd quarter. The adjusted return on sales was 3.7 percent and therefore, above the Q1 2020 level, which stood at 2 point 8%. We were able to clearly reduce CapEx in primary R and D as well as capitalization ratio for R and D stood at 19% in quarter. Thanks to all the developments and other actions, we were able to write a net cash flow of positive €199,000,000 Page number 18. Here you see a detailed view on brand level for the Q3 alone. Highlights are Scania had a book to bill of 1.5 percent in 3rd quarter. Sales revenue declined by only 15%, while unit sales were down 25%, mirroring a strong product mix. Adjusted operating return on sales closed to 9% and compared gross competition on like for like basis, again benchmark for the industry. MAN on strong volume year over year and sales revenue follow The operative loss declined to EUR 27,000,000 and was better than Q1, mirroring the production stop relief since in late March and the fact that we made good progress on the cost side, Camunis Omnibus sales revenue was clearly impacted by exchange rate, but again positive on return on sales. On Page 19, similar to our first half year reporting, I once more can just reiterate what was said in the last weeks and months, Traton looks at a sound balance sheet and ample liquidity. Both are highly important elements as they give us the freedom to concentrate on the steps necessary to emerge stronger from this crisis. In general, our balance sheet position is strong with an equity ratio within the Industrial Business of 36% and a net debt adjusted EBITDA ratio of domination of profit and loss transfer agreement with Volkswagen AG for the fiscal year 2019. EUR 1,400,000,000 has been transferred. Our gearing is currently at only minus 6%. That also holds true looking at our liquidity, thanks to strict cash management unrestricted cash of €2,100,000,000 and credit lines of €7,700,000,000 we are able to safeguard liquidity in these uncertain times. As announced, TRATON SE took out its 1st syndicated revolving credit facility with a volume of EUR 3 point 75,000,000,000 in the 3rd quarter. Further reducing operating costs by repurchasing our capital and R and D expenditures, we once more took decisive action. If you please go to Page number 20. Here, we've put altogether relevant information on the MAN realignment. Negotiations have been formally begun and shall be successfully closed, hopefully, by the end of the year. What we can witness, there's a clear momentum at MAN Truck and Bus. And of course, we keep you posted mentioning is the signing of a joint venture agreement for e mobility with our partner Hino, with the scope to develop electric vehicles MAN Scania and Camunus Omnibus brands will be concentrated at the Trachon office and combined with FeNO's expertise in alternative drive systems. We believe this will shorten lead times for future e mobility products, be it battery or be it fuel cell technology. Further, we have introduced strong products during this year, which underline our strong efforts to further develop our portfolio. He would like to emphasize, in particular, the innovations in the electrification of our trucks and buses. If you go to the next page, after highlighting some latest news within group, I would like to conclude the presentation with our outlook, which we already made public in an ad hoc release on October 25. Provided there is no further increase in the number of COVID cases and no associated countermeasures are adopted by the the will continue to recover by the end of 2020. However, we are anticipating a sharp decline in total unit worldwide for the entire fiscal year 2020 due to the market downturn. In line with unit sales, we are assuming that the sales revenue of the Trade and Industrial Business segment will also decline substantially year on year and are expecting an operating return on sales for the trading group of between minus 1% and plus 1%. The projected operating return on sales does not contain any expenses for the realignment of M and A and Truck and Bus announced on September 11. Due to the ongoing nature of the negotiations, obviously, with the employee representatives, it's not possible to predict the timing as well as not the amount of these expenses in this point in time. For the cash conversion rate, we are anticipating a negative net cash flow in the Industrial Business segment. As mentioned already in the beginning, truck markets for a 3rd party perspective can end up at minus 30% to minus 35% in Europe and in the bandwidth of minus 10% to minus 20% in Brazil. With that information given, Matthias and me are happy to answer your questions in the due course of this meeting. Thank you. Ladies and gentlemen, then we will now begin our question and answer It is from Claus Bergelin of Citi. Your line is now open. Please go ahead. Thank you very much. Hi, Matthias. And Christian is Klauz at Citi. First on Navistar, I obviously appreciate that there are no hard numbers on synergies right now. But if we think of the likely trajectory at least, you're starting introducing the CBE in Scania in Europe next year, the year after in LatAm and then you have MAN and Communist omnibus 20242026. But how much technology transfer can you really push through with Navistar in the short term? Obviously, when we look at the trajectory of the current brands, the synergy potential on the powertrain seems a little bit back end loaded. So just to understand the shape of the powertrain synergies at least. Thanks very much for the question. I think you shouldn't forget that we are already in 4 years where we actually work together in our alliance. So we know each other well. Our projects are running well. And I can tell you, you will not wait until the end of the century that we're going to see efficiencies. They're going to come significantly earlier. Yes. And I think, yes, and Klas what Matthias has said, look, I mean, so far with all the components that might come to Navistar, we would have only been possible to participate with our, let's say, 70% shareholding. Now if there's a full takeover, obviously, if the success of the product is in the market, then we can also benefit on the full scale. So the reason for asking is obviously you're sourcing Navistar is sourcing from Kamins currently and you have the 13 liter coming out now with Scania. So how quickly can we see that shift over? I guess that is the question. Hey, look, we're going to give more color after this once closing is done. I think you understand this, Yes, yes, yes. Sure. Then my second one is on the guidance for the year. I appreciate it's sensible to be prudent, but obviously looking at the numbers here, particularly on the scania side, you have a very strong order book into year end. Your book to bill is 1.6 on the truck side in Scania. And that would suggest that the margin could increase sequentially as you deliver out of the backlog around production. So I get that orders can be weaker in November onwards in Europe, but not really sure why the margin would go backwards. I think you have a lot of deliveries coming into the Q4. I mean, I emphasized on orders, obviously. And for us, it's very simple, Claus. I mean, we've seen how quickly the world turns in March, April. And I mean, if you see infection rates in Europe, which is for sure one of the core markets, I mean nobody can rule out how the next 6 to 8 weeks will come. Obviously, there might be things. As you have said, we are prudent people. Yes, I said it before, we have positive feedback so far from the market. But we rather be prudent when it comes to the entire year. And I think this is not a mistake, quite honestly. No, no, no. I understand. It's just that the backlog looks so strong in Spania. Then my final one is on the cooperation with Lino. Now focusing also more on the fuel cell side similar to what Volvo and Daimler are doing. So what is the scope here of the JV? Is it on the truck and the powertrain only? Or you're also thinking of including infrastructure, fueling stations similar to what we see at Nicola? Or are you relying on subsidies and partnerships here going forward? No. At the moment, we're really focusing on the technical side of the product at this point in time when it comes to electrification, when it comes to fuel cell. And we are especially exploring all the opportunities there from the fuel cell side when it comes to Nomburgs to evaluate what we can really do here. Thank you. Keep in mind, Klas. And keep in mind, the joint venture was just announced recently. So there's plenty of things to discuss. The key question we get from investors is obviously whether there could be some of the first mover advantage from startups in that they're also providing the infrastructure. Reason. Again, it's too early, but I mean Hino and Toyota have a good track record on fuel cells. So let's see where the joint venture leads us to. Thank you. Thank you. The next question is from Volker Engelau of Handelsbanken. Please go ahead. Your line is now open. Thank you very much. I'm Volker Engelau of Handelsbanken. Two questions from me. I'm sorry for going to back on this Navistar and Indian situation here. But they signed the 2 emission cycle agreement with Cummins, and you're targeting to implement your 30 liter engines. Does this mean that Cummins will continue to supply engines on the 15 liter side? Or what's the thinking here? That's my first question. I'm just really sorry. But at this point in time, we are not really commenting on this. You have to wait until closing. Okay. Maybe then on Navistar, everybody has the history with Navistar and the Maxforce border engine and pushing in the jar when you were changing everybody else went for SCR solutions. And that eventually resulted in a 5, 6 percentage point market share loss. Given where you're heading now, are you aiming to regain structurally lost market shares? Or how should we think about that going forward? Is that a reasonable target given that you have a quite competitive engine? Hampus, it's all well understood, yes, that you obviously want to get more information and gain more information actually on how Navistar will continue with its supply chain and so on and so forth. But we have to ask at this point in time, yes, for your patience. You know that's quite complicated within until closing for us to comment on. Navistar is an independent company, and we will refrain from speculating. So therefore, please be patient. After closing, we will answer all these questions. Okay. Fair enough. I hold my horses. Thank you. The next question is from Damian Flowers of Commerzbank. Please go ahead. Your line is now open. Hello. Thank you, Matthias, Christian. My first question is about demand. So in Q3, the sales volume growth was clearly better at MAN than it was at Scania. But when we look forward, when we look at the order book, that seems to be reversed. So the SKON you book to bill, as already mentioned, is better than that at MAN. But I sort of assumed that given all the new product you've called at MAN that you would be seeing continued strong momentum there. So is this is the orders that you're seeing a bit disappointing? Can you make a comment on the demand dynamics that we're seeing there between those two divisions, first of all? I I think if you compare to your previous year, as you know, in comparison back then, Scania market share in Europe has been down because of the spillover effect of the new truck generation Q1. That's still from the history. If you see all the book in Scania is quite strong, as you have said. On the MAN side, well, look, I mean, we're going to introduce the new generation of the heavy duty truck in the due course of next year, right? And as we have said before, we also need to watch out that margins are safeguarded there. So this is basically, if you so will, introduction strategy to a certain extent. I wouldn't say that we are disappointed on the MAN side. I think it's going according to check. And if you remember, Damian, the discussion we had in the IPO, how important it is that the launch of the new IMN track, obviously, would have been a better timing without the COVID crisis in Europe, that we need just to be, let's say, sensible and this is what you see there. So in terms of the timing of when we'll start to see that, in which quarter of next year meaningfully hitting the MAN volumes, is it in the first half? I think I would rather say 2nd to 3rd quarter, you would see the share of those new heavy duty trucks arising. Okay. And then It's obviously depending on the overall market dynamics, right? Yes. And then just a follow-up on MAN's profitability. I mean, when I look at your guidance and also the MAN guidance of €450,000,000 to 6.50 €1,000,000 loss. Clearly, you're pointing to a weaker Q4 versus Q3. So is that dynamic all about volumes getting softer? Or is it also about other cost headwinds that are playing a role as well at MAN? Yes. If you look into the past, Damian, you see Q4 always is one of the weaker ones, right, in every year. Second thing is, again, all the, let's say, discussions we currently see and the ramp up we still have there, yes? I mean, don't forget, we ramped down our production in the first half of the year. We needed to restart it. We have all these distancing things. It's really you need to be careful what you do in MIN now in the Q4. I think it's rightly said. And yes, hopefully, we are improving. Okay. Good luck. Thanks very much. Thank you. The next question is from Horst Schneider of Bank of America. Please go ahead. Your line is now open. Yes, good afternoon and thanks for taking my questions too. Before I try it again on Navistar, maybe first of all, another question related to the business you own already. When I look at the Scania charges in Q3, was that now all the charges that we should expect? Or is there the bulk of the charges only to come in the 4th quarter? That's my first question. I think you might see minor ones continuing, but not in the same magnitude. And I think by Q2 next year, everything should be baked in. So then the larger part is coming just in next year because I mean for 5,000 No, no, no. The other way around, Horst. I just said the $50,000,000 you saw, you might see the one or the other smaller thing, and this might continue until the Q2, but not in the magnitude you've seen in the Q3. All right. I mean, it sounds like a quite cheap restructuring, right, given the fact that you reduced 5,000 employees or you reduced now less than you wanted originally? No. I mean, there are other things. First of all, Skane has reduced significantly costs last year already in the fadeaway of the dual ramp up costs, right? Then they decided to take out the 5,000 people. And obviously, now with the higher order book on the direct side, you have a small counter effect depending on how the volume comes. But what you saw here in the Q1 is structural things like the bus plant in Finland or other things where you really now take actions there. So I wouldn't say that we didn't meet our expectations. No, that's not the case. Okay. The other question, I'll try it again on especially related to potential fees from the acquisition. You booked any of these fees already in the Q4? And if yes, in which segment? Say no. No. Closing. No, with closing. Okay. And you I guess you cannot yet comment on any purchase price allocation effects, right, that you can only do post acquisition. Hey, Horst, this is a nice try. Okay. Thank you. All right. But then on the refinancing again, because you said you leave all options open, You decide on these options before the acquisition or you decide on that when the deal is fully closed and all is fully consolidated? What I'm pointing to is the risk of a capital increase or not risk, but the possibility of a capital increase, then you would decide on that. First of all, I would say both. We will think through what we do in the refinancing of the debt in the course of the next couple of months. And there's nothing more to say than what Matthias has said. We keep open which instruments we use from the capital market. And I understand the background of your question, but I will not comment on this. We will cross the bridge when we get there. All right. Thank you. Thank you. The next question is from Nikolaj Khemf of Deutsche Bank. Please go ahead. Your line is now open. Yes. Thanks for taking my question. Nikolaj Khemf here at Deutsche Bank. My first question would also be on MAN. And can you give us more updates here on how MAN should improve and how the margin of 8% should be achieved? I understand that the biggest level should be labor cost, but what else can be done? And my second question would be on your alternative powertrains. So one of your key competitors announced last week at its Capital Markets Day an electric vehicle sales target. When will you price something similar like that? Please talk about to MIND. MIN. So, MIN is quite a holistic work we need to do. Now when it comes to material costs, we're going to attack there. When it comes to the overall headcount, we're going to attack there. When it comes to the overall plant structure, we actually have to improve there significantly to actually get the inbound and outbound electricity costs down. So it's really in every area we're actually going to have to improve the company. Yes. And keep in mind, we just introduced a new heavy duty truck that means like Matthias has said, not only on headcount or whatever is going to be agreed with the unions, also on the material costs. You have way more potential because if you have a new truck, it's something different when you discuss with your suppliers if you then have a 20 year old truck, obviously. So there's lots of potential, yes. And as for the What was it, electrification? Yes. Sales targets for electric vehicles. No, we're not going to announce them now. Not now. We are debating them, but we are not ready for announcement. The next question is from Mr. Engel of UBS. Please go ahead. Your line is now open. Hi. It's Inger from UBS. Hi, Mitesh. Hi, Christian. Thanks for taking my question. Just a couple on my side. I'll take one at a time. Firstly, just going back to MAN, could you maybe help us with any launch related costs that you're still incurring and for how long we should expect that to continue? Until Q2 next year, we will have some costs there, especially when it comes to manufacturing because in the ramp up, as I said before, with all the COVID measures, it's surely different than what we have planned for. So by Q2 next year, hopefully, those might be gone. Right. And do you have a rough magnitude on how much are the costs currently that you're incurring related to this? We don't communicate this, sorry. Okay. And I guess secondly, in terms of pricing, could you maybe just help us with given that overall strength of the truck market, particularly for Scania, are you actually getting any pricing benefits for Scania? And also with the new truck launch in MAN, are you getting any price increase for that? Well, one can only comment that we still are able to hold the price point we wanted to with the new truck generation on Scania, as you can also see reflected on their margins. I've said before that we when we talked about the orders in the question in the beginning of the call, that we are very prudent when it comes to the ramp up of the volumes of the new heavy duty truck on the MAN side exactly because we're going to follow a policy which is margin before volume on that end. So I can only say we are satisfied with the targets we've set ourselves. Understood. Thank you. And my last question is on working capital. I think it's been very strong in the past two quarters. But I guess with kind of ramp up in production expecting in Q4 2021, how should we think about this working capital going into 4Q? Yes. As you rightly said, we had a very good trajectory, I would say, in the second and Q3 when it comes to optimization of working capital and also the cash flow of the +199,000,000 in Q3 is a showcase for that. Obviously, now if you see the order book, if you would eat up that order book, of course, you have increased working capital in there. So I think that the spirit of cash flow optimization remains, but without doubt, there will be an effect in Q4 when it comes on eating up the order book. Yes. Thank you very much. Thank you. The next question is from Himanshu of Jefferies. Please go ahead. Your line is now open. Hi, good afternoon. Thanks for taking my question. The first one actually follows from the previous question on your industrial net cash flow guidance. You're guiding for negative net industrial cash flow for full year 2020 versus negative €150,000,000 year to date. Q3 was quite strong and normally Q4 is a strong cash quarter. Is it are you guiding negative cash flow in Q4 sorry, for full year because of the working capital ramp up? Or is there something else? Thanks, Himanshu. 2 effects. As I just said before, your ramp up production and your working capital is suffering from that. That's one aspect. Other than that, you saw that we have a prudent forecast when it comes to the EBIT guidance and those two factors relate to the cash flow guidance. So is your cash flow guidance based on the a bit midpoint? Yes. Okay. Got it. And secondly, on the Hino JV, recently Hino also signed a joint venture with XOS trucks in electric trucks in North American market and you also have a JV with BOOM on electric and fuel cell trucks. So how is that equation going to work? Or is there JV limited to North America with XOS and with Dheeru in Europe? Or if you could just shed some color on that? So our joint venture with Hino is not limited to Europe. It's a global joint venture. And we need to see after closing what opportunities we have with Navistar on that joint venture. All things are for creativity. Okay. But their joint venture with Exos Trucks in North America, is that something that will affect your positioning in North American market with them? No. But we cannot comment on Hino's joint ventures and how this would relate to a deal with Navistar that not yet has closed. So let's debate this if time has come, okay? Thanks. Okay. Thank you. Thank you. The next question is from Salma Shada of Seaport Global. Your line is now open. Please go ahead. Hi, good afternoon. This is Brian Lombardi with Seaport. So I guess question on the transaction process. What is it that you think will be the last to occur of the necessary items before closing? There's 2 things. 1 is, obviously, the shareholder meeting of Navistar, as Matthias has outlined, is supposed to take place in Q1. And then obviously, after this, the normal regulatory approvals like CFIUS and antitrust, and then there's basically closing them. That's it. Okay. The reason I ask is because, I guess in a departure from what would be customarily true, the closing can't or I should say there's no obligation to close before July 1. Both the items you mentioned would be conditioned, so it would be impossible to close or the obligation to close wouldn't exist before the conditions are satisfied. But that July 1 closing definition is completely separate from the conditions. Is there something with financing or some other procedure? No, no, no, no. It's just I mean, we are in the middle of COVID times, right? I mean, now Navistar plans for a shareholder meeting. If they do it in Q1, let's give ourselves a couple of weeks to get the antitrust thing done and the decivior thing. So there's nothing that you suspect on other topics. It's purely shareholder meeting, then all the governmental procedures and then that's it. It is a prudent time line. Sure. No, I appreciate that. It's prudent. That's why I'm focused on it a bit. I mean, if you get everything you need prior to July 1, do you intend to close prior to this artificial deadline? It depends. It's hard to give a correct answer to these questions. I can only say Persio and the team now heavily focusing on getting the shareholder meeting. Then we see that the votes come there and then we go into the regulatory process. And then we see how it ends. And then we give you an update on every quarterly call, okay? Okay. Thank you. Thank you. The next question is from Daniela Costa of Goldman Sachs. Please go ahead. Your line is now open. Hi, good afternoon. Thanks for taking my I only have one. I wanted to ask you conceptually about the thoughts regarding the revenue opportunity. When you look at electric vehicles, one of your peers recently have said they think it could be 40% to 50% higher than current. And I was wondering how do you think about that? And related to that, when we think about the aftermarket profitability, Do you think there will be any meaningful changes compared to IC trucks for the new powertrain trucks aftermarket? Thank you. I actually think the corridor you mentioned of 30% to 50% is very reasonable, and we see it in a similar way. Yes, there will be a significant long term difference when it comes to aftersales as a lot of revenues are generated by the powertrain on the aftersales side. Nevertheless, we also see the opportunities when it comes to battery cell exchange and so on that there will be a new field of after sales business, which we don't have today. So we need to work on that, but there are opportunities for us. And regarding the profitability of the aftersales, is it similar in your view to current? Yes, it's going to be similar. That's what we are targeting for. Thank you. Thank you. The next question is from Jose Arcemoni of JPMorgan. Your line is now open. Please go ahead. Thanks very much. Jose, JPMorgan, hi, Matthias, Christian and Angelo. A few questions, please. Maybe the first block, can you Christian, can you give us some guidance please on restructuring cash outflow for the year 2020 2021? And if you don't want to give us 2021, just 2020, please. Also some color on production Q4 versus Q3 for Mana and Scania. If you could quantify sequentially Q4 versus Q3, otherwise a simple guidance of flat, lower or higher versus Q3, please? And then for Matthias, a couple of questions, please. A bit more strategic. As you think about the group and capturing that aftermarket business as you transition into electrification. You will say you're part of a much bigger group, obviously, that has a huge bench in terms of technology. How deep or how vertically integrated do you want to go in terms of the key components? And I'm thinking about the electric motors, transmissions, etcetera. Can you go in a different direction and change the vertical integration of the truck in sense? And second, can you comment a little bit about your thoughts around the free float of the company and whether this is a topic that is still being considered or not, I think an important topic when we speak to investors, obviously, improving the free float of TRATON will be very welcome. Thank you. So Christian here, Jose. Thank you. First of all, on the cash flow and demand, we are in the middle of the while we are speaking here, we are negotiating with the union. So there is not yet an arrangement to say that you can predict how much do you need to accrue or when do you pay it out. So you just need to be pleased, a little bit more patient on this one, yes? And I can only tell you we are making good progress, but more is not to be said today. The second question, quite honestly, I didn't understand because the connection was really terrible. Can you try to repeat it? Yes. It's correct that you were asking for the vehicle integration or the vertical integration in the vehicles between the It was the third one. It was the second one that I didn't get. What was your second? Very, very simple. Production Q4 versus Q3, MIN and Scania. If you can give us some quantitative guidance, how do you see it sequentially or simply you think it's higher Q4, Q3, flat or lower? Okay. So MAN similar levels, Scania slightly up. Matthias, please. On the other topics, free float of the entity of the group in terms of the yes, the market cap free float? And the second question, yes, the key components. I'm sure we're striving for the key components to actually integrate over the brands. We need to see when is the optimal timing for doing that investment and really exchanging the components. But we have a strategic plan for that, yes, and we are striving for the big really effective components to be integrated across all our brands, for sure. And that includes, surely, Navy Star. With the free float, we said before, we leave all options open and we'll see when time comes when it's appropriate timing. Okay. And on the key components, you were referring to the electric truck, right? I mean, that's what I'm trying to get to at the end of the day. You have an opportunity to increase the vertical integration of the business and capture additional aftermarket going forward. Absolutely. We need to. If we don't get the aftermarket in the combustion engine, we need to do it on the electrified truck for sure. Most probably, but they will need different sales instruments, but we are working on that. Great. Super. Thank you. Thank you very much. Thank you. As there are no further questions, I would like to hand back to you. Yes. Thank you very much for your numerous participation actually in that call. And that concludes today's call. Please keep the IR team busy with any unanswered questions. So they are here in Munich, and they will take your calls, Marvin, Thomas, Helga and myself. And then we look forward actually speaking to you again once we have the fiscal year numbers ready. So that should be in March 20 21. And yes, look forward actually to catching up then. Thank you very much for participating. Thank you. Bye. Thank you. Bye.