Welcome to the conference call of Dürr AG. I will now hand over to Mr. Dieter, the CEO of Dürr AG.
Yeah, thank you, Mrs. Mohr, and ladies and gentlemen, good afternoon or good morning to those of you in the U.S., and welcome, everybody. With me on the call today for the first time is Mr. Andreas Schaller, the successor of Mr. Dielmann, and our new head of corporate communications and investor relations. Welcome, Andreas.
Thank you very much. Happy to be here.
We are a good week earlier with our earnings call than originally planned, and this has two reasons. First of all, we are resuming our guidance, as announced already last time, for the current year with new targets. And secondly, this guidance includes a new efficiency program focusing on the automotive business in Germany and Europe. The first half report will be published as originally planned on the 6th of August, but without an additional conference call. But if you have any questions regarding the half-year report, Andreas and his team are happy to give you the answers to the questions you have. Today, we start again with our key messages, followed by an overview of the first half results, some financial details, and comments on our division's performance. Let's first look at the big picture on slide number three.
The COVID-19 pandemic had an impact on order intake and profit and loss that was largely as expected. We should have reached the trough in Q2 and have seen increasing incoming orders since June. Despite the COVID-19 impact, we achieved a strong cash generation driven by continued solid customer payments, and as a result, we reached a new record level of total liquidity. Now that the business seems to have stabilized, we feel more comfortable resuming our guidance and have set new targets for the full year. While reviewing the expected business development over the next months and quarters, we came to the conclusion that demand development in the automotive sector in Europe will continue to be subdued in the near to midterm as markets are saturated there. As a result, we decided to take additional improvement measures in Europe, mainly affecting the division's PFS, APT, and MPS.
We discussed these measures with the supervisory board yesterday, and I will give you the details at the end of my presentation before we talk about the outlook. Now let's have a look at the overview on slide four. Order intake declined by 23% in the first half, which is a bit better than expected as we benefited from a strong order momentum from EV manufacturers in China. Incoming orders in China overall were more than 60% above prior year's level, resulting in a high utilization of our capacities. The order backlog declined by EUR 264 million since year-end 2019 to EUR 2.5 billion , which is still a high level. Sales revenues in the first half came in at 14% below prior year, and revenue recognition in Europe was weak, whereas we experienced strong sales realization in America and Asia.
Despite the impact of COVID-19 on sales revenues, EBIT remained positive for the first half. EBIT before extraordinary effects declined by 78% to EUR 23.7 million in light of lower sales and less high-margin service business, and despite the negative impact of the pandemic on sales and EBIT, we recorded a strong cash flow and a positive free cash flow in the first half of this year. The net financial status came in at minus EUR 121 million after paying the dividend in Q2, which is only EUR 22 million below the level at year-end 2019. As a result of the decent cash flow, our funding situation is very solid, and our total liquidity, including time deposits, reached a new record level of EUR 904 million. Together with available cash credit lines, we summed up to a total available funds of EUR 1.75 billion.
In light of the expected development of the automotive business in Europe, we have initiated additional measures for capacity adjustments and efficiency improvement in Germany and the rest of Europe. The measures will focus on the division's PFS, APT, and MPS, and we expect additional one-offs of EUR 35 million-EUR 45 million in the second half of 2020. In combination with other efficiency measures we have already started, mainly at HOMAG, we expect a lowering of the cost base by about EUR 60 million from 2021 onwards. The one-offs for the efficiency measures in the European auto business are also reflected in the new targets we set ourselves as we resume our guidance. Let's turn to slide five and have a look at our results. As mentioned, incoming orders and sales declined in the first half by 23% and 14% respectively. EBIT before extraordinary effects declined by 78%.
The improvement in operating cash flow was due to a major positive swing in net working capital. On slide six, you can see that the order intake reached almost EUR 1.5 billion in the first half, and the decline compared with the prior year was largely driven by the automotive business. Regionally, China continues to be strong with incoming order growth in automotive, Clean Technology Systems, and also in HOMAG. Especially orders from Chinese EV manufacturers increased and they made up more than 40% of the incoming orders for automotive in the first half. Order intake should have reached the bottom in Q2, as you can see on slide number seven. The momentum has clearly improved soon, and we expect the second half of the year to be better than the first half.
Page eight sets out our earnings performance, and as expected, it was hit strongly by the lower sales and the decrease of our spare part business, in particular in the automotive business due to low capacity utilization and plant shutdowns. On top, earnings were burdened by difficulties in customer access and by valuation allowances of 5 million EUR under IFRS 9, both due to COVID-19. We have taken various measures to cut costs, including the reduction of overtime, short-term work, and selective capacity reduction. In addition, we are able to lower overhead costs by 8%. All in all, however, this was not sufficient to make up for the loss of sales. Our reported EBIT of EUR 16.6 million included extraordinary expenses of EUR 17 million compared to last year's EUR 12 million . Around EUR 8 million were spent on efficiency measures.
You will find a detailed overview on page 32 of the handout in the appendix. Now let's move on to page number nine. Net financial status at the end of June was at minus EUR 121 million. This is, as I said already, EUR 22 million lower than at the beginning of the year and EUR 56 million lower compared with the end of March. Considering the impact of COVID-19 on earnings and the dividend payments of EUR 56 million in Q2, I think this is a very good development, and as you can see from the chart, net working capital improvement by EUR 86 million was an important driver for the strong cash flow development, and by comparison, in the first half of 2019, net working capital deteriorated by EUR 162 million. This strong swing is also reflected in the operating cash flow and free cash flow development.
In the first half of 2020, we achieved a positive free cash flow of EUR 44 million after a negative EUR 181 million in the first half last year. Let's take a closer look at net working capital on slide 10. All in all, net working capital management improved strongly compared with last year. While contract assets declined compared with year-end 2019, contract liabilities remained at a relatively high level due to solid customer payments. We continue to work on orders and delivery improvement towards the end of Q2 with customers reopening their production. And for the second half of 2020, we expect net working capital to increase again due to the recovery of the order intake, but we will manage this very tightly. On slide 11, you can see work in process in comparison to billings. The balance is very favorable at minus EUR 79 million.
Or in other words, the net payment overhang of our customers has increased to a level that is better than what we consider to be the normal of between -EUR 50 million- +EUR 50 million. Just a quick look at forfaiting on slide 12, and with a volume of EUR 7 million, I think this is not meaningful. Let's move to slide 13 and have a look at some key financial items. Equity declined to EUR 956 million since the beginning of the year, mainly due to dividend payment and negative foreign exchange rate effects. At the same time, cash increased by EUR 82 million- EUR 744 million. Our total liquidity, that means cash and time deposits, reached a new all-time high of EUR 904 million. Together with the cash credit lines of EUR 850 million, we arrive at total funds available of EUR 1.75 billion.
This compares with EUR 450 million of maturities in the next 12 months, consisting of first a corporate bond for EUR 300 million issued in 2014, second a tranche of EUR 50 million of the Schuldschein loan issued in 2016, and third a bilateral loan of EUR 100 million. On slide 14, you can also see that these upcoming maturities are well covered with cash and cash credit lines, and that our liquidity headroom is very comfortable. The medium-term maturity profile is well balanced and leaves enough flexibility for further financing instruments. Let's move on to our division overview starting with page 15. Please remember that prior year's numbers were adjusted as the automotive painting and automotive testing systems business was transferred from measuring and process systems to the paint and final assembly systems division as of January 1st this year.
Order intake in Paint and Final Assembly Systems dropped by 28.5% to EUR 400 million in the first half. The decline was partly due to timing effects as Q1 2019 included an extraordinary large paint shop order in North America, while in Q1 2020, a larger paint shop project was postponed to come in later this year. Incoming orders in Q2 were comparable to the level of the prior year. However, the regional dynamics were quite different. While Europe and North America were clearly impacted by COVID-19, we saw strong order momentum from China, including some large projects from local EV manufacturers. EBIT in the first half and in the second quarter was positive, despite the sales decline of 16% and 17% respectively. This is a result of our cost reduction efforts and the positive effects from the FOCUS 2.0 optimization program.
Overall, the growth pipeline in the automotive business is starting to increase again. Turning to slide 16, in the application technology division, order intake declined significantly in the first half and in the second quarter by 37% and 47% respectively. After a weak April, orders improved in the subsequent two months. This recovery should continue in the second half as the growth pipeline improves in the automotive industry, as already mentioned. Sales declined by 19.5% in the first half, and EBIT was impacted by the disproportionate decline of the high-margin service business due to underutilization and temporary shutdowns of paint shops. EBIT includes a loss of EUR 3 million , mainly due to the shutdown of the loss-making Karlstein site. Clean Technology Systems continue to perform well despite COVID-19, and this you can see on page 17.
Order intake improved by 3.8% in the first half, driven by strong demand from pharma, chemicals, and battery manufacturing. The growth pipeline is well filled with a book-to-bill ratio of 1.2. And sales revenues in the first half were 1.2% below prior year, but improved in the second quarter and should further accelerate in the rest of the year. And the operating EBIT was impacted by corona-related restraints in order execution, but remained clearly positive. And reported EBIT includes PPA effects and one-offs for the closing of the corona production sites, totaling EUR 5.2 million. On slide 18, you can see that the order intake of Measuring and Process Systems declined significantly in the second quarter. This was due to weak demand from the automotive and aviation industries and from power plants. Orders of high-margin standard machines in the automotive declined specifically.
And growth pace for the second half should be better as the project pipeline in China and Asia has been improving recently. Sales revenues declined by 14.3% in the first half, and EBIT was burdened by low sales, underutilization, a weak service business, and an already addressed margin weakness in the special machinery business. Let's now have a look at woodworking machinery and systems on page 19. Business with the furniture industry was less impacted by COVID-19 compared with the automotive business. Nevertheless, order intake declined by 16.5% in the first half. Demand in the system business declined more strongly compared to the larger and more stable single machine business. And in China, order intake increased by 13%. We expect the market recovery in China to continue, and I am improving our market position with the acquisition of HOMAG China Golden Field.
Closing of the transaction is expected for the second half. The optimization at HOMAG is on track with the focus on harmonizing IT infrastructure and processes and the implementation of a new production system and the standardization and modularization of products. Thereby, we align the foundations for strong EBIT improvements over the next years with a target margin for HOMAG of 9% in 2023. Slide 20 shows the development of our service business in the first half. Service revenues declined by 16% and reached EUR 441 million , contributing 27% of group sales. The service business in Clean Technology Systems and woodworking machinery remained relatively strong with only a single-digit percent decline, in contrast to the application technology and Measuring and Process Systems with strong declines. The service margin was only down slightly. Service sales should improve in the second half as automotive production increases again.
Now we come to the additional efficiency and improvement measures that I mentioned at the beginning. We came to the conclusion that demand development in the automotive sector in Europe will be subdued in the near- to medium-term. Markets are saturated, and we expect only a limited number of new automotive plants to come. Together with the ongoing upgrade in service business, this is not enough to fully utilize our current capacities. And as a result, we decided to take additional improvement measures in Europe, focusing on the divisions PFS, APT, and MPS. We plan to reduce capacities in Germany and Western Europe, which will affect about 600 employees. This comes on top to 200 jobs we already cut at HOMAG, APT, and CTS in the current year.
Details of the additional measures will be discussed in the following weeks, and we expect to book additional restructuring charges of EUR 35-EUR 45 million in the second half 2020. As a result of the measures, we target a lowering of the break-even point by EUR 30 million in 2021. As we have several efficiency improvement measures going on at the moment, we have created an overview on slide 22. Here you can see that the charges we have taken and expect to take per year in the lower part of the chart and the cost savings in the upper part of the chart. In Q4 2019, we announced efficiency and production improvement measures at HOMAG, and we booked restructuring charges of EUR 37 million. These measures are expected to yield savings of EUR 20 million in 2021 onwards.
Early in 2020, we announced further measures, including closures of sites of APT and CTS in Karlstein and Goldkronach, yielding savings of EUR 10 million from 2021 onwards. The charges for this together with further one-offs for smaller restructuring measures amount to EUR 22 million in 2020. In the PFS, the new efficiency measures in Europe I was just talking about on the previous slide. All in all, this sums up to the restructuring charges of between EUR 57 million and EUR 67 million in 2020 and to savings of around EUR 60 million in 2021 onwards. With PPA effects amounting to roughly EUR 80 million, we arrive at a special effects level of between EUR 75 million and EUR 85 million this year. We believe that this is an important step to strengthen our profitability in a sustainable way and reach our midterm goal of 8% EBIT margin.
After talking about costs, let's have a quick look at the market developments before we come to the outlook. On slide 23, you can see the projected development of light vehicle productions in 2027. The expectation is that we will return on a growth path after the corona crisis. However, it will take us until 2023 before reaching the levels of last year. As the business has stabilized, we are resuming our guidance and present new targets for 2020 that you can find on slide 24. We expect order intake of EUR 3.1 billion-EUR 3.4 billion, which reflects the recovery in the second half. Sales revenues should reach a level of EUR 3.2 billion-EUR 3.4 billion. Sorry. It is our clear goal to report a positive EBIT margin for the full year. Before extra ordering effects, we target an EBIT margin of 2.5%-2.8%.
Operating cash flow for the full year is expected at between EUR 70 million and EUR 120 million. This implies a weaker development in the second half due to an expected increase in net working capital as order intake recovers. We will manage this very carefully, but we will finally end up, or where we will end up depends also a lot on the business dynamic at year end. We have cut the capital expenditure target to EUR 75 million to EUR 85 million. As a result, free cash flow should come in around break-even. The net financial status at year end is expected at between -EUR 180 million and -EUR 230 million due to the buildup of net working capital. In summary, let me point out that we are financially well positioned to safely weather the COVID-19 crisis and its effects.
And with the measures started since last year and announced today, we have laid the foundation to accelerate margin improvement and to come out of the crisis stronger than we entered it. With our innovative and resource-efficient product portfolio, the increasing number of projects in the e-mobility sector, and the huge potential at HOMAG, we are very optimistic about the future. Thank you very much for your attention so far. Now I'm very happy to answer any questions, and I hand back to Mrs. Mohr.
Thank you, ladies and gentlemen. We will now begin our question and answer session. If you have a question for our speaker, please dial zero and one on your telephone keypad now to enter the queue. If you have more than one question, please ask them one by one. Once your name has been announced, you can ask a question.
If you find your question is answered before the first speaker, you can dial zero and two to cancel your question. If you are using speaker equipment today, please use the handset before making your selection. One moment, please, for the first question. And the first question is from Ingo Schaller, Commerzbank. Your line is now open. Please go ahead, sir.
Yes, thank you. My first question would be on the very good order intake you had with the Chinese electric vehicle OEMs in the second quarter. Can you tell us a bit more with which products you've been commercially successful? I was thinking whether there's typically a different scope, such as more final assembly or certain innovations that were frequently the decisive factor in the favor of Dürr and key tenders, or anything else that we should keep in mind with regards to product mix in this part of your revenues for order intake?
Hello, Mr. Schaller. Thank you for this question. These orders were mainly paint shop orders, and there was no, let's say, the technology there, the innovations, is what we have today and also driven by our digital products, but mainly because in China, those EV companies, they want to produce high-quality painted cars. And the choice for them is limited since Eisenmann is out of the game. And we have such a strong brand and image in China that we are the first choice for that. And I can really say that we got a very, very high percentage of the projects which were in the market.
Okay, that's very clear. And then maybe on your restructuring program or efficiency program, of course, this year, it's probably quite necessary to do something like that. But I think other companies in the capital goods sector move from one restructuring program to the next one, and it's almost every year. Whereas I think Dürr in the past has always been regarded as a company that always also finds growth opportunities and is able to offset some of the market pressure with finding interesting internal growth opportunities, digitalization, and so on. I was just wondering how we should think about this efficiency effort. Do you think it's a, let's say, one-time effort, and you have to right-size certain capacities one time, and then in the years after that, Dürr is going to be a pocket of growth in the otherwise partly cyclical sector?
Or do you think it's also an indication of Dürr maybe changing the mindset a bit, becoming a bit more cost-conscious, defensive, and less growth-hungry than in the past?
I think you know me since many years, and that you know that I'm pessimistic. Opposite, I'm optimistic. No. First of all, we also don't like these measures, but they are necessary, definitely. And what we are doing now is well thought through, and that's it. We are not planning to have the next program in six or nine months if the world is not totally changing, yeah? And what we are doing now, particularly in the paint shop business, and that's mainly the efficiency change, which is relatively small measure, we knew that, and we already saw that we have, in principle, too much capacity.
Before COVID, we said, "Okay, this demand in Europe could maybe we lose over time, and we have time to really make this reduction year over year without big efforts." But what we have to do now is the same that we anticipated already, but now in a short time, and we can't wait two, three years as we originally were anticipating to make it more smooth. Basically, it's not only driven by corona. It's mostly also driven from a structural point of view. Just to make it also clear, if corona would have happened three, four, or five years ago, it would be a much bigger problem for us because the German teams were much involved in the projects in the world in the paint shop business. Hundreds of Germans were in China to help them project.
Today, our Chinese organization has become so big and so mature and so skilled that they can do this more or less alone, and the help they get indeed from Germany is very limited, and even then we also have a lot of digital facilities now where we can help them without traveling, and I think that's a change, so it's basically the result of the move of the business to globalize into Asia and America. That's it, but we are not anticipating any further program if the world is not changing totally.
Okay, very clear. Thanks.
Take care.
The next question is from William Turner, Goldman Sachs. Your line is now open. Please go ahead.
Hi. I have two questions. The first one, keeping on sticking on the kind of restructuring theme, your comments on Europe and being skeptical on the growth outlook over the medium term for Europe, can you just go into a bit more detail on why you've changed that view? Because when you look at the Europe order intake and compare it to the Americas or Asia, excluding China, Europe outperformed those markets. And then also kind of relates to Europe. Some rumors that I've heard, and they haven't been confirmed, is that the Tesla Berlin factory, which I was under the assumption that you were supplying the paint shop to, has gone to one of your competitors. Can you please comment on that too, if possible?
The last one, normally we don't comment on specific orders, but in the Berlin project from Tesla, we are delivering the paint robots, yeah? And the paint shop has been awarded to a competitor. And that's fine because that's right. It's not fine, but it's how competition goes. But the business in America, we have a new paint shop. We are also, because there's a new paint shop in discussion in America, as you know, from the same company, we are very eager to get that. The midterm is just, I mean, in Europe, there will be no, let's say, additional capacity needed. But for sure, also in the next year, paint shops get old, and there will be brownfield projects.
But we have a good visibility on that, and we basically have calculated that this business out of brownfield and greenfield jobs will be not sufficient to keep the people all busy we have on board, and therefore we took that measure, yeah?
Okay, sure. Great. And my other question is on the gross margin. The contraction you saw in this half, it's even larger than what you had in the financial crisis, and then sales declined by a much greater amount than what's experienced in this half. So I was wondering if you could go into a bit more detail on the moving parts there. Does it have anything to do with the pricing of the backlog that you're currently executing, or is it more due to the loss of services? And is any element of that temporary, and you'd expect to recover quite quickly in 2021?
Yeah. First of all, the order intake for the paint shop business and the margins and the new orders are good because we have improved our cost position. So from the margin point of view, we are better, particularly than in the financial crisis or the last years when our competitor made insane pricing. The main effect on our EBIT is from the service business, which is particularly the APT area, highly profitable, and this will come back. That's for sure. We saw already recovery in June. And because the only part of Dürr, which is really, let's say, linked to the production volume of the OEMs, is the spare part business of APT and some parts of PFS, but not so much, and on the Schenck side as well, and in APT, particularly, there's a lot of spare parts which have to be replaced very regularly.
And when the plants are shut down or going from three shifts to one shift, the decline in service revenue is very linear to that. And this is now picking up again, and so we see that as an improvement. That's a temporary effect.
Very exciting. Thanks.
The next question is from Nikolai Kempf, Deutsche Bank. Your line is now open. Please go ahead.
Yes, good morning. Nikolai Kempf here from Deutsche Bank. You mentioned that the China momentum was pretty positive throughout the Q2. Would you expect it to continue in H2 and also next year? How sustainable do you think it is?
It depends on the question. The pipeline in China is still very good, also for the second half. And there's a lot of, but also not only with EVs, but also with the existing OEMs, the spark fuel projects, because all those paint shops got older. So for China, we have, whether it's next year, this is not foreseeable yet, but I can only look at the pipeline from today for the next. And the pipeline is one thing. There are a lot of discussions about projects, but what really comes into orders is something we can look at with a six-month, let's say, view. And I would say that in China, we still have some good opportunities. But we also have opportunities elsewhere, also in the U.S., and even also in Europe. There are some opportunities for being awarded this year. We know that in the second half.
So I'm, let's say, pretty optimistic. How 2021 looks, that's too early to say.
Yeah, thanks. That's clear.
And the next question is from Claudia Matheux, BTKM Advertising. Your line is now open. Please go ahead.
Thanks. I have a question about the reduction program in Germany. Will there be any layoffs in BTKM?
The measures will also affect BTKM, but the way how we do it will be German versus the south of Europe, so we will talk about freezing program. We talk about bringing people into pension, who are close to it. So there will be no, that's what I think the nature of your question is, there will be no discrimination between the two.
Okay. Thanks.
Pleasure.
There are currently no further questions. As a reminder, if you would like to ask a question, please press zero and one on your telephone keypad now. The next question is from Christian Cohrs, Warburg Research. Your line is now open. Please go ahead.
Yes, good afternoon. Thanks for taking my questions. Just two, one by one. First, maybe still related to automotive. Presumably, the summer break for many production sites will be shortened. I think usually during production break, you carry out modification refurbishments, which I think generate very nice margins. Do you expect that you can mitigate these effects or that there will be a catch-up effect then towards the end of the year? That's question number one.
Okay. Thanks for asking these questions one after the other, please for me. Summer break modifications, there are summer breaks. I was a little bit astonished. I would not do that, but anyway, they have to do it maybe, but for summer break modifications, it's too late to give us orders, and we have not so many orders for summer break modifications as we usually have due to the fact that they should have given us the order in March, April, latest May, and in those days, they were not doing anything like that, so whether there will be a catch-up, it depends on how necessary those modifications are. I think we are now working on the pipeline for the Christmas shutdown. It's too early to tell you how strong that is because your question is whether we pick it up from what we lost. I'm not sure yet.
I can tell you more in the third quarter, but at minimum, there are projects for the Christmas shutdown, but for summer, definitely less, quite less than normal for the COVID-19 crisis, yeah.
Okay. And the second question is related to HOMAG. You talked a lot about the project partner in automotive. How do you see the market? You said China is, you see encouraging signs for the Chinese business of HOMAG, but maybe just also outside China. What do you see actually for HOMAG? Is there more to come? Do you see also encouraging signs in other markets?
Yeah. Good question. Thank you because we sometimes focus too much on automotive, but that was related to our measures we took. As we already said, HOMAG's order intake was by far not as affected. By the way, maybe important to know, we anticipated last year already that the market for HOMAG this year will be weaker. We anticipated a -10% in order intake. Now it's -16%, so the COVID effect is not too much. Looking at the regions, in China, as I said, we have 13% more order intake in HOMAG than last year. Last year was very weak, but this year is better. But it's mainly the standard machine business in HOMAG. We have three lines of business in HOMAG where you have to look at service business, which is about EUR 380 million.
We have standard machine business and the so-called system business where we're talking about larger orders, lines up to total factories. There are sometimes orders up to even EUR 60 million. Those orders appeared a lot in China two years ago. Last year already was not much, only one. And we are discussing a lot of those projects in China to be awarded, if one or two maybe this year, but mainly 2021. So for 2021, we see for the automotive an increase in the market activity is definitely, and that's also what the industry sees. On the other regions, for example, Germany is on the same level like last year, where there is no effect in automotive in order intake. Europe a little bit down,
but northern Europe as strong as last year, whereas southern Europe was strongly affected as countries like Spain, Italy, for the reasons you know, yeah?
That's also in America. We had a delay, but America is very optimistic that we'll catch up some things in the second half of this year because the activities are up. And so overall, the aftermarket for next year will increase. That's definitely what we see.
That's helpful. Thank you.
My pleasure.
Ladies and gentlemen, once again, as a reminder, if you would like to ask a question, please press zero and one on your telephone keypad now. We have another question from Ingo Schaller. Thanks. Your line is now open again.
Yeah, thanks. Just a quick follow-up on the Eisenmann situation, as you mentioned a few times. This is currently implying a good favorable dynamic in terms of the competitive environment. I think the last time one of your competitors went insolvent in the U.S. a decade ago or so, I think it took a few years until a new competitor emerged and became relatively strong. Just wondering whether you already see any development of any perspective on what the competitive landscape in Europe might look like in a few years' time, how much pressure you see from OEMs with the new second source being built up. How would you, with your industry experience, expect this to develop?
Yeah, Mr. Schaller, thank you. I mean, you basically already gave half the answer. The point is definitely our customers don't like the situation. That's clear. They like as much competition as possible. When we talk about fewer competition or less competition, then it's mainly for large projects, greenfields, also large brownfields. But for, let's say, the medium business venture, where we have EUR 15-EUR 20 million orders in revamps, we always had a lot of competition. And also in Europe, we had smaller companies who are acting in that field. And for sure, at the moment, the customers are pushing those smaller companies to, let's say, give us enough competition in those situations. But this will take years to make some of those small ones in a league where they could be really competitive on large orders with us.
But I will not exclude that one of those maybe will be pushed enough to get there, but it will take some years. I had a recently with a board member of a southern German OEM discussion because they gave, two years ago, when Eisenmann was going crazy, some orders to them and to our Japanese-Italian competitor. And those orders were really badly executed. And he said, "You know what? We should stop this experiment. We should just talk with you how we can do things better and take your experience we have." And I think at the moment, we have in the paint shop business a very good position, and we are working to continue that. But it's competitive, and we are working on our costs. But I think we did a good job in the forecast, sorry, in this FOCUS 2.0 program.
We see that in our margins, and I'm pretty optimistic we will also improve that also next year.
Do you have the impression that your clients have a strong preference for a strong European supplier, or are they equally pushing the American or Japanese or Asian?
The American suppliers we have, they don't want to go to Europe or Asia. These guys will stay over there, but they push also the Chinese one, which wanted to buy Eisenmann, which it did not do now, and they are not so much anymore that it has to be from Europe. If the Chinese guys can do worldwide business, then we are also happy with that, so I think that's our main focus, to beat this guy, and as you can see by our success in China, we are very competitive with this guy also in China.
Okay. Thank you.
And the final reminder, ladies and gentlemen, if you would like to ask a question now, please press zero and one on your telephone keypad. And we haven't received any further questions at this point, so I hand back to Mr. Dieter.
Yeah, thank you, Mrs. Mohr, and thanks a lot for your questions. I think if you have any further questions after that, please Andreas and his team is happy to receive your call. And we will also attend some virtual conferences in the next weeks and months, and we are looking forward to stay in contact with you. But thank you very much for joining us today. And we'll speak to you soon again. Next time with my new CFO, Dietmar Heinrich. All right. Thank you very much, and have a good afternoon, and goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.