Earnings Call: Q1 2020

May 14, 2020

Good afternoon, and welcome to our 1st Quarter 2020 Conference Call. Thank you for joining. With me in the room are Kristine Johansson, our CFO and Tom Blades, our CEO. We will now start with the presentations followed by the question and answer session. With this, I'll turn the call over to Tom. Thank you, Bettina, and likewise, good afternoon from myself. I'm going to walk you through the headlines in the market very quickly and then hand over of course as always to Cristina. So starting on Page 2, I think no surprise significant disruptions in the market, many through COVID, but then also of course through the developments on the oil price. Orders, actually, that's the positive headline on our page here. The orders were up 9% year on year, organically even 11%. Revenue year on year, also 9% coincidentally and 7% organic both below same period last year. EBITDA adjusted dropped to CHF 11,000,000 Most of that came out of the second half of March even, not even the full month of March, driven by the revenue drop and of course the underutilization on account of not being able to access sites and again the effect of the oil price with respect to rigs accessibility mainly in the North Sea. Liquidity is actually quite good. It's sound. Free cash flow reported slightly improved over last year. We do have a sound cash position. We have a solid balance sheet. Nevertheless, we did decide to be prudent and to reduce the dividend to the statutory minimum, which is €0.12 per share in order to preserve and safeguard our liquidity in an uncertain environment with a forward perspective. We did spend quite a lot of time internally looking at the various scenarios that we built. As the weeks progressed, that began to narrow down and that did give us a level of confidence to come out with the current outlook. We have a list of assumptions of course attached to that, so caveats. And currently, we are forecasting a revenue decrease versus last year of around about 20%. Yet, we will still achieve an adjusted EBITDA positive. More details of that when we go into the financial section. Very roughly looking at the markets, our customers are broad, they're global, they're large customers and typically we're seeing about a 15% to 30% reduction in their CapEx ambitions and about a 10% to 15% in their OpEx ambitions. Now if we look at the various parts of our business, beginning with Europe, E and M, so Engineering and Maintenance, beginning with Energy and Utilities. You recall this is our fastest growing segment over the coming years. On the right, you see the arrow up, the 10% indicates that is the portion of our revenue in Europe for E and M, so 10%. But the upward arrow again underlines the trends, which are driven by ESG. So climate change. We are seeing interesting developments in biomass power stations. We just signed a deal in Austria, for example. And then of course, infrastructure will be expected to pick up as the government tries to revive industries. And I think you're well aware of our developments in nuclear, which remains important for us in the U. K. 1st and foremost, but also in France, in Finland and in terms of decommissioning also in Germany. Our largest revenue is from chemicals. As you can see, they're 40%. We have seen reduced production levels. But interestingly, the market is fairly robust in Germany. It's actually a little bit ahead of plan in Switzerland. Austria, a little bit down. And what we're seeing mainly here is that the activity shift is around the turnarounds, many of which were planned around the middle of the year. These turnarounds where the customer is under pressure because of various regulatory needs or because of asset integrity needs. They're trying to ship those into late Q3, early Q4, so as late as possible yet in 2020. But the large part have already said, no, let's push that to 2021, which makes for interesting discussions because there will be a congestion both late Q3, early Q4 and then in the Q2 and the Q3 of 2021. Oil and Gas, yes, as already said, it's the biggest hit, therefore, the 2 red traffic lights and the down arrow. We don't see that changing anytime soon. When we do look at our locations, the hardest hit have definitely been Aberdeen, so Northern UK and Sibangar in Norway. Both of those are heavy offshore industries. As I turn the page, we'll come to what it means in the U. S. But the double red there and the downward arrow, this is something which will be with us for quite a while yet. We are taking the right measures both around personnel and about reorienting our business. But I think we'll come to that in the Q and A. I flip the page to E and M International. Also beginning with Energy and Utilities, it's a smaller part. As you're aware, the majority of our revenue both in Saudi and in Kuwait comes not from oil and gas but from power generation. That does continue. So that's a stable business. In North America, we're less oriented towards power or energy and utilities, But we do expect that the government will pump in money at a later stage. It's not in our numbers. These are the trends and these are the discussions we're having with our regional management and also with customers in those areas. Chemicals is again, you see there the arrow flat. We aren't seeing a lot of slowdown in the projects that we've begun in the Middle East. In North America, we are coming to the end of our projects. So you won't have seen that directly in our Q1 numbers, but you will see later in the year. A lot of this was anticipated, but of course now with the oil price developments and downstream developments, we think that those projects that are expiring won't immediately be replaced with new ones. Finally, of course, oil and gas, no surprise, downward arrow. Also here, we are seeing that if investments have kicked off, in other words FID is done and the project has begun, they do continue. If FID has been sanctioned but no start of the project then these are currently on hold. And of course anything new really is a question mark right now. I think having said that, that kind of covers our end market. I will go over to technologies, which remains a challenge, but we think we're dealing with that. The markets are in terms of pharma, they're flat. There is talk of customers reviewing their supply chains and moving production back into their borders for various reasons. Hence the comment at the bottom of the page, the arrow is flat, not because we don't see an uptake in the current environment around COVID and around new products, but again because we're dealing on a second level, we're a 2nd tier supplier with the EPC companies. They'll see it 1st. And then the expansions which may come their way, I think we will profit from when it comes to building out the current pharma capacity in Europe. Energy and Utilities, again, upward arrows, similar story to my comments on E and M in Europe. It's driven mainly by the demand in nuclear, of course, Hinkley Point. On the downside, the maritime business scrubbers, this has gone to 0 for a number of reasons. The fleets have been downsizing tremendously around the world as global trade drops, so does the requirement for ships. But also of course the spread on high sulfur and low sulfur bunker fuel has dropped down to $50 to $60 down from a high of $300 which of course would mean that the return on investment on the scrubber has gone from somewhere around 18 months to 7 years. That and with reduced demand means that business really is down to 0. Nevertheless, we do think that the current developments in energy utilities and very much so around nuclear in the UK is going to drive our business upwards and we'll continue to do so in the coming quarters. That's the very quick sprint through the markets. I think no surprises for you. And therefore, to get in details on the numbers, I'll hand over to Kristina. Thank you, Tom. Warmly welcome also from my side. Let's have a look at the financials, starting off on Page 7 with the order intake. Actually quite a good number for the Q1. On one hand side, we have larger projects increasing that we were missing in quarter 3 quarter 4 last year. And now we in quarter 1 were winning and signing off both the first part of Hinkley Point around €50,000,000 but also BP project pipe rack in Gelsenkirchen, which is about €100,000,000 So that helped us on the big project side. We also need to keep in mind that we had some corrections in the order books in regard of the framework, especially framework contracts in oil and gas, which means E and M Europe, so Norway and UK. So we were also reducing this out of the order intake. So an organic increase versus last year Q1 of 11% is a very solid number for the Q1. Looking at the book to bill, we are at almost 1.2 after March and the order backlog at 2,562, which organically is 4% below last year's number. However, we have a solid pipeline and especially in regard of Hinkley Point, we are expecting to see further orders coming in larger size. So a positive first quarter on the order intake. Then proceeding to Page 8, looking at the revenue. It was, as Tom said, negatively by corona and the lower oil price, especially during the last 2 weeks of March. On the top of that, as we have communicated earlier, also North America that had an extremely good project here last year, we also expected that the Q1 would be substantially lower. And therefore, you see we managed to generate EUR 915,000,000 of sales, which organically is 7% below the level in the Q1 last year. Looking at the profitability, the Q1 is closing with an EBITDA adjusted of minus 11% versus minus 4% last year, obviously also colored by the lower sales, lower utilization and in some of our entities, some underutilization. So in the quarter 2, where we will we expect to see the lowest sales numbers and most of the impact from corona and the low oil price. The underutilization with different mitigation actions, we do whatever we can. That includes, of course, furlough. And we already, by the end of March, had a large number of staff on furlough, but also in those locations where we don't see a fast or a midterm improvement, which means, especially in the oil and gas, we are also laying off people. Looking at the EBITDA adjusted margin, we are achieving then in the weakest quarter from the seasonality, a minus 11% or 1.2% minus. The adjustments or special items amounted in the Q1 to €9,000,000 So the reported EBITDA closing at minus €20,000,000 is to be compared with the Q1 last year, where the EBITDA reported was minus €3,000,000 The €9,000,000 of special items or adjustments, that is represented by €6,000,000 of restructuring already planned and €3,000,000 of IT investments rolling out in the last year, our joint IT projects. Looking at the forecast for special items, I remind you that we had EUR 72,000,000 of adjustments last year. We planned before corona in the lower oil price to substantially reduce that. We are now expecting a number of around €50,000,000 for the full year as special items. Of course, the increase then related to restructuring cost restructuring measures that we need to take, especially in U. S. Where we normally cannot use any furlough programs, but also in the oil and gas side, especially in UK, where we don't see the market recover that soon. The number of people on furlough that we will also have going forward is mainly related to U. K, to the Nordics, there Norway, to Germany, and the Netherlands as well as Austria. If we then proceed to the next page, to Page 9, looking at the 2 major KPIs within the P and L, we have on the left hand side, the adjusted gross profit. And due to the underutilization of our capacities, we are in the first quarter achieving a ratio of 7 point 4% or EUR 67,000,000. That is to be compared with last year and the highest sales where we were at 8.1%. Also comparing with the last quarter, which is normally the strongest quarter in the seasonality for us where we achieved 11.3%. Going forward, we are expecting to improve this adjusted gross profit ratio, the 7.4 percent significantly by using the mitigation actions I mentioned, relying on furlough programs in Europe that we are using, and they are in place, as well as some restructuring here in those entities with a substantial lower sales than planned. On the right hand side, we have the selling and administrative expenses. Also here, very positive Q1. We have what we internally call the sub-seven project that we presented in autumn last year and where most of the implementation was done in the Q1 of this year. And we managed to close in absolute numbers the Q1 with a SG and A cost of €84,000,000 versus last year €89,000,000 in the 1st quarter, so a reduction of €5,000,000 even if most of the impact of the sub-seven million is starting to come in, in quarter 2. To remind you here, we have committed us to achieve an SG and A under the sub-seven of EUR 330,000,000 in absolute numbers for the full year 2020. And given now the loss in sales that we are expecting for this year, we will go even lower. So we are, in addition to the sub-seven, taking additional actions to try to mitigate and be flexible here as much as we can. All of that already initiated. Then proceeding to the Page number 10, looking at the whole three segments reported, we have E and M Europe, the largest segment where we clearly saw in orders received an improvement. So orders received in the Q1 sorry, my mistake. We saw a reduction going from €595,000,000 to €573,000,000 so a reduction organically by 3%. Here we have a part of the Hinkley Point order and also a part of the pipe rack that is acknowledged in the Q1. Looking at the results, we are achieving a result of 0.7% due to the underutilization or €4,000,000 in absolute numbers in the Q1. The underutilization, of course, related to the oil and gas part, which is Norway and U. K, but also partly in the Q1 due to corona hit in Poland. That is, to a large extent, providing our businesses with staff and also Austria. Looking at book to bill, still solid with 1.1. And looking at the outlook, we will come back to the full outlook for the group, but the outlook for 2020 is a significant decrease in revenue, obviously, because we have the upstream oil and gas in this segment. And then EBITDA adjusted, we are guiding right now with saying still positive. If we then proceed to E and M International on Page 11, Looking at the revenue, we see a large drop here in the Q1 versus the Q1 last year. So organically, minus 25%. Most of that is related to North America, as I previously mentioned, where we had larger projects giving us a lot of sales last year in Q1. And these projects are now slowly but clearly coming to an end. On the orders received, we have organically a decrease of 4% in the Q1. EBITDA adjusted is 0.8% minus, especially due to underutilization in North America. And given that we have very, very little tools in America to be flexible and no follow programs, We are here working on the restructuring. And you will see as we proceed into quarter 2 also that a part of our layoff programs will be related to North America, some of that already implemented. The outlook for 2020 for the segment E and M International is for revenue, a significant decrease versus last year. And also here an EBITDA adjusted still positive. Proceeding to the smallest and last segment, 3rd segment, Technologies. Here we have on the order side then the other half of Hinkley Point and Pipedrive coming in. So a very, very solid growth in orders received actually organically over 150% in the Q1. On the revenue side, due to underutilization, again, we are going back, so organically 5% lower revenue in the first quarter of March. EBITDA adjusted is negative, but improved versus the Q1 last year. We had a fairly big hit in regard of corona impact in both Austria and in France in the Q1. On the top of that, as Tom mentioned, the effects coming from the scrubber business that is now not building a business case that makes sense. Looking at the outlook for 2020, the guidance is a slight decrease in the top line and an EBITDA adjustment significantly improved versus last year. Last year, we had a loss of minus €28,000,000 in Technology. Last but not least, on Page 13, we have the free cash flow, net trade asset and also the net profit. Both net profit reported and adjusted reported minus 24%, adjusted minus 13% is negative. Free cash flow reported improved slightly to minus €93,000,000 prior year was minus €102,000,000 Free cash flow adjusted, minus €80,000,000 that is a similar level as last year in the Q1. And also net trade assets, similar day numbers as we saw last year after the Q1. As of today, the cash flow development now being in May, but looking at closing April is bearing up very well in this despite the negative business environment. We are on plan. Even if we have a lower sales and we have a lower profitability, we are on plan when it comes to the liquidity and cash flow. We have strong measures in place to safeguard the liquidity going forward, And we have no refinancing. We had the refinancing completely closed and finalized successfully last year. The next time where anything will need to be refinanced will be in 2022. So from a cash point of view, very solid and looking very good. Last but not least, I want to raise that S and P has done the yearly review, and they just today, I think even after lunch, they were publishing the report in regard of our rating. We were fighting hard because we believe that the impact that we will see negatively on sales and profit this year will it will have a significant impact as you see in the guidance this year, but we also see good opportunities in quarter 3 and 4 to start to pick up again. But nonetheless, given the difficult environment right now, the rating has been a downgrade. So we go from BB to BB- but with a stable outlook. A stable outlook very much because being able to keep that outlook is based on our strong liquidity on our strong progress on the cash flow. And I can also confirm that April and today, mid of May, this strong liquidity is continuing to develop and also then, of course, helping us through a very, very difficult quarter 2, where we regard the quarter 2 from a sales and profitability point of view to be the weakest. Thank you. And now back to Tom with the current outlook for 2020. Thank you, Christina. Let me begin by reading the fine print at the bottom of the page. So we have a number of assumptions. As I mentioned at the outset, we've been spending quite a lot of time not only modeling what we think the year might look like, but of course, calibrating that against a lot of customer interaction and interaction with our regional management. What we see currently, and I think you hear from many places is Q2 will be the worst. April will be the worst month in Q2. And then we see a gradual recovery throughout the year. And by Q4, we should be close to what we had budgeted. That of course again is on the assumption that the turnarounds which play a part of that remain where they are, so late Q3. It does assume that some turnarounds go into 2021 and that doesn't change. Government support could seem to be in place as is advertised and I think generally supported across Europe. And we think the oil price, of course, will remain roughly where it is, no recovery. So we're not expecting any tailwind of support from there. So having deliberated around that and I think also having a fairly well reacting and proactive management team, I think the last 3 years of what we've been through have toughened the management. They know what to do. They know not to hesitate. The structure we put in place at the end of last year not only gives us the advantage of reducing our SG and A and giving us some tailwind there, but also putting more decision power into the regional management. Of course, they use that to react quickly. On the basis of that, we did change our current outlook, as you're aware, published this morning. So the revenue year on year decreased around about 20%. Our EBITDA adjusted will be positive and our free cash flow reported will also be positive. So with that, I think that concludes our brief summary of Q1. And I will return it and then open for questions. Bettine, over to you. Yes. We start now our Q and A session, Stephanie. We would now be happy to take any questions you may have. The first question comes from Maarten Beutal from Bank of America. Yes. Good afternoon. Thank you so much for the presentation. I just wanted to ask for a little bit of clarification on your free cash flow target for 2020. You expect this to be positive. So what sort of working capital assumptions are you using? Are you expecting a positive inflow of cash? And you mentioned that in Q2, so far the performance is actually quite good. So could we get maybe a bit more clarity on that? And also in terms of free cash flow, what is the amount of restructuring expenses that is currently anticipated to be taken in 2020 in terms of cash impact. Good. Yes, let's start off with the full year impact. What we from April as a positive factor, of course, has got is that a number of countries are letting us postpone payments of social insurance, but above all tax. So from April, not before April, but from April, we will see that we can delay quite a lot of these payments, partly also beyond the year 2020. But in most cases, we are talking about that it had to paid until the end of the year. But for U. S, for example, is coming in with programs that is executed so that in 2020 payments can be postponed to 2021 or even 2022. On the top of that, we then have, of course, also the work that we started last year in improving our true working capital, the trading working capital. And even if we are right now in line with the numbers for the Q1 last year, our expectation is that this year, we will be able to improve this. And if we, example, compare with what we achieved in DSOs and DPOs at the end of last year, we have similar numbers that we are expecting to see improving as we proceed this year. So the trading working capital also helping us here. And in regard of the restructuring, I mentioned a number of €50,000,000 we are expecting or slightly above €50,000,000 for this year. We expect also that the cash out will happen this year to give you a fair feeling for how much restructuring will burden our cash flow. Okay. Well, thank you so much. Next question comes from Norbert Creitlau, Commerzbank. Good afternoon, ladies and gentlemen. I had two questions, if I may. The first one is on the corona and oil price impact in Q1. Could you maybe quantify roughly the breakdown of the 7% organic sales drop between, say, excess constraints from corona oil price plunge effect and maybe other effects? I mean, in the U. S. Where projects phase out, it also looks to be sort of a demand problem. So could you give us a rough idea about the breakdown of the sales impact? And the second question would be rather on the underlying strategy, which you communicated on the Capital Markets Day, that is in particular to boost the gross margin by efficiency gains. Would it be fair to assume that maybe some of the work which has to be done now might cause maybe some delays, but that the underlying work to raise efficiency and therefore, to have in the midterm better margins that this is on track? If I start off with the corona and oil price impact on the quarter 1, It's always difficult to set an exact number and relate it to one reason, but I would say that the effect in the Q1 on sales was in absolute numbers around €50,000,000 So we lost around €50,000,000 sales in the Q1 due to corona and the lower oil price. Great. Thanks. Then if I would pick up your question on the margins, Mr. Cretel. I think when we look at our margins in the new orders, okay, we're quite satisfied that we're able to still take in new orders above the aggregate 12% threshold that we're targeting for in the long run. So I'm quite happy with the order intake development. I'm quite happy with the margin in the backlog. What does give me some concern is utilization. And our way to address utilization is to adjust the headcount, of course, but also in a way that doesn't leave us stranded when we go through what is going to be quite a big swing in the number of people that we have out there in the customers' facilities. In the worst case, which can actually be a best case, we're actually looking at some countries in Q4 where we can move employees cross border to deal with what we think might even be the classic use it or lose it surge at the end of the year. So I think, again, to repeat, order intake margins are good, margins in the backlog are good, underutilization short term is really the issue. Now in the long term, so going back to February 13 Capital Market Day, I think in the long term, definitely when we look at our numbers and let's say our 2024 numbers, we will have to take a large part of the oil and gas expectations out of that and replace it with other revenue. We have ideas. We think we can do that, but that will be subject to another discussion later on in the year. So overall, long term, mid term, we are confident that we can continue to drive our gross margins in the right direction that is upwards and towards the long term 12% aggregate target. Good to know. Thanks. The next question comes from Gregor Kuglitsch, UBS. Hi. Good afternoon. Thanks for taking my questions. Perhaps 2 to 3. So the first one, can you just give us a sense in your budget how bad Q2 is? I mean, are we talking 20%, 30% declines? Or is it more? It's very difficult for us to really know exactly. Just to you can get a bit of a sense in terms of the decline that you expect there. And then secondly, you obviously caveated your guidance with a number of points. But as well, I guess, the one that's perhaps, to my mind at least, the riskiest is probably the sort of turnaround situation. So I want to understand if those that you currently have in your budget, if they were not to happen, what the impact would be? Just as a rough sense, if that would be helpful. And then finally, can you just give us a sense, I know you don't disclose your covenants, but have you I presume you've stress tested the earnings and so on for and at what point you get close to covenants. So if you could just give us some sense at what level you'd see problems, I don't know, in terms of revenue decline EBITA or whichever way you want to look at it? Thank you. Maybe I'll begin with the overall picture of the V. We said 20% on the year. You saw numbers for Q1. We said Q2 is going to be the worst. So yes, we're around the 30% drop year on year in Q2. And then of course, coming out of that as we go forward. So that's really the shape of the curve. I think that's what you're heading for. The caveat in guiding, it's not really in the budget, it's in the forecast. And we had to make the forecast based on a number of assumptions, which again we tested with the customers. I'll give you an example. We have a turnaround planned in Holland with 1 of the customers. And on April 28, which coincided with Global Health Safety Environment Day, we actually did a dry run of how a turnaround in a turnaround, you're putting in several 100 people into a facility. How we do that under the COVID norm, so having additional protection, respecting where we can the distancing, sanitizing, going in and out, all these things, monitoring temperature and it can be done. So we think that if we're ready, if the customer is ready, our people are disciplined, they're well trained in HSE and we can then go ahead and perform the tasks. So those are all kind of the caveats, if you like, that play into this. Now if there's a second wave, if the government changes its mind on its levels of support, then of course, we would have to revise those assumptions. But we're feeling we wouldn't have come out. I mean, you know us as being conservative, you know us as being ideally boring as I put it in the past. We wouldn't have come out if we hadn't done the necessary homework behind this. But as you said, there are caveats. I will then hand over to Kristina for your question on the covenants and the stress testing. Yes. I mean, especially on the liquidity side, of course, I said that we are well on track. We are probably better on the liquidity and cash side than we are on the profitability side right now. But we also know that a couple of clients that will change their behavior in paying us that can make a significant difference here. And if we get larger projects coming in, in the second half, we will also need cash to finance and fund the working capital. So of course, we are doing on a regular basis a stress test. We have a covenant in place for our credit line for our RCF. But for the funding last year, the bond, we don't have any covenants to meet. And this covenants that we have for the RCF, the EUR 300,000,000 credit line, is quite a generous one. It doesn't mean that we can't get into trouble. But given the forecast that we now do on a very regular basis, given these scenarios that we have in the range of best and worst case, we still expect that we will be able to keep these covenants and manage that. From a cash point of view, obviously, quarter 3 will be the biggest challenge as the sales will go down in quarter 2 to the lowest level. So quarter 3 will be the real stress test. But right now, we are quite confident with the assumption we have that we will not take any risks here. And in case we would, if 1 or 2 or 3 major clients would, for whatever reason, not pay on time, then we obviously also safeguard with further mitigation actions here. But right now, we are confident that we would be able to manage this from a cash point of view well. The next question comes from Tristan Kord, HSBC. Thank you very much. I have 2 questions. The first one is on your outlook for the 2 E and M segments, where you expect a significant decrease in revenue for both of them this year. Yet the development in the Q1 was quite different and I also would have thought that the international business might be hit harder than the European business gives high exposure to oil and gas and the pipeline in the U. S. Market versus the European one. Can you elaborate how we should think about this? And if you expect both segments to be down by a similar magnitude or if there will be a distinction in the significant decrease wording. That would be my first one. The other one is, if the restructuring no, sorry, otherwise, if the recovery is not coming as forecasted or planned, when would you revisit your current plan on restructuring? Is that an ongoing basis? Or is it that you say, okay, let's see what happens until June or July, and then we will decide on this again? Thank you very much. Yes, interesting questions. So I look at my notes as well here. I think when you say the 2 segments in Europe, you mean one is the E and M segment, the other is the T segment. I'll assume that's what you mean? The 2 E and M. So the 2 International and European, so both E and M segments. Okay. Now I'm back with you. So they are definitely impacted in different ways. I would say the impact is less in Europe. So the drop down, the V isn't as deep. Let me try to fumble for the right words. The V isn't as deep and then the recovery is there. Internationally, it is deeper, the V because of North America getting the double hit, if you like, and then recovering slower. So that's probably the best way I can put it. And then again within Europe, we have a very mixed picture because as you said or as you alluded to, North Sea significant, but it's going to stay with us. So we have to live with that and we adjust on a mid- to long term basis rather than a short term adjustment, which is what we do in Continental Europe. We have one country strangely enough where we're ahead of budget, That's Switzerland. And talking with them already this week, that's not going to slow down. So you've got this mixed picture, which we're trying to manage, but we think we have the right perspective. We have the right variance and we have a little bit of, let's say, leeway around our guidance. So I can't be much more exact than that. But deeper V in international than in Europe and also slow recovery, quicker recovery in Europe. Perfect. So the second part apologies, second part of your question, if recovery is not coming as planned, when will we revisit our current plan on restructuring? Well, we look at our plans continuously. So it's not that we close our eyes to the end of the quarter. Really, it's on a monthly basis, if things are on track and if things move, then of course, we get that information quicker. When I allude to things moving, for example, the government support on furlough in Holland, it was originally already complicated enough and it was a wage subsidy. Currently, there is a discussion around it turning from a wage subsidy into a loan. Okay. So when those things happen, we look at them quickly. We build them into our model and check the impact. But other than that, the next expected message to the outside world, assuming of course that on the aggregate things are the way that we are portraying it, when again we have some wiggle room, some bandwidth if you like, then that would be at the end of Q2, which we would then announce in mid August. Great. Thank you very much. Next question comes from Stefan Bonhagen from Metzler. Hi, thanks for taking my question. I have 3 questions. So my first question is, you said that there will be some permanent cuts maybe in different business areas with a subdued outlook. Can you concretize which business areas do you exactly mean and what kind of concrete measures? So what are potential long term impacts on sales and profitability? My second question is regarding your Energy business. So it seems like you have a very good run there. And I just want to know if we can may expect some more orders with high volume in the coming quarters? And my third question is, if you look at all the easing of lockdown measures around Europe and the increase in oil prices, do you may already seen some kind of recovery in your business, especially in the maintenance business? Thanks. Okay. Let me have a go at those permanent cuts. So and then it moves a little bit also to your last question. In the upstream business, so again, Aberdeen and Stavanger to be very specific, we think that the cuts we're looking at right now, they're in the order of 45% to 55%. We think that those are more permanent cuts. So there we have actually gone ahead and released people. Where the government furlough rules and regulations allow, we have furloughed people because it costs us little or no money because the government is putting their bill. But ultimately, we will have to move some people from furlough into terminations. So there we're adjusting our business to the environment on a, let's say, mid term basis, but of course with immediate reactions. In other parts, I mentioned scrubbers earlier on. We had expectation for the scrubber market to have a second wave this year, we've taken those expectations to 0. We do have ongoing orders that we are completing. The customers are contrary to before where they were pushing for delivery, they're pretty relaxed because a lot of those ships are not moving right now. And even if we deliver, then the customer still hasn't set a date for installation. So given that outlook, we're looking to see how we can review strategic options. Let me put it that, inverted commas, for that business. But we don't expect that to be a contributor as we go into the future. So we're trying to, like I said, look at alternatives for that particular business. Within Technologies, the business is that we're struggling last year are improving, but they're still struggling. And our remit there has always been to turn them. And then once they're turned and we're able to also there look at strategic options, we would do so. That's going to be a little more challenging right now. We may have to widen the horizon, but also there we're going ahead. Your question to try to define the level of volume around energy, energy, oil and gas, I would say, I think we touched on that, Christina mentioned at the beginning. A large part of the 20% is oil and gas related. The other part is push of turnarounds into next year. The turnarounds will catch up. The oil and gas will be a much slower. So we're not actually planning, as I said, for a tailwind from oil and gas recovery. We think where it is right now, it will be for some time through the combination of adequate supply and short term reduction in demand. The development and thank you for the question there on order intake around energy, yes, we do think that will continue. In fact, we know it will continue because we're having those discussions and we feel confident that we can continue to grow the energy business in line with the expectations that we articulated at the Capital Market Day in February. Lockdowns in Europe, there I think also I alluded to it, it never went down as far as some of the other industries did, right. So as I mentioned in Switzerland, it didn't go down at all. In Germany, we think I told you a low point on the year of about 30% in Q2. Germany in Q2 will be at the low point of 10 plusminus percent. So again, changing businesses. So when you drop by 10%, getting it back up again is not that difficult. So I think we are fairly confident in our current visibility and our ability to get back to work, which is happening as we speak. Okay, thanks. The next question comes from Erik Stijs from So sorry, there are no more further questions at the moment. There are no more questions. So we now conclude today's conference call. In case you might have further questions, don't hesitate to contact the IR team or myself. Thank you for joining, and stay safe. Goodbye.