Good afternoon, ladies and gentlemen, and welcome to the Yin Update Conference Call regarding the Q1 Results 2018. At this time, all participants have been placed in a listen only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Doctor. Stefan Trager.
A very good afternoon from our end here in Jena as well, and welcome to our earnings call presenting the result of what we believe has been a pretty strong Q1 of 2018. With me today is Hans Wilhelmacher, our CFO, and I'll position you to get straight to the presentation. As I already said, Q1 2018 has been pretty strong for our company. We've managed to grow revenues by a marketable 16% in the Q1. Drivers for that growth has been, for a start, our Toll Collect project.
We've already communicated in the past that we will see a good step up in our sales driven by that project, in particular in Q1 and in Q2. Another driver for the growth has been the continued strong demand for the Semiconductor Manufacturing Equipment segment. And to anticipate questions here already at this very moment, That market seemed to be very, very strong, and we don't see any near term sort of slowdown effects here. So the continued strong demand in the semiconductor manufacturing equipment has been the 2nd important driver for our growth of 16% in sales in Q1 this year. As a result of our growth, we've seen a significant margin step up from 10.9% EBITDA of sales in Q1 2017 to now 14.6 percent EBITDA in relation to sales in Q1 this year.
Again, driver had been volume. Of course, mix. We have sold very profitable product lines in particular. But also, and I would like to point this out in particular, is significant reduction or marketable reduction in our G and A spend. Our journal and admin expense in the Q1 of this year have been CHF 3,000,000 lower than in the Q1 of last year.
There were some onetime effects, which we'll discuss in the call. But yes, overall, I think we've managed to reduce our admin expenses quite a bit. So as I said, we're very pleased with our Q1. And with that said, I'll hand over to Al Sitter, who is going to detail the numbers for us here.
Yes. Thank you, Stefan. A warm welcome from my side as well, ladies and gentlemen. Next slide, please. Here you see our revenue development over the quarters, and you see it's a 16% revenue accrue.
This is with €189,900,000 the strongest Q1 figure ever, which is above Q1, Q2 and Q3 last year. So it's really a strong quarter. And to answer maybe question of you in advance, it could have been €6,000,000 more, which equals to 19% growth rate if you took into account that we have negative impact on the exchange rate side. Just to answer this question, if you might have asked this question. The growth is, as Stephan already said, mainly driven by Optics and Life Science.
The semiconductor business is going on very strong as well as our Mobility segment concerning especially meaning the Toll Collect project. Yes, having said this, I'd like to come to the next slide. Here you see the growth in the regions. We are around about 67% foreign revenue, which is significant part. And you see the growth is splitted all over the continent.
It's in Americas as well as in Europe and in Germany, double digit growth rate. In Germany, it's positively influenced by Toll Collect. So all regions are supporting our growth. When you then follow me please to the next slide, here you see our earnings figures. You see the EBITDA and the EBIT.
Stefan already explained to you our EBITDA development in terms of absolute figures and margins, a strong increase, much stronger than revenue. All three segments, including DCS, which has shown a stable development concerning sales, but a better profitability is contributing here. And I'd like to highlight in addition to EBITDA, our EBIT figure, which is even higher above prior year, it's 88.7% plus. And now we have realized already an EBIT margin in Q1 of 11% compared to 6.7% in the prior year. This is coming from the sales, from the revenue mix and from the lower half churn costs as already explained.
If you then follow me a little bit in the details of our P and L of the group, when you see that the gross margin is more or less in the region as it has been in the prior year. But we have also some impacts here in the gross margin coming from a project business in the automotive area, but this should improve in the months to come. Our functional costs, as already mentioned, are roughly around about €1,000,000 below prior year Q1. But keep in mind that our R and D spendings and selling spendings rose slightly, where administrative expenses were sharply reduced. So this is positive concerning these are the positive impacts you see then in the earning figures.
The financial result is influenced by a negatively affected currency loss. The other financial impacts are equal. So no matter here, our earnings before taxes is nearly doubled. It's EUR 19.3 compared to EUR 10,000,000, which is a significant rise. The earnings after tax is also nearly doubled, meaning we have reached an earnings per share of €0.27 per share compared to €0.15, €5, which is a really, really strong increase here.
And we have, by the way, benefited in the tax line from the tax U. S. Tax reform, yes. Then you see on the next slide our figures, which we, of course, have in the focus, which are the KPIs looking in the future of the rest of the year, the order intake and the order backlog. The order intake is coming down a little bit 10% as assumed by our side as planned because in the prior year and it's mainly driven from the DCS business because if you look and Stefan will show you later on the segments in more details, but you will see a positive, a strong development in the order intake in the Optics and Life Science segment.
So it's mainly driven by the DCS segment where we had some major orders several major orders realized at the price here, but Stefan will explain it to you a little bit more in detail later on. For us, in the focus of the book to bill ratio, which is clearly above 1, it's 1.05, meaning we have still €9,000,000 more order intake when sales. So this is in line with our expectations. And if you look to the order backlog, it's the same level like at the year end, stable order backlog, good basis for the coming months, almost 75% of the order backlog will be converted to revenue this year. So we are quite sure that we will have a good year with the rest of the month.
And if you then follow me to the last slide before Stefan will show you the segments in detail to the free cash flow, Then you see that we had a very strong operating profit before the adjusted working capital. We have, obviously, with 16% growth rate, you have great receivables, you have inventories. So we have an increase in the working capital, which cost a little bit cash flow, free cash flow, but which will be raised in the months to come. So our cash flow from operating activities is equal to the last quarter 1 year ago. On the investing side, we are still below prior year.
But in the prior year, we had the big investment in U. S. And our Rochester Hill in the campus building. But our investments will be high and strong throughout the year, so the higher investments are coming. But for the time being, our free cash flow in Q1 is still 30%, CHF 13,300,000 compared to CHF 10,200,000 above prior year Q1.
So having said this, I'd like to hand over to Stefan again. He would and he will explain to you the performance of our segments.
Thanks, Peter. And let's get right into tier, starting with the Optics and Life Science segment. In the Optics and Life Science segment, quite frankly, the demand is still very, very high on all sides of the house here, in all our businesses in our Optics and Life Science segment. And it has to be said that the Optics and Life Science segment in Q1 has seen a remarkable performance. We've grown orders by almost 13% in the 1st 3 months of this year.
At the same time, revenue has been increased by 16.6%, always 17% over and above what has been already a very strong Q1 last year. Nevertheless, despite that strong growth in sales, the book to bill is still above 1 or actually quite a bit above 1, which speaks to demands that we see in this segment. The ongoing strong demand in the semiconductor manufacturing industry, the ongoing strong demand in our Healthcare and Life Science businesses and really across that whole industry at the moment. And as I already pointed out, we are monitoring very, very closely the development, in particular, of course, in the semicon arena. We are discussing with our customers.
And at this very moment, all the questions we get is, can you deliver more, please? So we don't see any slowdown in that segment at this very moment, of course. As a result of the growing revenue and profitability continued to increase in that segment, EBITDA margin in the segment is now at a very strong 23.2%. Obviously, there is a volume but also a mix effect. And overall, the only thing I can say to OpEx and Life Sciences has been an extremely strong Q1, and we continue to be very bullish about this business going forward.
Let's go to the Mobility segment on Page 12 of our presentation. Starting with revenues. Revenues are up sharply by 31.9%, almost 32% here. Obviously, that has been driven by the contribution from our top collect project. We've anticipated that.
We've communicated that. I think there's no surprise here. We are now in the phase of delivering and obviously invoicing the hardware, the equipment to our partners, Toll Collect. That's an effect that's particularly strong in Q1 and Q2. I think we've detailed that a number of times now.
It's a particular H1 effect. We are in discussion about ongoing business in terms of service contracts and the like, so that's positive. The growth in this quarter is very strong, and I continue to point out that's a H1 effect. Nevertheless, we are very bullish about this business as well. The order intake in the business is slightly slower.
It's actually down minus 8% versus a very strong prior year, and we have discussed the reasons for that. There are certain frame contracts that we have booked in the past. And overall, though, we are actually positive concerning that business going forward as well. Clearly, the profitability of the segment has been improved, well, significantly, very significantly. Again, not a surprise to us, and we've communicated that in the past.
We had in prior year onetime expenses in this business, development expenses, R and D expenses, in particular, expenses in costs related to the Torcolek project, and we're now harvesting essentially from what we saw last year. The EBITDA margin is now at 11.5%, which is obviously very strong for our Q1 in this year, but again, driven by, in particular, the 4th quarter. With that said, let's go to the DCS segment on Page 13. And Ankit already pointed out, we do have seen a sharp decline in orders in this segment. However, let me again point out that we had an unusually strong comparator here.
The Q1 2017 has been unusually strong. We've booked a number of large orders in Q1 last year. I'll point you to a tank order for Poland to a U. S. Army order that we have communicated, I think, last year and to an order to do with our Nixos Bird products.
So big orders have been booked in Q1 20 17. That makes the comparator difficult. Nevertheless, it is it has to be said that in the Defense and Civil Systems segment, the order intake in Q1 went down pretty significantly. The sales are flat in this segment or almost flat in this segment as expected versus prior year. Nevertheless, the EBITDA number, profitability is actually up, and that is due to a positive sales mix.
The mix has been favorable for us, which resulted in an increase of 13.7% of the EBITDA margin, which is now at close to 10%, which again for Q1 is actually pretty strong. With that said, I would like to take you somewhat into the future and look somewhat into the future with you again. If you follow me on Page 15 of our presentation, we have discussed with you and then with all shareholders and stakeholders our ideas around strategy going forward. And we've discussed that we see our strategy going forward really to be around 3 building blocks for growth and margin expansion. We've discussed the ideas around more focus.
We've discussed our results around more innovation and around more international. And we've discussed that essentially, we aim to take the transform the Enoptic Group from a relatively diversified industrial conglomerate to a more focused technology group. Let me just point out the, shall I say, the what happened thus far and the progress we've made thus far. Of course, it's very, very early. Just a few weeks into that period, nevertheless, we obviously have started on working or implementing and deploying these strategies.
So in terms of more focus, we've started 2 projects, one project to consolidate legal entities and to set up our business more focused. So I would say going forward, so we have started the project to consolidate our OS and our HCI divisions into 1. And we're very optimistic that in the beginning of the New Year, 2019, we will be able to start with our new business setup. And again, in discussion also with representations from the unions and other stakeholders, we have started to merge legal entities or projects to merge legal entities here in Germany, in particular. We have a second project that we've started.
We call it JOIN. It's a project that's meant to leveraging efficiencies in our admin functions, and you do see some of the effects here. Basically, the idea is to consolidate and make more efficient our corporate functions and our shared service functions. We're going to consolidate those functions into 1 entity in order to leverage synergies and become more efficient in our admin work. In terms of more innovation in terms of our R and D work, Peter pointed to that already.
We have stepped up our R and D expenses by about 5%. Obviously, that's just the first step, but we wanted to be clear to the organization that we actually do mean it. We do want to spend more on innovation. We do want to become more innovative. I think combined with the fact that we've also increased our sales and marketing expense somewhat and in the same time reduced our general and admiss expense in a way that overall is actually saved on functional cost, shows that we're, yes, committed to what we've set and promised to the shareholders and to the capital markets.
We want to make our business more agile, faster and more nimble in a way, and I think we're off to a good start here. In terms of taking the business more international, again, I have said a number of times and we have said a number of times that the goal here is not to install additional infrastructure. We have infrastructure around the globe. The goal really is to make our company think and to tick more globally and to, yes, address, shall we say, issues more from an international perspective and then regional perspective in the various regions. And also to do that, we have hired a new President for Genoptic Asia, a colleague who is Chinese actually, somebody that I worked together for the last 10 years with.
I trust him a lot actually. He came to us from my previous employer, Tecan. Before that, he had been with Danaher with GE at MetLife Toledo. So he he's used to work in the international environments, but on the other hand, also obviously being Chinese and living in Shanghai, somebody that understands in particular the yes, the name of the game and the roles of engagement in China. And somebody, by the way, that's the absolute evangelist if it comes to compliance, that's his first he wakes up thinking about compliance in case the vet thinking about the compliance, and he learned that very much over the years.
We also have communicated that we have a new head of our traffic solutions business, somebody that's actually living in England, representing the English part of that business. Kevin Chavez came to us from an acquisition that Unoplic has made some time ago into that business, and we're pretty confident that it will enable us to actually integrate the various parts of our traffic solutions business, the better. And to come up with combined and integrated and holistic product road maps, not driven from a particular site or country view but from a global view. And in addition to that, we have communicated that we have to change the composition of our executive management team. So if you want the extended management board, if you want the real, operatively responsible body of our company, we have now included, obviously, the new President of Asia, but also our American President is represented.
In other words, we have our regions represented on the highest level of the organization, which is which I think is a very good thing. So off to a good start on all three of those building blocks. We are very confident that we can deliver good results here. We have communicated the priorities for 2018. I think I did say a number of times, we have to walk the talk here as management.
We want our company to be a bit more focused. And
as part of
the board here, our part is that we've given and set 3 pretty clear priorities for the whole of the organization for this year. Obviously, we've talked about that the establishment of the new business structure is on the way, making good progress there. In terms of launching the new brand for our mechatronic businesses for our defense activities, I can report that we have started a project here together as a professional agency. And again, we're confident that this new business or this business with a new brand identity will be starting into the New Year as planned with the new brand, with the new name and with the new identity, if you want. And in terms of reorganization of businesses in Asia, as discussed, hired the new President there, and he is currently traveling around in Asia quite a bit.
He just started and is trying to get an overview of your business there, coming up obviously and thinking about possibilities and options, and we're going to report on that once we know a bit more about it. Finally, let me just give a few color or comments and put a bit more color, shall we say, around our guidance 2018. We did say that we confirm our guidance today, obviously, in the light of the very strong Q1, in the light of a still ongoing strong demand in the semiconductor arena and in the light of a somewhat reduced FX risk. Dollar came back a bit in the last few weeks, which is good for us. So in light of those very positive factors, we are confirming our guidance.
There are still some concerns. We have and we've discussed that a number of times, increased, yes, shall we say, increasing strain in our supply chain and in the labor market. It's getting increasingly difficult to hire skilled personnel on all our sites. Unfortunately, in particular, here in the areas where we have our factories for the optics and lifestyle segment. We are, like many other companies in Germany at the moment, trying to hire skilled personnel, but it's getting increasingly difficult.
We come up with all sorts of incentives already for employees that can defer possible candidates to us, which does show that the labor market in Germany is pretty tight at the moment. And that's a risk that we see for the remainder of the year. There's also a risk of certain, let's say, politically induced shocks to the global economic system. I'm not in the business on commenting on political moves of certain players, but we, of course, have the obligation to look into that. It's not as if we're 1 to 1 linked to moves, in particular moves that have been communicated in the last few almost hours by the U.
S. Administration. But we do see overall uncertainty in the political climate, and there could be risks there could be risks and shocks to the global economic system. And therefore, we think we're monitoring for that very closely, and that could be a risk for the remainder of the year. So taking it all sort of unbalanced and weighing all these factors, as I said, we are confirming our guidance at this point in the year.
3 months into the year, we expect revenues we continue to expect revenues to be in a range between €790,000,000 €810,000,000 and anticipated EBITDA margin between 14.5% 15% and an EBIT margin between 10.5% 11%. With that said, Let me pause here and love to get lots of questions from you guys.
And now we have a first question from Mr. Abbott. Mr. Abbott, your line is open.
Yes, good afternoon.
I have 3,
if I may, sorry. First of all, in your Optics and Life Science division, obviously, the operational leverage is very high given the strong volume growth and the mix effects you mentioned. But from this level, assuming revenues were to continue to grow, which your order book obviously indicates, A, would you have the capacity to meet that demand? Or at what point would you have to start increasing capacity? And B, should we expect a similar drop through margin on those incremental sales?
The second question was if you could just give us a feel maybe for how the order pipeline is looking in the mobility and DCS divisions. And the third one was on mobility. Obviously, strong top line growth in the quarter, strong year on year increase in earnings, yet the margin was not back up to double digit level, which obviously implies you're earning a single digit margin on this Tolco Lake project. Should we expect kind of a similar mix in Q2 and then in the back half of the year in mobility lower sales as Toll Collect installations roll out, but a higher margin again? Thank you.
Hey, Greg, thanks for your questions. Good questions, and good afternoon to you in particular. On the first one, optics and life science, capacity we try to enhance already. It's not as if we're holding back on any investment here. On the contrary, we do need to expand capacity.
We're trying to expand capacity, and the limiting factor is labor. And with that said, yes, we could do with more capacity in that arena. If we would have that, and hopefully, we get that, obviously, there you are right, a pretty high operational leverage effect or lever effect. Nevertheless, we do run fairly high margins in the segment already. That would be a bit almost reckless as I'd say there's even room for more.
But hey, I mean, it does depend really on how fast we can manage to ramp up our capacity here. And again, limiting factor on our end really is labor. That's the issue. On the auto pipeline for mobility and DCS, on the mobility side, 2 areas here. There's the automotive business and there is the Traffic Solutions business.
On the Mobility side, we're actually pretty positive, shall we say, both in for both areas. I think on the automotive side, we have a good order sorry, pipeline, a good pipeline. Obviously, long as a question of conversion rates and how high a conversion rate really is and can you convert at all or not. But on the automotive industry or automotive business, we're confident. On the traffic solutions side, the problem with the traffic solutions business is always comes in chunks.
There are a bunch of relatively large quotes and tenders and businesses out there at the moment. Obviously, we're competing. And it's a question of pulling them in or how it falls to us or to competition. We're working hard on making sure it comes to us. But it's always it's chunky.
I think that's what I can say. It could go our way. If all goes our way, hey, fantastic. But rarely happens. None of it goes our way is unlikely, so we'll have to see the dice roll here.
On the DCS, that's a bit harder for us to predict at the moment because what we see out there are, on the one hand, very positive signals from our customers and our partners. If you follow what other participants, German participants, for example, in the industry are reporting on the auto play that would think, wow, that's fantastic. And if only auto play comes to us, I mean. And of course, these political signals that we all get are positive. But at the very moment, we don't see it as a sort of order in our book.
So I'm a bit more cautious here really because we need to find out how come that we have these chosen mixed signals. On the one hand, very positive signals from important customs of ours, which should actually transpire and increase sales on our end. But on the other hand, yes, we haven't booked it. So we're a bit more cautious on that end. In terms of the margin figure in the Mobility segment, I mean, first of all, the EBITDA margin is at 11.5% already.
No, I was referring to EBIT. Sorry. Yes.
Yes, yes. I figured. Which is EBIT is at 8.4%. And you are right, it has been higher in the past. However, please do keep in mind that that's a Q1 here.
So I would think that the order remainder of the year, it will rise to more sort of the normal levels that I think you referred to sort of the double digit range. Of course,
I don't want to give sort of
too much of a guidance here. You never know. One never knows. But for a Q1, that's a pretty strong margin already.
Okay. Thank you very much.
And
then we have a question from Mr. Breth. Your line is open. Mr. Brass?
Hello and good afternoon. I have a question also on the Life Science segment. I guess here, it looks like it's also very strong demand in general. And is it fair to assume that here maybe also the little bit not linked strongly to the semiconductor space. Therefore, it's the beginning of a cycle that maybe continue to be strong going forward for a while now.
And my second question would be also looking at the labor shortage, I would say, in Germany. Is there a possibility for you maybe to do some bolt on acquisitions maybe outside of Germany to have a second foot somewhere with strong labor force where you can outsource a little bit of those pressure that you have in Germany?
Thank you very much for your questions, and good afternoon. To the first one, life science is actually not very cyclical typically. It's a fairly nonvolatile marketplace. So I wouldn't say that the beginning of the cycle is probably more that we are overall successful in that marketplace. And I would also like to point out that in this HCI segment, we have life science, health care and industry.
So that's also an industry related part. So I would not read into that or let me put it that way. I would not want you want to leave you with the impression that this is a result of a strong surge in demand on the Life Science market. I think life science market had been pretty strong in the last few years. It's typically a less volatile segment, and we're making good inroads there, shall we say.
I think that's a better way of putting that. In terms of the bolt on acquisitions, obviously, you know that I can't disclose what we're working on exactly. We are constantly in discussion and processes for potential acquisitions. In your specific case, though, trying to acquire capacity, in particular for our optics segment, that's a bit more challenging because what we are doing in this segment is really pretty specific and special. There is not that there aren't that many places out there that are sort of a good fit for us in this particular optics segment where we are seeing the strong demand at the moment and the shortage in labor.
So it's a bit harder to see. Yes, there are some competitors out there, but they're all working on their own stuff at the moment. So yes, it's a bit harder to see, shall we say. But overall, of course, we're constantly working on potential M and A opportunities.
Okay. Thank you very much.
The next question comes from Mr. Schalmann. Mr. Schalmann, your line is open.
Yes. Good afternoon. The first question is on optics and life science. What drove the demand in health care and industry applications? Or is that existing applications with existing customers, with the new applications, new customers?
So I want to get a better feeling of structure of the current strong order momentum.
Existing, predominantly.
Okay.
Okay. I assume you referred to some sort of new products that we have learned from existing.
Yes. Okay. And then again on the capacity issue, I mean, how what is the I don't want to get a guidance, but I mean, what is the ability you think that I mean, the order momentum looks like you could do double digit growth maybe in 2018 2019. Would you say that might be possible if order momentum keeps up to meet that with the capacities you can add? Or do you think that is too high and that maybe high to high single digits would be a more reasonable number, just in regards to the available capacities you see in the market?
That's a good question. That's a
very good question.
I will answer that. Look, I think first of all, I think the anticipation that the demand remains at that very high level throughout 2019 as well is very optimistic. But if we would take that optimistic scenario and it does remain on this high level, then we would do our very best to fulfill the demand. I think at some point, the industry will the industry is struggling already. Let's put it on the table.
The whole industry is struggling already. We're already at a point where it's getting hard even to get material. I keep pointing to the labor, but at some point, specific glasses that we all need, we're just running out the world is running out of calcium fluoride glasses at the moment. Thank God, at this very moment, we haven't seen sharp rise in prices, by the way. That's another factor to sort of think and keep in mind.
We don't see that at the very moment, but we have long term contract, So that could change at some point. So I think the feeling I would like you to leave that with is if it continues to be as strong as it is in the moment in throughout the next 18 months, shall we say. At some point, we will struggle as a total industry to fulfill that, But we will definitely be able to continue to grow very, very much in this segment if the demand stays at this high level.
Okay. That's fair enough. With respect to the automotive pipeline you mentioned, was that relating to the metrology business or the laser systems business or both?
Both. Both. Both, yes. I see that it's nodding here saying both. It's in terms of capacity, I see.
But the metrology business is actually seeing we're positive about the metrology business. The metrology business is seeing good demand at the moment. I think overall, it seemed to detect that the discussion in the industry has changed a bit in the last few months from the original, oh my god, what's going on and what does this whole e mobility mean to us to a that's actually not a bad thing. Because lots of people are talking about hybrid engines and hybrid models at the moment. And if you want to have a hybrid, you need a particular or very you need a combustion smaller but more effective and efficient combustion engine as well.
And that drives demand for a bit of a change in the tone in the discussion here. And it does show in our order book. And on the laser processing side, we had a bit of a slow start into the year, but the pipeline is strong. So that should come in the next or that should even increase going forward.
Okay. The laser pipeline is the existing larger projects with existing customers or new customers, new projects filling the pipeline?
Both. Mainly existing customers, but some new as well.
Okay. And my last question is regarding the mobility, the toll collect, the things that were on around the conversion. Do you think that a new ownership, a new owner there has an impact on your positions in gaining the upcoming service contract?
I don't think so. I don't think that has an impact. Of course, one never knows. But what we can tell from our end, what we detect, at least, in the discussions is that seems to be a well managed and professional process. So at this very moment, we have our partner, Toll Collect.
We have a good and professional relationship with our partner there. And I can't comment on the project and the process there. But I would assume that everybody in the game acts professionally. And so therefore, I think we have a slight or a plus or a negative for us. It's not negative or there.
Okay. Many thanks.
Welcome. And thanks for your questions.
Then we have no further questions at the moment. And Mr. Brass has another question. Your line is open.
Yes, I have one follow-up. On Page 5 in your presentation, you see if you look at the APAC growth, which is 4.9%, at least it looks a little bit low at least in comparison to the other growth rates, which are quite high. Any comment on here why it's, let's say, only growing slightly? Or is there any specific customer reason that should also be better than in the future?
That's a good catch. I don't have a particular reason here, but it's we have communicated, I think, a number of times already that we are not, shall we say, satisfied with the growth that we do see in Asia, which is why we actually do address that. And we see that as an important potential going forward. So you are right. It's overall somewhat disappointing and good opportunity for further growth going forward.
Thank you.
And Mr. Abbott has another question. Your line is open.
Yes. Just really quick follow-up again on the current in the optics business today overall. With demand so high and discussions you say for the customers typically being about speed of delivery, I would assume, therefore, your margins suggest that. It's not that it's also a price effect, I. E, the price sensitivity, I guess, is not a particular issue.
Are you able to actually take advantage of it and push through some price increases? Or is it really just more a volume and a mix in terms of product mix that is driving net margin?
Greg, typically, these are long term contracts in that OEM business. So often, prices have been way in advance actually. But it's more of a volume and mix effect of orders. Look, I mean, everybody is really pretty foolish not to try and use it. But I would be not I have to be more sort of yes, to be frank, I would say, it's more of a long term contract business, and therefore, prices have been discussed way in advance.
Okay. Very helpful. Thank you.
And then we have a question from Mr. Roten Eicher. Your line is open. Mr. Rothenager?
Yes. Hello, Peter Rothenager. One question regarding your P and L. I was a little bit positively surprised
about a
strong decline in administrative expenses. I know Q1 last year was a very high figure, but also with comparison to the recent quarter, we have seen already an improvement. I know, Doctor. Trelegas, this is particularly one of your targets to bring down administrative costs. But has there already been some special positive impact from your measures?
Or what is the reason? And what can you expect here going forward for the upcoming quarters?
Good afternoon to I assume you're in Munich. Look, you pointed to it. Q1 20 17 has seen particular onetime effects in connection with the change in the Board, and that has been booked. Expenses that had been booked last year. That obviously helped us in this quarter, the comparison this year to prior year.
Nevertheless, we have already we also have taken measures to reduce our admin expenses, which predominantly are
labor costs.
And we've taken and booked those expenses last year and did you see the windfall this year?
The savings.
The savings, yes.
Okay. So what we have seen now in the Q1 can be perhaps a run rate also for the upcoming quarters?
The direction. The savings, not the savings. Direction,
yes. Okay. Then on the operating side with regard to Mobility, would you say in terms of the Tolcolect project, there would be a similar stake in terms of sales like in the second quarter like in the first quarter?
Similar.
Yes. And then the equipment delivery is gone. So in the 3rd quarter, no further sales coming through?
Normally not, if it's running like that. Yes.
So depending on how it goes, but that's the plan.
Yes. In terms of traffic safety, you mentioned in general the pipeline is not too bad and there is competition out. But what is your personal view? Can we see here in the current year some major projects coming up? Or yes, what is your picture?
Look, we hope, but hope is never a good indicator, shall we say. We're competing. And obviously, as always, if we do win real major orders, we will communicate that. We're working hard on
a few,
and we hope that the dice will fall, as I say, and roll into our direction. We have everything we have with offering there. I think we have a good offering there. I think we have a good offering there. I think we have a good
And then we have a question from Mr. Oliver. Your line is open.
Hi, thanks for taking my question. Just one, if I may. Should we expect some cost already this year as part of the execution of your strategy 2022, more specifically in your organization of business coming out from division? Thank you.
So I'm not quite sure if I got your question correctly. Has it did you ask if you expect costs in relation to the reorganization?
Yes, already this year.
Okay. I think we've we don't plan with a lot of big sort of cost impacts from a restructuring perspective here. We will see some expenses, of course, but I wouldn't plan with a lot of large restructuring expenses at this very moment in connection with the reorganization. Okay.
And maybe then another one for the pulp project. Should you win another order in pulp project? Should we assume that there is a bit of a learning curve effect? Or you will still need to go through the same prep work effort that you had to do last year?
I mean, I wouldn't I would work hard with my organization to make sure that we do get a learning curve effect here. Otherwise, we wouldn't do the right thing. Obviously, if there would be another project falling into our laps, Often, they are somewhat different. So there will be adaptation costs in this case, or there should be adaptation costs in this case. It's a bit speculative, to be honest, and I hesitate somewhat speculate because as I say, the specific cars specs are typically different in different regions.
And at the very moment, we don't have another. So it's a bit hard to speculate. But some leverage effect should be there. We wouldn't have to, I think, reinvent the whole thing entirely.
Direly. Thank you.
You're welcome.
Yes. And we have no further questions anymore.
Well, then thank you very much again for participating and for your interesting questions. Again, in summary, I think we're, yes, coming off a strong start into the year as expected. We have some tailwinds. We do see some risks. Overall, we're confident with respect to the rest of the year.
And yes, we'll I think that's the most important one, making good process and progress rather in deploying our strategies. And I think that's the most that's even more important than an isolated quarter. We're making good progress in deploying our new strategies, and we fully intend to do so going forward. Thanks for your questions, and have a good rest of the week. Or for those of you in Germany, a nice holiday tomorrow.