Earnings Call: Q2 2021

Aug 12, 2021

Okay. Once more, good afternoon, and welcome to Bill Finger's conference call on the Q2 of fiscal year 2021. My name is Bettina Schneider, and with us today on the line are Christina Johansson, CFO and Interim CEO as well as Duncan Hall, COO of Bilfinger. Christina and Duncan will now present on Bilfinger's business development in the last months as well as some of the capital allocation decisions, which were made yesterday and published yesterday evening. For the moment, your lines are put on mute. Afterwards, we are happy to answer your questions. With this, I'd like to hand over to Kristina Johansson. Thank you, Bettina. Dear colleagues, a warm welcome to our conference call also from my side. Today, Duncan and myself would like to present the numbers for Q2 2021. And afterwards, we look forward to answering your questions. I'd like to start on Page 2, where I would first give you a short overview of the key figures reflecting the continued positive momentum we have seen in volumes and earnings in quarter 2. We are experiencing a supportive dynamics in most of our markets. Orders received have grown 16% organically, making it the best quarter in more than a year. We again surpassed the €1,000,000,000 level also due to a major contract wins in our Technology and E and M International segments. Duncan will later go into these wins in more detail in a moment. Revenues were significantly up by 29% organically. However, Quarter 2 of last year was by far the quarter most affected by the COVID-nineteen pandemic. We achieved significant growth rates in E&M Europe and Technologies. A good EBITDA adjusted of EUR 26,000,000 In the Q2, it's a clear indication that the cost reduction program implemented in 2020 are paying back. We also recorded a lower amount of special items. After a strong Q1, reported free cash Q2 was minus EUR 43,000,000 and thus substantially below the prior year's level. This was mainly due to growth related working capital consumption. Moreover, the prior year quarter was also supported by deferred taxes and social security contributions of more than EUR 90,000,000 that have been mostly paid at the year end 2020. Correct yield for these deferrals reported free cash flow year to date was on prior year level. In our outlook for 2020, we expect unchanged Significant revenue growth. In light of the encouraging earnings development in the 1st 6 months this year, We now anticipate the adjusted EBITA margin to exceed the pre crisis level of the financial year 2019 and to reach approximately 3%. Although revenue in 2021 is still expected to be significantly below the 2019 figure. I would now like to turn to Page 3 and comment on the decisions made yesterday on the use of the funds that we received in May from our preferred note in the resale of Aplionna. As already communicated last night, the Executive Board and the Supervisory Board decided to allocate the available funds, including the EUR 468,000,000 for Aperona by following a balanced and shareholder friendly approach, still in line, however, with our long standing financial policy. We will use our strong liquidity for debt to redemption, but also for distribution to shareholders as well as for investments in organic growth and acquisitions. €108,500,000 for the early redemption this October of the outstanding tranches of our promissory note loans due otherwise in April 2022. This will save us an interest expense will save us an interest expense of around SEK 3,000,000 per annum. Furthermore, the Executive Board and the Supervisory Board will propose an additional dividend payout of EUR 3.75 per share to the Annual General Meeting in May 2022. This corresponds to a distribution of €150,000,000 to our shareholders. In addition to the regular dividend for the financial year 2021. Further, the Executive Board and the Supervisory Board will make a proposal to the AGM in May to approve a new authorization to buy back shares in the maximum amount of 10% of building its capital stock. Afterwards, The Executive Board intends to propose to the Supervisory Board a share buyback program with a volume of up to EUR 100,000,000 starting in summer 2022. The strong balance sheet and the Effective positive free cash flow in the coming years will also enable us to invest several EUR 100,000,000 in organic growth and bolt on acquisitions to strengthen our market position, especially in the dynamically growing sectors as well as with some regional additions. The final scope of investments will depend on our organic progress, M and A valuation multipliers as well as on the quality of potential targets. As you can see on Page 4, all this is embedded in our midterm target to regain an investment grade rating. Nearby, we confirm our capital allocation priorities. We communicated this also in our Capital Markets Day in February 2020. It is our policy to maintain the key financial metrics in the range of an intermediate financial risk profile according to S and P. We also confirm our dividend policy. It consists of a floor dividend of €0.01 per share and the explicit intention to provide a sustainable dividend stream of 40% to 60% of adjusted net profit going forward, assuming a corresponding development of our group. We will also act according to our communicated M and A criteria. Now new companies We'll be fully integrated into the group. We want them to be EBITDA accretive 1 year after integration and expect them to earn the capital costs 1 year later. Generally, we keep our asset light business model with a strong focus on the return on capital employed. Ladies and gentlemen, this is how we intend to optimize our capital efficiency. We now would like to come back to the development of Bissinga in quarter 2, 2021 and provide you with a short overview of the market development in our 3 business segments. I will now hand over to Duncan Hall. Good afternoon, everybody. I hope you're all well and that you and your families are staying safe and healthy. I'm going to take a few minutes to talk through the markets, and then we'll come on and talk about some of the recent contract wins. So on this first slide, you can see the E and M Europe markets here. And when we look at the Chemicals and Petrochem, we continue to see a good demand for both maintenance and projects. It's come back nicely. We've seen the recovery come forward and projects start to emerge as well. It's also been very good for our business in Both 2021 and looking forward to 2022 to see a very high number of shutdowns being carried on. Some were deferred from 2020, and now these will be executed over the next 18 months, which is very positive for ourselves. Within Energy and Utilities, we still see the drive for energy savings and natural resource savings accelerating, and we're receiving offers for front end and orders for the front end projects across all these energy transition spectrums. It's developing as we had expected. We're working with a mixture of technology providers and also our existing energy businesses that we work with We're heavily investing in the transition towards carbon neutral technologies. And our services and reputation in these areas really appeal to both of these customers. Within oil and gas, maintenance is increasing. We still have some restrictions from COVID that remain, slightly different ones around some is some bed space restrictions offshore, Some is also getting personnel into those markets into some of the territories that still have some restrictions. But we're seeing certainly the maintenance area really recover. And in half 2, we expect that to fully get back to what we've seen in the past. There is still a backlog of maintenance work and some efficiency projects that we expect to start to see emerge as the next project cycle for our customers comes around. If we move on to E and M International, some similar trends, not a lot of movement in the market here. Again, positive, but certainly Lagging behind Europe in terms of the pace of recovery that we've seen here. There are some good opportunities in Chemicals and Petrochem emerging for our core maintenance services, especially from our global customers. We're seeing some good crossovers come here and learning from the efficiency improvements that we've developed in Europe coming through. Energy and Utilities and Oil and Gas demand continues to be strong. And similar to within that we see in Europe, oil and gas customers looking to invest in the new technologies as we move forward. Moving on to Technologies. Here, where we operate, as you know, in 2 very highly attractive markets and developments continue to be positive. In the nuclear areas, we're in discussions in addition to Hinkley Point, where we're already operating for opportunities in France, further ones in the UK and in Finland. And in Germany, we are heavily involved in decommissioning, having just finished a successful project at Mulheim Kirlig. In pharma and biopharma, After the initial vaccine changeovers brought us some small to mid scale projects, we're now seeing more significant investments in longer term COVID related treatments, which is having a good positive effect on our pipeline as well as existing orders. And very pleasing to see as well, we've secured some maintenance contracts, And we see this pipeline really starting to emerge, and early success has been great within our business as we start to develop but crossover successive services on the back of the projects. If we move on to Slide 8. Sorry, I think it might be slide no, Slide 8. And talk about some of the projects. Obviously, it wouldn't be right if we didn't talk about Hinkley Point. But this is in a very different way. So in addition to our existing 3 major contracts, we've recently secured over EUR 20,000,000 contract here for inspection services. So this is one for a competitive bid, where we've developed our inspection solutions And real value to the customer by adding our strategic services onto our core offerings. Yes, very much Our status as a Tier 1 supplier has been confirmed by this additional order area, and our main contracts are progressing very well. The endorsement of us providing the inspection services into Hinkley Point over the next 5 years certainly confirms that we must be doing okay in this area. If we move on to The next slide, an emerging market, battery production plants and batteries in general. This is a real key area for the whole energy transition market. Transmission and storage of energy is absolutely key to the future. Batteries will play a major role in this, not just storage, but also the transportation. And this particular example is a production facility for feedstock It's in Finland. It's funded by our E and M Austrian business with support from our local Finnish team, another very good example of One Bill Finger delivering more to customers. Also, we've got significant opportunities And already contracts in progress across the spectrum, whether that is extraction of the raw materials, chemical production in this particular case as well of the feedstock for the batteries and also final battery assembly. And these are actually happening across quite a number of our regions in Europe. It's not just isolated to Germany and the Nordics. We're seeing this come across everywhere. And we're really establishing strong references in this key growth area to enable us to go forward and grow even more. In this last area, I just want to talk briefly about biopharma and very successful order intake year to date And a good developing future pipeline. Again, this is another great example of the full scope of Biltinger really appealing to a customer. So here, we're doing engineering, fabrication, installation and Bill Finger delivering as one team with 3 of our technology businesses involved in this This order also involves the design of a twin facility that will commence after this particular asset has been built. So we're really adding value in the efficiency of the process for a customer here and learning from the first plant to deliver a second plant in the future. Which involves it's a key order also for our French business. And over the next 2 years, they'll be working closely with our Austrian colleagues, ITS, to do the fabrication of the skid units to install in this particular project. So a great piece of work for us. I'd now like to hand back to Kristina to give more background on the numbers behind these examples. Thank you, Duncan. I'm now coming to Page 12 with the order development of our group in the Q2 Of 2021. Orders received of the group increased to clearly more than EUR 1,000,000,000, reflecting very good organic growth of roundabout16%. This was based on winning major contracts in the Technologies and E&M International Business segments. But we have also seen a very robust development in the European maintenance markets. The order backlog grow organically by 9% to more than EUR 2,800,000,000 and this despite the growth in revenue. The book to bill ratio stood at a good 1.1. This represents the 3rd consecutive quarter of over 1 and paves the way forward for next year's growth ambition. Turning to Page 13. Group revenues swung back by nearly 30% to EUR 977,000,000 compared to with a weak prior year quarter, which had been heavily affected by the COVID-nineteen pandemic and marked the low point of the last year. Coming to EBITDA, we saw in quarter 2 a strong overall development. However, we still need in E and M International to have some patients that have not yet fully recovered. The group in total achieved an adjusted EBITDA of EUR 26,000,000 after a loss of SEK 35,000,000 in the prior year period. This year's quarter 2 figure corresponds to an adjusted EBITA margin of 2.6%. This was due to favorable effects from the efficiency enhancement programs implemented in 2020 and the resulting improved capacity management. The margin improvement is very encouraging, and we anticipate a continuation of this trend for the full year. Reported EBITDA was also clearly positive at EUR 21,000,000 reflecting The significant improvement in special items from minus EUR 16,000,000 to this quarter minus EUR 5,000,000, which mainly related to the harmonization of the IT landscape. For the full year 2021, We still expect a maximum of SEK 20,000,000 minus SEK 20,000,000 of special items. Coming to gross margin on Page 14. At 9 point 7%. The gross margin improved considerably against the prior year quarter as did gross profit, which rose to €95,000,000 Adjusted SG and A expenses decreased slightly to EUR 70,000,000 and was up below the sustainable target level of EUR 75,000,000 per quarter. The reduction in SG and A or the further reduction in SG and A was due to COVID-nineteen related effects, such as continuing low travel expenses. The adjusted SG and A ratio measured against revenue was this quarter 7.2% and is thereby quite close to the target of a ratio below 7%. Turning then to our 3 segments and starting off with Engineering and Maintenance Europe on Page 15. We achieved substantial revenue growth at a very good margin level in this segment. Orders received increased by 3% organically to EUR 649,000,000 compared with the prior year quarter. This segment had in relative term been less impacted by COVID-nineteen effects last year than the rest of the business. Significant growth rates of our order intake were recorded, particularly in Germany, Belgium and the Netherlands as well as in Northern Europe. Revenue increased by a substantial 36% to EUR 665,000,000 supported by growth in all our European regions. However, some COVID-nineteen related restrictions are still in place, especially in the North Sea Offshore Business. The book to bill ratio in the Q2 was 1, reflecting the increase in both orders received and revenue. Looking at the E and M International segment with North America and Middle East on Page 16. We see an encouraging order pipeline and order intake. However, we have to put a continuous focus on EBITA improvement here. Audit received increased substantially by 48% to EUR 199,000,000. Development in North America was of a major long standing maintenance contract. Orders received in the Middle East remained at prior year level. Revenue grew organically by 19% to EUR 143,000,000. Here, we have seen considerable FX effect mainly due to the changes in the U. S. Dollar rate. The book to bill ratio in the Q2 was 1.4 and thus provides the basis for further growth going forward. Adjusted EBITDA remained negative at €97,000,000 Strategic measures, the adjustment of capacities, however, are increasingly showing effects. It should also be mentioned In this connection, in view of changed market conditions and business prospects, We decided to sell our shares in a joint venture in Oman. The transaction is expected to be completed In the Q3 of 2021, when we expect to receive a book gain of EUR 9,000,000 The cash in of the purchase price in the amount of EUR 10,000,000 we recorded already in June. The outlook for full year 2021 remains unchanged. A significant revenue growth is expected at E&M International and also a significant improvement in adjusted EBITDA to a slightly positive result compared to the loss of EUR 21,000,000 in 2020. Coming to Technologies on Page 17. The segment delivered a strong increase in orders received of organically 51% to EUR 169,000,000 This was largely supported by the credit award in the biopharma sector that previously Duncan described. Book to bill in quarter 2 was at 1.2%. Revenue also grow organically by a 36% to EUR 145,000,000. After a private year figure Of minus EUR 20,000,000, the segment's adjusted EBITDA now reached EUR 7,000,000 positive and was positive now for the Q4 in a row. As a result, the adjusted EBITA margin improved to a very pleasing 4.7%. We also confirm the outlook for Technologies In 2021, we anticipate significant year on year growth in revenue, and EBITDA adjusted will improve to a clearly positive result after minus €11,000,000 in full year 2020. Turning to Page 18. Following the Q1, net profit was again positive In the Q2 of 2021, driven by the improvement in EBITDA and EBITDA profit improved to SEK 13,000,000 compared to minus SEK 60,000,000 in the prior year quarter. The current quarter 2 figure includes a low level of special items, and it reflects a largely normal business development as well as a margin improvement. In quarter 2 2021, Adjusted operating cash flow at minus EUR 27,000,000 and reported free cash flow at minus EUR 43,000,000 both were substantially below the very positive prior year figures. As already mentioned, This was, on the one hand, due to growth related increased working capital requirements. On the other hand, The prior year quarter was supported by deferred taxes and Social Security contributions of more than EUR 90,000,000 that have been mostly paid at the year end 2020. Collecting for these deferrals, reported free cash in the first half of twenty twenty one was on prior year level. Looking at the liquidity development on Page 19. Net liquidity, including IFRS 16 liabilities, improved significantly against the end of the Q1 2021. This was due to the proceeds from the preferred Note for Aperona in the amount of EUR 458,000,000 that were transferred to Bilfina in May this year. In quarter 2, net trade assets increased in absolute terms to the level of EUR 514,000,000. DSO improved against quarter 2 2020 by 11 days to 77 days. DPOs were 65 days at slide with last year. On Page 20, I would like to give an update on our slightly increased outlook for the full year 2021. We expect an unchanged significant revenue growth in financial year 2021. Furthermore, a substantial improvement in adjusted EBITDA is anticipated. In light of the encouraging earnings development In the 1st 6 months of 2021, the adjusted EBITDA margin will now exceed the pre crisis level of the financial year 2019, which was 2.4%. We expect it to reach approximately 3%, although revenue in 2021 is still anticipated to be significantly below the 2019 figure. The structural cost cutting measures that we implemented with great agility in the second half of twenty twenty have been showing increasingly positive effects. We also anticipate a substantial improvement in our reported EBITDA due to significantly lower expenses recognized as special items. The expenses for the restructuring measures implemented as a consequence of the COVID-nineteen pandemic and the volatile oil price development primarily impacted financial year 2020. Finally, looking at liquidity. Free cash flow is expected to be positive, but below the prior year level, this despite a substantial improvement in EBITDA. The reasons for this are increased working capital requirements as a result of the planned revenue growth, the cash out effects for the restructuring measures implemented in 2020 and a normalized level of capital expenditure. That brings us to the end of our presentation. Thank you for your attention. Duncan and I are now looking forward to take your questions. Thank you, First question comes from Eric Lemavier. Erik, the line is yours. Yes. Thank you for taking my question. I've got 3, if I may. First, so you mentioned investment in M and A and organic growth. What do you mean by investment in organic growth? Is it CapEx, CapEx in additional capacities, for instance, or is it R and D CapEx? This is my first question. Regarding M and A, what kind of additional growth do you intend to acquire in the, I would say in the next years or going forward through your new allocation policy. A third question regarding the cost, which have disappeared with The pandemic, you mentioned the transport related cost. When do you expect this cost to reappear in your P and L? And the last question, if I may. With the last report of the GIEC, which was published this week, do you see Or do you expect any new interest for nuclear projects? Thank you. Thank you, Erik. I think I'll start off and then probably Duncan will assist Also with some of the answers. When we are looking at organic growth and talking about investments in organic growth, I think it will be what you already said, it will be a part of the mix. It will be also some New skills, so it means investing in people, but it will also require maybe partnerships and joint ventures to develop new technologies in the way forward. A big topic is, obviously, also grasp the energy transition. And you can imagine that we also try to develop our skills when it comes to topics like hydro, Hydrogenous projects and this kind of fairly new R and D topics, And that will require some investments also in organic growth. When we look at M and A targets, Here, we are looking at partly enlarging our portfolio In specific geographic regions where we see that 1 or another bolt on acquisition And it's nice when we make up not as big as we would like to be. But also in specific areas, We can mention, for example, biopharma, where we believe that the skills we have today could be broadened, and we could provide more services to our existing customers. So it is quite a broad range. We are talking about bolt on acquisitions. The focus is Europe and North America. And as always, you have quite clear wishes on your list But you have to have a certain flexibility when it then comes to look at what is available. But I think we internally have a very clear strategy of what we would like to do in the M and A area. Looking at the pandemic related cost savings, when I talk about the SG and A, obviously, we have been traveling also in quarter 2 less than we expected. I think all of us hoped That the pandemic by this time of the year in 2021 wouldn't have the impact that we still have seen. So there has been less traveling, That amount of face to face meetings, which obviously save money. Will it continue? I think that we have learned to do things in a different way. But obviously, you need to have a good combination of face to face Interactions end virtually. So I think it will come back to some extent, but not to the level that we had pre the pandemic. All right. Thank you. Then the last question here in regards on Nuclear and new nuclear projects, I would like to pass on to Duncan. Yes. Just prior to commenting on the nuclear On the pandemic costs, we're averaging 250 people absent from work on a continuous basis. We still have a bit of headwind there, where people are either quarantining or recovering from infections. Hopefully, this will get better as the vaccinations roll out, and we can get everybody back to work and operating as normally as possible. In nuclear, it's a very positive environment. Nicely. We're in discussions on the sign up to support them going through their funding process is well underway. We're in discussions in Finland. We're supporting Fanninville already and also have a number of opportunities in the French EPR2 rollout program. So we are seeing this come through. As you know, they are not the fastest of moving projects. But when they do come, they are significant and Go over many, many years. So still continuing positive environment and performing well in the U2 area. But you don't expect an acceleration or an increase of interest from politicals To access the nuclear development, all of us are working. Because it is a way You know, to allow it to the way to emit the CO2 emission. Yes, I fully agree, Harry. And the political aspect of the investment as well is the French elections coming up quite soon, which will have a Significant impact on hopefully releasing those investments. There's the funding issue and we can all read about that in the press in the UK moving through. So I think there are some trigger points that can happen that can then mean that they can accelerate onto the timetable that we can see. What we do know is once the funding is given, these projects will now move quicker because we have now started building nuclear power stations again in Europe. So that lead time will be shortened and will be more efficient in that building. Thank you. Thank you, Erik. Our next question comes from Christian Quardt, HSBC. Thank you very much and good afternoon. The first question is if you could maybe shed some more light on E and M International About the turnaround that you expect in the second half of the year, I appreciate you said that you are targeting a positive result. Just Asking for some color on this after we are, let's say, at minus €12,000,000 in the first half of the year. And also just to confirm The profits you expect from the Oman sale, but they are not part of the adjusted EBIT. I just Wasn't sure how we should read it in the presentation. The second question is probably more difficult for you to answer, but in the absence of Anyone from the supervisory board being here, I just have to ask you what the current status is in terms of CEO succession. And With the latest announcements you made last night on the share buyback and the capital allocation, just wanted to ask why these were done now. I would Initially, you have thought that maybe wait for the next CEO and then decide on these things. So is it more like This is a general strategy and the new CEO has to adhere to it. Or how should we think about this? Thank you very much. I appreciate any answer you can give on this. Good. Thank you, Christian. Let's see if we can get all the answers here. If I start off with the COs, which I can only, to some extent, repeat what I have previously said. The supervisory board Has the search ongoing, and they will come back with an announcement as soon as they have come to the conclusion On that search, I can honestly not say how long time it will take. And I am fully aware of the fact that they are very, very careful. And they I don't know if you can be 100% sure when you come with a new CEO that it will be the right one, but I think given the history of this thing and they want to be as Sure as possible that it will be a good solution. And in the meantime, I'm committed to continue to drive both these Independent of me or independent of the new CEO is that we are not losing any state here. We are continuing on this transformation journey As far as possible, obviously, last year was a difficult year, not only for us, but for many others as well. I wouldn't say it's a last year because we used last year to a large extent to once more cut cost. But I think we are all very motivated here to continue on this journey. And now with the next step this year And then next year, we don't want to lose any speed. So that is the most important thing for Bilfinger. And I think with myself and with the team around me And with Duncan, we try to do everything here to drive forward. The capital allocation topic, of course, You can decide to wait until a new CEO is coming. But as I said, I don't think Lithuania can afford to lose any time here. And therefore, we decided that we need to be fast in making decisions. And given now that we received The money for MAPFiona in the quarter 2, we decided the Executive Board and the Supervisory Board that we wanted to drive this communication already now instead of the alternative to wait until we are finished this year. So it was a joint decision. I think a new CEO does not mean necessarily that he will completely change everything and have a completely new strategy. I think also Duncan and myself that joined in 2018, we have been fine tuning that strategy that was already there, but it's not a completely new strategy. We believe that this strategy put in place makes sense, that it fits for purpose Today, and then it's more about in the after COVID market situation to maybe adjust something to set a bit of different priorities. But all in all, the Supervisory Board and the Executive Board are standing up for this strategy going forward. Then coming to your topic around E&M International, that is the most challenging segment for us. I think it's important to keep in mind that the largest part of this segment is North America. It has been a Challenging time, on one hand side, we know that many of the previous large projects that came to an end at the end of 2019 or in the early parts of 2020. We came in before the COVID in 2020 into the year We did not pay the order books and then COVID happened, which didn't help us to gain order intake. In our markets in North America, in our industries, we have also clearly seen that the ramp up after COVID that in Europe started to become visible from September last year, probably around about 6 months after Europe And only this year, in quarter 1 and quarter 2, we see an increasing willingness in North America to go ahead with projects, But also, the pipeline has been improving recently and also the order intake, as you can see. It is The route we have taken, and we see the right signs. But unfortunately, it will take some time until we see the real Big moves forward on the top line, but also on the bottom line. So the target this year is to build pipeline, to build order intake and then take the next step into a clearly positive result next year. I think also to some extent, the elections in U. S. In the later part of last year also contributed to a bit of a ramp up at the latest stage. Right now, we see a lot of these infrastructure projects coming through, But this was not visible in reality at the end of last year. Last question was the Oman business. Maybe I can answer that directly. This will be an adjustment. And the capital gain, like any kind of capital gains on disposals, are in the adjustment line. So it's This profit is not part of our EBITA adjusted guidance. The guidance increase is purely operational. Great. Thank you very much. I appreciate your answer. Okay. Next question comes from Stefan Boenhagen from Metzler. Hi, good afternoon from my side. I have 3 questions on 3 different topics. The first one is, If you can share your view on the inflationary environment in your end markets, which also affect your customers, Would you consider it as for your business, whether as a headwind or a tailwind? Maybe also a Second question again on E&M International regarding the order intake in H2. You mentioned a couple of things, but for me, it is not quite clear if you have certain visibility on the order intake improvement In the second half of the year, I mean Q1, especially Q2, were affected by some positive onetime effect. And if you can Give clear commitment that you think that the order intake in H2 will clearly improve. And the third question is on the Margin development in the second half of the year. You gave this updated adjusted EBITDA guidance of 3%. I mean, This would also imply that you are expecting a significant or a meaningful improvement of the margin in the second half So what are the main drivers for this margin improvement in the second half of the year? Thank you. Do you want to start with the part? Yes. Let's start on inflation. I'll talk about it in 2 aspects. There's people and then there's materials. On people, actually, we're seeing quite low inflation, obviously, in some areas, which is good for us. That means we don't have so much of a pressure on increasing the service elements when we discuss with customers on a year end basis and our efficiency gains can come through for bottom line benefits for both ourselves and our customers. So that's very much we would see as a tailwind. On the material element where we are seeing significant price That is a challenge. We don't see it hit us too much because most of our material suppliers are actually European based. We tend not to do the large main plant items in bulk steel and bulk pipe purchases. They're done by the customer. And they are a challenge for the customer. Where we are now looking to compensate that is we are putting in multiple of our Contracts going forward linked to material indices to ensure that any significant changes, we are able to recover that as we go forward. So again, that would be neutral for our basis. What is a negative is the time challenge that it gives us, not just for ourselves with inflationary and delivery pressures that we've seen throughout the pandemic. Customers are struggling on delivering materials, which is delaying projects, which is where we do have a little bit of a challenge on getting some project revenues actually materializing and hence that always puts a stress upon the end completion date, which is always a challenge. But that also brings opportunities. Just on E and M International, not going to get carried away with commitments, but We had some good order intake at the start of the year in the U. S. Those projects are now underway, and they're performing well. And we expect them to continue to perform well in half 2. They were below 20% in completion terms in half 1. So we expect that to come through. Our revenue levels that we see in A&M International are reasonably secure And actually, order intake and order backlog we have. We really want to get our order intake improved So next year, we want to get back up to the levels and the levels of profitability that we expect from those particular areas. That's about as positive as I'll get. Christina, you're going to? Yes. I'm smiling. I think we are careful when it comes to North America, but the last month I can only say that the last month, we have really seen an improvement in revenue in the bottom line. We already see it in reality, but it will take some time to get back to what we had in 2019 here, both in top line and bottom line. Talking about the margin development in the second half, I think there are a number of factors. I think we should not forget That we also have a seasonality in our business and the second half is always stronger than the first half, which help us then to get Better utilization of our people resources and at the massively also a better margin. We have been driving hard here to the extent that we would like to have a little bit of seasonality, Then a little bit less seasonality, but the resource and natural seasonality to some Many clients are planning in quarter 1 and then executing during the next coming three quarters. And then to some extent, in the Last quarter, year end, they want to make the spendings that they have budgeted. So we will not get away from that. That means that we will have more revenue in the second quarter and the better utilization. Also, what I mentioned before, the monthly improvements in North America and that we recently have seen will help us in the Q2. But also, of course, the portfolio mix that we have will also generate, as we know then we know the projects Appun, Hagen, does that answer your questions or do you have follow-up? No, I don't have follow-up Okay. Wonderful. Very good. Next question comes from Craig Abbott, Kepler Cheuvreux. Hi, good afternoon, everyone. Two questions, please. First of all, on CNMC Europe, you mentioned You have been benefiting from the turnaround with this higher margin. So clearly, we saw that in the 2nd quarter with a 6% margin. And you suggested this should continue going into 2022. But structurally, I'm just wondering how we should be thinking about that Margins are a 5% to 6% level. How sustainable you might see that level going forward? Or is it just being a little bit Securly supported by some short term factors. The second question is very I would just like to understand a little bit better. You talked through the case study on the feedstock plant for the electric vehicle battery And I realize this is currently a niche And I just would like to understand what type of services exactly is it that this business is providing here, Yes, I. E, what is your USP in this area that might enable you to win future changes in this area as this segment develops? Thank you. Okay. Thanks, Craig. The line was a little broke at times there. So I'll try and answer the best of them, please. At the end, if you can put me back on the right track if I depart. So on turnarounds, yes, we literally saw Probably 50% of the turnaround in 20 20, sorry, postponed. And they've been hungover now into 2021 2022, With 2022 actually even seeing a bigger increase than 2021 in terms of those postponements. So we're certainly expecting the revenue to continue in that, and we're very actively ensuring we're working with our customers to schedule those turnarounds to ensure we can deliver the resources in that and also provide additional resources from other areas on a blue collar level. In terms of the profitability of those, we do well on those projects. That's because these are the highest risk Projects that customers have when their plant is off. They obviously have to look at bringing in additional material supplies to supply their customers. And so they want these coming back on time. They're never under resourced. They're never under managed. And we deliver these projects consistently year on year. And the trust developed between our sales and our customers means we get booked very early. We don't have a lot of discussion around contract terms. The bulk of them are incentivized reimbursable contracts. So we believe this is a very, very sustainable area for us that we will continue to develop. We're driving some efficiency projects to improve our performance even more and also going through a training program to ensure we can put more resources into this area. It's a good position for us, and we're going to maintain that. And by the way, it is universal. It is not just particularly in one area. We do turnarounds right across our business, but our strongest area, as you identified in A&M Europe. In battery plants, is it a niche area? We are providing a lot of our traditional services within there. The scale of these projects fits nicely. They are not massively large projects. So they're generally sub 100,000,000 And you're working with customers that don't have a lot of project experience. So to be able to have somebody like us in there that can deliver An engineered, fabricated and construction set of services, including mechanical, electrical and all the ancillary scaffold insulation painting works very well. They don't have to manage the interfaces, and they get a very efficient product at the end. We are working in a number of areas, well, in the engineering front end, So modular solutions to take those through, but we don't take process risk on these. So we do not want to have performance of the plants linked to What we did, we're taking engineering risk and delivery risk, which is our normal areas. The USP is we are building a strong reference case and a strong reputation With those customers, the customers are very consistent. We are not seeing a wide range. There's a small number of customers that work in this area, And we're developing very good relationships to them. Okay. Absolutely. That's the area, Greg. Think you understood my questions quite well. Thank you very much. I have something helping There are no further questions. So we conclude today's call. Thanks for participating. We wish you all the best. Enjoy the rest of the summer, and we'll speak to you again later in November. Have a good day. Bye bye.