Earnings Call: Q3 2019

Nov 4, 2019

Dear, ladies and gentlemen, welcome to the 9 Months 2019 Conference Call of Trade Tennessee. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. Now hand you over to Rolf Wohler, Head of Investor Relations, who will lead you through this conference. Please go ahead. Many thanks, Kai. A warm welcome to everybody from Wolfsburg to our conference call on the occasion of the 9 month results 2019. Together with me here in the room is Christian Schulz, our CFO Julia Kruberil, our Head of Corporate Communications Annette de Danielski, our Head of Group Finance and Claus Schatter, the Legal Counsel. And last not least, we have Andreas Franzachter today with us, our CEO. Before I hand over to the gentlemen, I have to mention a couple of housekeeping items. First of all, you should have received the presentation titled 9 months 2019 results. Then you should have received the press release on the 9 months and our 9 months interim statement. If not, you can download it from our website under the IRR link, which is ir.trayton.com. And further on, I should draw your attention on Page 2 of the presentation, which is the disclaimer. Please read it carefully. With that, I hand over to Andreas for the introductory work. After that, we have Christian, who will guide us through the main deck of the presentation, before Andreas will comment on the outlook for 2020. And afterwards, we are very happy to take your questions. We would ask you to limit your questions to 1 or 2, as we have about 50 minutes for this call. And in order to be fair to everyone and to take everyone's questions, 1 or 2 questions per analyst would be greatly appreciated. With that, I hand over to Andreas. Andreas, the floor is yours. Thank you, Rolf. Warm welcome also from my side, this time in our voice board. Before we go into the presentation slides, let me briefly wrap up our results for the 1st 9 months of 2019. You know, the economic sentiment has further deteriorated in recent months, and the Q3 became more challenging for our industry. I think it's fair to say for the whole global economy. In the Q3 2019, we have seen signs of weakening industry. Order intake in Europe declined significantly. How much of this drop is due to the pre buy effect in connection with the new smart digital Tahoe Craft in the first half year of twenty nineteen? And how much is poor market weakness is hard to quantify, but we have to admit that the negative trend is accelerating. Against this background, we saw a solid development of our key figures during the 1st 9 months. Looking at our industrial business, we were able to perform in line or even outperform some of our core markets during the 1st 9 months of 2019. Our truck unit sales grew without MRN TGE, which you know has much lower revenues and margin than trucks. The TGE is based on the Volkswagen Grafstel. Our truck unit sales grew by nearly 6%, while our top line in the industrial business grew by plus 9% on a like for like basis. Operating profit of the industrial business was up by 41%, adjusted for minor effects in 2019 at the MRN truck and bus exit of the Indian market, which impacted industrial business in the 1st 9 months of 2018, was $760,000,000 The increase would have amounted to 25%. This increase was related to better volumes and product mix as well as efficiency gains due to the elimination of bottlenecks in the supply process and the end of parallel production at Scania together with the new truck generation introduction. On the negative side, we had inflationary cost increases, higher depreciation and amortization, and expenses in connection with production preparations for the new generations of trucks and buses at Mi and Truck and Bus. The later one weighted on profit at MiN Truck and Bus in the Q3 2019. We ended the 1st 9 months in 2019 at 7.1 return on sales in our industrial business. Another positive story in the 1st 9 months is the development of the net cash flow in the Industrial business. It came in at €345,000,000 in the 9 months of 2019, of course, adjusted for the sale of the power engineering business. More importantly, we improved the net cash flow considerably quarter by quarter. After minus $376,000,000 at the end of the Q1, we improved to plus 182,000,000 in the Q2 and further improved in the Q3 to €539,000,000 You can see we are further moving in the right direction on this KPI as well. Our net liquidity position in the industrial business, we have no financial indebtedness after the 1st 9 months of 2019, improved by to €1,200,000,000 in the industrial business. Looking at the financial service business, it saw a growth in the 1st 9 months of 2019 in the net portfolio of nearly 18% year over year and 11% versus end of the year 2018. Penetration rate and return on equity remained at a very healthy level. All in all, the Drayton Group came in at 7.5% return on sales and are still well at the upper end of our targeted range for this year, which is, as you may know, 6.5 percent to 7.5 percent return on sales. So for 2019, we can confirm our targets even though we think and feel it will be more challenging to achieve them in particular when we compare it to the situation roughly 3 months ago when we spoke last time. And that led it to our 2020 market outlook. What we can say today is that without any doubts, 2020 will be even a more challenging year for our industry than the second half year of twenty nineteen. The only drug market which is at the moment and is still foreseen to growth meaningful in 2020 is Brazil. Our expectations for the truck market in the European 28 plus 2, that means the European 30, so to say, is a decline of 10% to 20%. This is why flexibility is the name of the game for the rest of the year. For 2020, further measures have to be implemented. We explain further on how we prepare ourselves for the potential scenarios in 2020. All we aim for is to safeguard our competitiveness in a potential rapid downturn in order to emerge stronger with a renewed drug portfolio and an aligned cost basis. That's just a short introduction. And with that, I hand over to for the details. Thank you very much, Andreas, and also a very warm welcome from my side. So let's jump into the presentation, and let's go to Page number 4, which is the group highlights. Briefly, you can see unit sales up 8% for the 9 months. This splits into plus 7% for Q1, plus 12% for Q2 and plus 3% in Q3. So there's some deceleration in the overall trend, and this is largely explained by, first of all, the slowdown after the pre buy digital telegraph that we talked about in Q2. And secondly, we can see an overall cool of the economic activity. If you look into the brand's performance, you can see MAN's dynamic decelerated the most in Q3 with unit sales down by 2%. The decline of truck unit sales would have amounted to minus 10% in Q3, if you would leave out the TGE, which is quite increased in number of sales. However, Scania saw still a fairly good development in Q3 'nineteen with unit sales up 6% and for the Communist Omnibus sales with positive momentum up 11% in Q3. Trade and Group sales revenue increased by 5% in Q3 and by more than 7% on a like for like basis. Sales revenues in Q3 ahead of unit sales by about 400 basis points, basically based on better product pricing and mix. The operating profit increased by 34% and amounted to nearly €1,500,000,000 in the 9 months of 2019. Here, we have taken into account that in 2019, we had some minor effects and 9 months 'eighteen were impacted by the market exit of India, like Andreso said before. So adjusted for this increase would have been amounted to 20.2%. 9 months 'nineteen operating profit benefited from improved gross margin, 20.2% versus 19.6%. Distribution costs grew slower than sales, and the admin expenses were stable year over year. The positive effect from R and D net to the P and L amounted to €45,000,000 after the 9th month of 'nineteen. The return on sales improved to 7.5%. Please keep in mind that previous year 'eighteen Q3 was impacted by the market exit of India, which was €150,000,000 which you can also see in the prospectus that we have given for the IPO. Profit after tax after the 9 months grew by 19%. Please bear in mind that the 9 months 'eighteen saw 111,000,000 contribution from discontinued operations. Basically, that is the PE, the power engineering profit share. And before this effect, the net income rose 29% after the 9 months in 2019. Net cash flow in the Industrial business after 9 months totaled 2 €323,000,000 However, you know this contains the proceeds from the sale of the TE business in the amount of 1 €978,000,000 Adjusted for that, net cash flow was plus €345,000,000 after 9 months. Other highlights in the 1st 9 months of the year, Innovation Day in Sodertelje, where we have given, let's say, some signs of our capabilities on technical going forward, and we established last week now the procurement joint venture, Wafino, which is now operationally immediately. If we turn Page to Page 5, you can have a look on Industrial Business. As anticipated, the order intake continued to soften and declined minus 7% in Q3, bringing it down to 6% after the 1st 9 months. Order intake for truck went down by minus 8% and an accelerating trend, while order intake for buses declined by minus 10%, with a slightly recovering trend during 2019. The order intake for truck business, there was a considerable decrease in Europe, driven particular in significant declines in Germany and in the UK, which were only partly offset by other markets. Demand grew in Brazil in the wake of the economic recovery, resulting in a substantial increase in order intake in Brazil. We also saw substantial declines in our markets in Russia, India and in Turkey. We're going to come back to that later when we discuss Ghana and a little bit more in detail. Order intake for buses was slightly lower in Europe than in the previous year, substantial growth in Brazil. Overall decline in order intake for buses was reinforced by Mexican and especially the Middle East markets that are basically down at the moment. As already mentioned, we have, at the same time, strong unit sales, and we have put the book to bill development in this context. So if you look into book to bill, and we can see that after 9 months, we're still at 0.95 percent, backed by the good development in buses and the demand of the MAN TGE, of course, talk about that in a second, if you take the TGE out on the MAN side, you see some more serious decline on trucks. Sales revenue after 9 months 'nineteen Industrial Business grew up 9%, slightly above the unit sales, and operating profit was up 41% as return on sales stood at 7.5%. Financial Services Business, looking at the net portfolio during the 1st 9 months of the year, up by 11%. The penetration rate continues to be well above 40%. Sales revenue is in line with net portfolio growth, but operating profits, as you can see, growing somewhat lower than sales with a return on sales hitting 16.5%. With that, let's quickly go to Page number 6, where you can see the sales revenue development quarter over quarter. We have increased from €6,000,000,000 to €6,286,000,000 quarter over quarter. If you then see the return on sales there, it is from €4,100,000,000 to €6,500,000,000 Keep in mind, if you would put the adjustments back in there coming out of the India effect, the increase would have just been from 6% to 6.5%. 9 months stay at the level of 7.5% return on sales. And basically, if you would see the group revenues without the Fauge ESG impact you have seen in the year before that we adjusted, that was the sales company of Volkswagen events that we have excluded last year. The revenue would have increased not only 6.5%, but 9%. With that, going to the unit sales on Page number 7, you basically can see on the left hand side quarter over quarter that our unit sales increased by 3%. In that, you could consider trucks being flat, buses being up 8% and the TGE that was what I mentioned before on the M and A side, plus 68%. For the 9 months, we see an increase of 9% return on sales, Daren, trucks with 6, buses with minus 4 and the TGE with 108% compared to the prior year. Talk a little bit about markets, How have they developed in 2019, Page 8. You can basically see looking at the chart that we have to note that the comparison is not always like for like because we are mainly heavy duty but not exclusively. However, as an indicator, if on the right hand side, you take the market, this gives us a good feeling for the trend. So the European market's heavy duty truck is up 5%. We grew, including our medium duty share, by 11%. Germany was up 8%. We grew by 14%. South America, where Brazil is about 80% by around 10%. We grew 24%. And it's still true that the markets like Venezuela, Argentina or others are in a very sorry state. But Brazil, as I said before, plus 42%, and with that, we have grown in line with the market. If you now go to order intake, which is certainly of your interest, you can see, as told by Andreas also in the intro, that the order intake is backed by the strong development of the MIMTTE front and the recovering bus business development in the course of 2019, but trucks are not really gaining traction at the moment. You can see in Europe, the regulation change for TahoeGraph led to a pre buy effect in the first half of the year. According to our own estimates, it was around 19,000 trucks. We'd watch the situation very closely and have prepared ourselves for a softer Q4. Book to bill on a brand level for the 9 months 2019 is on the MAN side, 0.99 Scania, 0.89 and for Vico, 0.97%. Please keep in mind that if you take out TGE on the MAN side, it would be considerably lower on a level of 0 0.96%. If you ask yourself, why Scania has a little bit deterioration in there. It was mainly a UK effect in the UK market, which was a margin on a level of 1400 units, and that's basically that brings it down to the level I described here. Briefly, Page 10, Industrial Business Unit Sales, shows you the corresponding unit sales going up 3% as well in the 9 months. Now currently on a very high level of 179,000 units, It's just as I look to chart number 7. Going forward to sales revenues in the Industrial Business, Page 11, grew faster, grew 9% faster than unit sales, plus 8% during the 1st 9 months of the year. Sales revenue sits in Q1 with plus 9% Q2 with plus 11% in Q3 with plus 7%. When we look at the different sources of sales revenue, we can state that new vehicle sales grew by +12%. The average revenue per unit was up by 4% after 9 months of the year and amounted to €71,000 compared to a level of €68,000 in the prior year. Used vehicle sales revenue grew by only 2% during the 1st 9 months of the year, after sales and service grew by plus 5%. As already mentioned, operating profit in ROTH benefited from an increase in unit sales and positive earnings from the end of parallel production on Scania after the successful introduction of the new truck generation. On the negative side, we had inflation related cost increases, higher depreciation and amortization and expenses in connection with production preparations for the new generations of trucks in MAN Truck and Bus. Remember last time we talked in Q2 that we started in Q3 already ramping up the production despite the fact that market launch will be in February next year, and M and A is quite busy working on that end. Therefore, return on sales of the industrial business improved to 6% in Q3 and amounts for the 7.1% for the 1st 9 months of the year. Maybe a few comments on primary R and D. They amounted in 9 months 'nineteen to a level of 982 which is corresponding to 5% of the sales revenue, about 40 basis points below our level in the 9 months of 'eighteen. The P and L effect amount declined from 844,000,000 to 799,000,000 and the capitalization rate was close to 33%, down from 36% in Q1 and 34% in first half of the year. Continuing going now on the brand view on Page 12. It just reads as follows on MAN. You saw more or less stable sales revenue in Q3. Despite unit sales declined by 2%. However, looking on pure trucks isolated, it declined by slightly more than 10%. We should all keep in mind that from an M and N perspective, the mix with the TGE is dilutive in both revenue and also on return on sales. Having said that the ARPU for MAN was decreased 9 months, only slightly by about 1% year over year. Excluding the TGE, MAN was even slightly up. And that's quite encouraging in the light of the new introduction of the truck because we always discuss that pricing is important for MAN, and I think that is a good sign. Nevertheless, return on sales in MAN in Q3 was only at 1.3%. Basically, there's 3 reasons for that to be named. First, it's the sequential step down in sales revenues Q2 to Q3, which you know because in Q2, we said there's the digital type of graph of the pre buy effect. So, MAN was disadvantaged in absorbing its fixed costs in Q3 secondly, a less favorable product mix and a difficult market environment for used truck vehicles and thirdly, as I mentioned before, higher expenses, including starting depreciation and tariff increases in the launch of the new truck that MAN has started by September, October this year. Scania saw sales revenues increasing by 10% in Q3, whereas unit sales were up by 6%, driven by truck and bus business. Return on sales in Q3 at 11.5% and on a like for like basis, again, amongst the best in terms of profitability in the industry in Q3 2019. Volkswagen and Communist Omnibus saw sales revenues increasing by 26% in Q3, whereas unit sales were up 11%. Return on sales, 3rd quarter at 2.5%. If we continue now to go to Page number 13, talking a little bit about our liquidity, you can basically see our industrial business, our cash and cash equivalents outstrip the net financial indebtedness. It improved to €1,200,000,000 after the 1st 9 months of 'nineteen. It stood at €689,000,000 at June 30. The improvement in net liquidity was driven by positive cash flow. As you could see, we made progress there in Q3, and the cash flow amounted to €539,000,000 Basically, the cash flow benefited from 2 things. 1 is the improved operating profit and secondly, a relief in working capital year over year. There are 2 nonrecurring effects included in Q3 net cash flow, which amounted in total to €225,000,000 That is the sale of the military business out of MAN to Rheinmetall. And secondly, we've had an effect in Brazil where we got money back on some social payments. Overall, we improved our net cash flow considerably. After the 1st 9 months. You can see a positive trend in the upper end in that little blue box in the chart where you see cash flow developed in Q1, Q2 and Q3. So we see our measures taking action. Page number 14, very briefly on MAN. I think it's worthwhile noting that the reduction in revenues or the intake, sorry, was driven mainly by Germany, Poland, Russia, India and Turkey, given the situation there. I have described before the 2 effects that lead to higher costs on the amounts that you can find in here again. It's basically, if you so will, a weak third quarter driven by the pre buy effect and the general Q3 and by the ramp up of the new truck generation. The good thing is, Emma and presented the good the electric bus city bus, the Lion CTE at the Bus 2 Bus Fair in Berlin. So we have a product ready to be sold here. If you go a little bit more in detail on Page number 15, you can see these figures per quarter, order intake, unit sales, book to bill, sales revenue, operating profit and return on sales. I think we concentrate here only on Q3. Order intake down 13%, unit sales down only 2% and by this, resulting obviously in a book to bill of 0.93% for the 3rd quarter. Sales revenue are more or less flat, and operating profit increased. Here, I would like to point out that Q3 2018 was impacted by the market of India with €150,000,000 like for like operating profit was down significantly, as I explained before. As told on Page 12, return on sales in Q3 only at 1.3%. Again, three reasons: sequential step down in sales revenues Q2 over to Q3 of this year was 441,000,000 euros By this less absorbed fixed cost on the MAN side, a less favorable product mix and difficult market environment for used vehicles and also then on the third side, the impact of the new truck generation, which as you all know, is the key to lift MAN to a next level. And by this, we must not fail in any events with the new truck. Scania, on Page 16. Unit sales of trucks, as I said before, up 11%. Order intake declined by minus 8%. Order intake in truck was also down 8%, mainly caused by U. K, Russia and Iran. Operating profit, nevertheless, a very strong third quarter, also on the Scania. And we have introduced now fully, as we said, the new Scania truck generation, double ramp up costs as promised before are faded out. And we have introduced, for those of you participating, the Innovation Day our axle, which is a fully autonomous contract without a cap. Going also here a little bit more into detail of the key figures from left to right, order intake, unit sales book to bill. I think it's worth noting that the order intake was down 11% and stay up by 6%. By this, you see that the book to bill on Scania for the Q3 only is 0.77%. Sales revenue, up 10%, operating profit, 41. So one can really say that Scania has recovered on the margin side towards the 100 basis points that we have described when we were in London beginning of the year. I think it's also important to understand that Scandinavia return on sales improved to 11.5 percent, is also continuing to concentrate on margin rich business as also referring to the brand positioning of margin before volume. Needless to say, also in Q3, Stania was amongst the best in our industry. Volkswagen, Camunis and Omnibus, Page 18. You can see Brazilian market recovered in tandem with the economic upturn, Truck unit sales up 20%. Export sales in Latin America is still difficult given the situation in the countries around Brazil. Operating profit on Camillus Ambulos benefited from the increase in sales revenue. It was, to a certain extent, offset by foreign exchange rate effects. And basically, it also includes a gain of €13,000,000 from a reversal of a restructuring provision. Nevertheless, we see Camillus Omnibus progressing. Are we satisfied at the moment? Of course not. But one also needs to keep in mind that the Brazilian truck market, especially on the extra heavy, was recovering on the light and medium duty. It's still in an upward trend. So we are confident that we can manage that in the future also better than it is today. Briefly Page 19. Again, the 6 KPIs in an overview for Q3. Order intake up 15%, sales up 11%, resulting in a book to bill of 0.99%. Q3 improved return on sales on 2.5%. Percent. But again, work is not over in Brazil. We need to continue. Financial Services, Page 20. Sales revenue as at 30th September, up by nearly 11%, 13% growth in Q1, 8% in Q2 and 11% in Q3. The return on sales is very satisfying on a level of close to 17% for the 9 months of 'nineteen and in the 3rd quarter, 16%. When we then continue to the next page, you see that the net portfolio has grown 11% from year end 2018. The penetration rate remained at very healthy levels according to our plans. Now if we go to Page 22, let's come to the outlook for the market in trucks in 2019. And one needs really to say it's fair that you said the economic sentiment has further deteriorated over the last quarter. As you all know, the political environment is challenging, potential hard Brexit, trade wars, crisis and conflicts in Iran and Turkey. And the global GDP forecast was revised down again by the IMF plus 3% for 2019 in October. And also Germany, Italy are forecasting showing only limited growth, and the outlook for 2020 is hardly any better. Fed lowered interest rates, ECB restarted quarters of easing and overall, we had to witness a decline in order intake, which has been somewhat anticipated in previous months, but showed an accelerating trend in truck business in the last 3 months. However, our market outlook for 'nineteen is more or less unchanged. We see Europe 28 plus 2 stable in 'nineteen Germany, which represents about a 5th of Europe, slightly up. For Brazil, we expect substantial growth in 'nineteen. I think this outlook here on 'nineteen is not very much different from what you see in the overall industry. When we go to the next page on Page 23, leading us to the outlook for Trade and Group. And we clearly confirm our outlook for 'nineteen. We expect a slight increase in unit sales for the overall year. We expect group sales slightly above prior year, whereas we do not adjust for the Fauguersg business in 2018. Sales revenue in 2018 amounted to €585,000,000 Again, this is this Gebrock Fahrzeug business company that we sold back last year in light of the IPO. Group return on sales is 6.5% to 7.5%, and this year is around the midpoint in 2019. I alluded to the main reasons of our confidence in the introduction. With this, I would like to hand back for to Andreas. Thank you, Christian. Let me come now to the market outlooks for trucks in 2020. All what Christian has said before, it also drew for the outlook of 2020. We are operating under high degree of uncertainty. What we can say without with certainty, not without with certainty, is that 2020 will be much more challenging than the second half of twenty nineteen. We currently think that European truck market can be down by 10%, but it could also be down by 20%. We need another couple of months to finally assess where we stay in the range. On the positive side, we can note that Brazil, which is an important market for trade ins, with the brands Canyon and Volkswagen will be likely up and provides us with some buffer. However, after a long period of unparalleled growth, we have to prepare for a decrease of 10% to 20 percent. That brings me to the next slide. I think it's the last one. What we have already started is that we reduce time accounts, take out shifts and reduce temp workers as the slowdown seen in Q3 further continued into the Q4 of 2019. If, however, the situation gets worse, further, then we have to make more action in order to safeguard our competitiveness. And this is what this chart has shown you. Because one thing is clear, we can and will not compromise the start of the new drug generation at MIN. In addition, we also have to safeguard the profitability of SKAMIA. Our aim is to emerge stronger from the downturn, from which we do not know how severe it will be. This is why we must and will be flexible, and we will tackle the respective cost items. And again, to be clear, it's nothing decided yet as we just simply don't know where we will end up in 2020. But one thing is for sure, we are prepared and have all the flexibility to react to different market conditions. With that, we are happy to take your questions. Thank you. Ladies and gentlemen, we will now begin our question and answer session. The first question we received is from Klas Bergelind from Citi. Your line is now open. Yes. Andreas, Christian Erols with Klarsen Citi. So the first one I have is on the cash flow. It's obviously good to see an improvement. But Christian, I was wondering if you could help us on how much of this is linked to the lower production and especially at MAN in the old range versus the improvement we have waited for at Scania following the NTG. So I'm thinking of the cyclical effect versus the underlying improvement. And also, if you could comment on the work you're doing with VW to change your payable days. I think you're paying your suppliers sooner than what you collect the cash from your customers. So I will start there. Thanks. Yes. So let's put it like this, Dals. The Q3 effect was mainly really done by the work of working capital reduction that we have run-in our demand to cash initiatives, basically majority coming out of Scania in there. The two effects that I've mentioned before obviously helped us, but nevertheless, we saw an improvement of higher than €300,000,000 But I would consider that mainly the work of the demand to cash and not yet the big amount of the deteriorating that's overall business on the MAN side. Secondly, when it comes to the payment terms, well, we address that actively currently with Volkswagen, also on with Christian Levin, our COO currently. And we also work in order to improve these payment terms if we still largely adjusted to Volkswagen, also in our relationship agreement, be pursuing that, and we'll hopefully also gain some progress there. Okay. That's good. My follow-up is on MEN, please. If I could ask, how much is cap R and D? There is still a positive swing in the group bridge. It seems like if I back out R and D, you're almost loss making on a cash basis. And how much was cap R and D last year? I'm trying to get the bridge clean year over year in MAN. And then sort of within this, looking into next year, it seems like EUR 200,000,000 EUR 250,000,000 of EBIT is a working assumption depending on the market outcome. Could you help us with what pricing assumption you've baked into this? And how much cost do you expect from the truck and bus launch relative to the 2018 baseline? So let's put it that way. I mean, we do not go in detail on the cap rate on the brand level. As I said before, we reduced it already substantially compared to 1st and second quarter and continue also to work on here on the M and A side. When it comes to, I mean, of course, we are not giving forward looking profit statements for the year 2020. The only thing I can tell you is that there was extensive exchange between MAN and Scania on the preparation of the new truck in order to avoid the known things that hit Scania, and they are already baked into the plan. And as I said before, we must not favor the new truck. So we need to take all things that will come in the next year because for sure the ramp up of the new truck is in focus. But so just quickly, so are we talking around €200,000,000 €250,000,000 of cost drag for the whole launch from 2018 baseline? Or have you said anything, Chris, then in terms of we can get some help on the bridge into next year? So as I said before, we will not comment on that, let's say, range. You know that, Ostranya, we lost 200, which was 100 basis points on dual production and another 100 on material cost. But again, just with all respect, it's difficult to say it now. Yes, sure. All right. Thank you. The next question we received is from Hampus Engellau from Handelsbanken. Your line is now open, sir. Thank you very much. Two questions from me. If you if I look at the Skane order intake in Latin America, it was down 4.3%, while if I look at the Volkswagen order intake, which is I know it's really not fully comparable, which was plus 15%. If you could maybe talk a little bit about the difference here in development in Brazil, in particular, if it's the lower medium dutyheavy segment that is performing or how we should think about the difference? 2nd question is maybe a little bit nitty gritty on the cash flow, but I would be interested to hear that why the depreciation and amortization during 9 months was minus EUR 626,000,000, which is EUR 147,000,000 increase year on year, If you could maybe add some flavor on that. So okay, so let's talk first about the market. When you differentiate the segments, you see that the extra heavy, so the segment above 16 tonnes, is on a 5 year high at the moment. You see that the market is quite good in Brazil and that there, Scania gets some support from the market. When you go back to light and medium duty, the overall economy, let's say, improvement hasn't yet reflected fully in that segment. So this is why we're optimistic for the year to come that Camune is an omnibus, which is mainly present in Light and Medium Duty, will benefit in the same positive way that Scania did on the other hand. And on the other question, Hampus, we will get back to you. Yes, you were referring to depreciation and amortization on the profit and loss for trading overall? Yes, exactly. That's SEK 147,000,000 increase year on year on 9 months. And I guess I was looking for if there's a specific one off write down or something on the amortization side, But we can come back on that. Maybe could I also maybe one question on I mean, you highlighted a little bit on the order side, but it would be interesting to see what if you look at the European business like MEN and SKOVIA now, where are you in terms of taking down run rate? Are we looking at the 10% in each year now? Or where are you? So let's put it that way. You saw, as you will see this afternoon, it should be already out, that Scania and MAN both taking actions on MAN. We currently see that in Munich, Nuremberg and Salzgitter. We extended the production tax. We also released a second shift in Krakow and Poland, and we will have selective closure days also for the German operations and the same thing basically on Scania. You can see basically we will extend Christmas vacation in there. We will have selected production days that we do closures on. And we are, as Andreas has said before, quite flexible with that page that we have in there. So everything that is in the current site in 10% to 20% around, let's say, 10% to the midpoint, we can very well act with our time accounts, with our flexible workforce. Of course, if a cool off in the European market would turn into the, let's say, direction of 2,009, measures would have been different, and those haven't been taken yet. But of course, we monitor very closely the current market development also with our union members and with suppliers and are able to adjust quickly. And basically, that's what I would like to comment on that. Thank you very much. And maybe just one point on the depreciation and amortization. Don't forget, we have the IFRS 16 effect in there. That might be the point, but also get back to you on that. Okay? Thank you. And we go on to the next question is from Kyle Miller from Bank of America Merrill Lynch. Your line is now open, sir. Thank you very much for taking my question. The first one is coming back to the chart you showed with your 2 market scenarios, so the sliding scale. Can you give us a bit of color? You obviously talked about reducing time accounts and temporary workers. How much in terms of temporary workers and time accounts are you already tapping into in the second half of this year? And how much do you basically have left for next year? And then following up from that, we obviously know sort of your guidance for through the cycle margin. If the scenarios of a minus 10% next year materialize or maybe even a minus 20%, percent. Can you give us a little bit of color in terms of where you think a Scania margin or a MAN margin could get to if you assume the cost measures you've sort of indicated today? Let me start with the second part of the question that you will not get an answer. We will give you a guidance then that the Q1 as it used to, and it depends really on the market condition. So as I said before, we up to now don't know exactly how the market will be. It will be between 10% 20%. That brings us to this kind of chart that we showed you. We have the first things what you're always doing is time accounts. So we are using time accounts, like Christian mentioned. We will have a longer break between Christmas and so on. This is the it's underlined with time of cards. The second thing is we have 10 temporary workers. We have approximately in our locations so far, 10% to 15% temporary workers. And depends on how this will go. We will see part wise this year and then next year, the rest of the temporary workers. So it's the major thing is, if you have the orders and the orders are I'm looking to a situation overall, the orders are still, based on the circumstances, not so bad. So we have to produce this, and now you have to adjust when the orders are in a different level. As I said, we feel pretty secure through our measurements, like we said, all the time. In a downturn, it's expected. And whatever the downturn will be, we have a lot of potential to react. Perfect. And then maybe just have you seen any changes in pricing as a result of the, obviously, the slower outlook? Has anyone of your peers trying to fill the book on better price terms? I don't know what our peers are doing, but we are very price disciplined. I think you mentioned in this in your remarks always, we if you look to our brand positioning of SKAGNYA, it's a very simple thing, price before volume, like with such we've mentioned before, and we don't see or we don't compromise this if markets are getting into a different situation. The next question we received is from Erik O'Brien from SEB. Your line is now open, sir. Eric is not in the queue anymore. The next question we received is from Tim Rokosser of Deutsche Bank. Your line is now open, sir. Thank you very much guys. It's Tim from Deutsche Bank. I would have two questions, please. The first one is Andreas, you lived through quite a few truck cycles already as a manager. How does this one feel to you? And if you do talk about a high degree of uncertainty when making the forecast, how do you come up with the 10% to 20% number? And then secondly, I appreciate the freeway effect, I appreciate the ramp up costs, but for someone who has followed Scania and MAN for many years, it's really not a surprise at all to see how those 2 brands are now developing at a turning point of the cycle. Scania seems to just always anticipated earlier, does very well in reacting to it. MAN is always the opposite. Now, yes, okay, you get a little bit of a bounce maybe in the Q4 margin development, but it seems to be a very clear direction. I appreciate that you're giving us these measures on Slide 24, but when is it, if not now, the right time to really go structurally into the cost of MA and beyond short time work, beyond taking out a few shifts. This is a continuously underperforming asset. This has already been a big discussion of all of us during the IPO process and afterwards. If we now see minus 10% to 20%, why not really fixing this company to finally make it live up to its potential? Thank you. I think let me start with the first one. If the world would be so easy, then you MIN, like we said all the time, is the new truck generation because there we are changing not only the full product line that was necessary, The product is 20 years old and is in certain areas not as competitive as we would like. And the second thing, we changed this kind of our introduction with the introduction of the new truck, we are changing a lot of processes. And these processes will bring us to another level. Of course, it's not only the kind of issue that we see this time compared to cycles you mentioned before. Of course, we went through cycles. Forget that the the 2,008 2009, that was the cycle that was an external, yes, initiated crisis. In the normal cycles, you will see something like 10% to 20%. Now what is different than to other kind of market conditions maybe 10, 15 years ago, it's really the unstable situation. We never met such an experience or I met never such an experience that a REIT can change a lot of different kind of things. And we don't see it only in one country. So all this kind of unstable situation brought us to the point that we say, okay, there is a trend that we can see 10% to 20%, and we will know better than in the Q1 of next year. The second thing is there was this pre buy effect, I think Christian Schulz mentioned before this new digital Tahoe kraft that was launched. And is there a pre buy effect? Did we get this from some customers? Yes. They see it like that. So this is the unsecuredness. And so the most important thing in our business is really that we are using this downturn, whatever however this downturn will end up and to come out stronger. And all the kind of measures we have prepared already will go into some substance if it's necessary. And so again, we feel us very well prepared, and now we have to show that we can realize this preparation because so far it's only on paper, but I'm pretty sure that we can do it. And to add on your question on MAN, I mean, we discussed it all the time that the coming 6 to 7 quarters are kind of a challenging situation for MAN with the new track. Now we see that we started in Q3 with the new track. Of course, we have the discussion, Tim, on how to improve structural measures. But if you, in parallel, introduce a new track, that gives you a lot of challenges. So it remains unchanged what we have said. The next 6 quarters remain our period of transition and then now let's work through that. Great. Thank you, guys. Thank you. And the last question for today is from Sebastian Hubert from SocGen. Your line is now open, sir. Yes. Good afternoon and thanks for taking my questions. More on a housekeeping things regarding the positive tailwinds you had from FX. Can you give us some figures here like we have gotten during the Q2 as well as can we do the math what was the real impact on Q3? And then also, I guess, after having achieved after 9 months the upper end of the range, that your comments on 2019 outlook to end up at above the midpoint of the EBIT margin range is still valid despite a more challenging Q4 2019? And then also your sneak preview you have given at the beginning of the year for further growth in revenues and margin improvement for 2020, Mr. Renschler, is that still valid? Okay. So let's take the one. First of all, the X-ray effect is pretty much neutral. We saw positive effect on the Stania side with the Swedish krona. But on the other hand, we've seen a burden on communeis on the bus in Latin America. And as such, you can say, it levels out in the group to a minor 2 digit €1,000,000 number. Second thing is your question. I said before, we are comfortable around the midpoint, not above the midpoint. That's what I said before. So we have a close eye on the development of Q4, as I said before. And we are within our range and around the midpoint. And lately, since I would like also then to take the question is outlooks on 2020, we only give around March when we have the annual press conference. By then, we will confirm how we see the next year. Okay. But just as a follow-up, during the Q2 call, Mr. Schulz, you flagged that you are happy to see an outcome above the midpoint of the margin range. So it's a And today, I said I'm comfortable around the midpoints. Which is not ruling out that it could be slightly above, but it does not rule out that it could be slightly below the Okay. Thank you. We have no further questions. I'll hand back to the speakers. Yes. Thank you very much. Thanks for the very vivid discussion and the very good questions. Thanks for sticking to the 2 questions per analyst. Very much appreciated. Yes, and then we look forward actually catching up with you over the phone. So whenever you feel there was a question unanswered, then we will get back to you and you can always reach us under the known numbers in Munich, the whole IR team. We thank you very much and speak later than March 27 when we will have our annual press conference. Thanks and have a good rest of the week. Bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.