Ladies and gentlemen, thank you for standing by. I'm Stuart Chircop, call operator. Welcome, and thank you for joining JOST Werke Q3 2021 conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch tone telephone. Please press the star key followed by zero for operator assistance. Our speakers today are Joachim Dürr, CEO of JOST Werke AG, and Christian Terlinde, CFO. I would now like to turn the conference over to Joachim Dürr. Please go ahead.
Thank you, Stuart, and a very warm welcome from Neu-Isenburg to our Q3 2021 investor and analyst call. We've had a Q3 with very strong demand worldwide for our products and, but also with very volatile supply chains and unprecedented material cost development. With our flexibility, we were able to deliver a quite strong Q3. The highlights were that we increased our sales by 28%, and we achieved a Q3 record of EUR 252 million in Q3, 2021. Our adjusted EBIT grew by 20% to EUR 24 million, and the adjusted EBIT margin was 9.6%. The Chinese market downturn and the truck market disruptions due to the semiconductor shortages could be offset by our global presence and our worldwide customer base.
The underlying demand in transport and agriculture continues to be very strong, with some demand shifting into 2021 due to the existing supply chain constraints. We have increased our outlook for 2021 and assuming there will be no shutdowns at our customers due to semiconductor or COVID incidents, we target for a sales volume of EUR 1 billion for 2021. Let's have a look at the market development in Q3. This is a comparison between 2021 Q3 and 2020 Q3. We can see that compared to last year's Q3 , we have a strong development. However, if you remember the previous estimations, the development is much weaker than initially thought.
That's true, especially for trucks, where you see the supply chain issues and especially the semiconductor shortages limiting the growth rates. For Europe, we have had a Q3 growth of 4% in the truck market, constrained, as I said, by the semiconductors. In trailer markets, we don't see these constraints as much, therefore, we had a growth of 31% compared to last year's Q3. On the tractor market of 8%. JOST was able to increase the turnover by 25%. North America, here the expectations have been much higher, but we still see good growth rates, 6% in trucks, 38% in trailers, and about 10% in the agricultural tractor market.
For JOST, we were able to increase our sales by 63%, which is substantially above the market, and it certainly also includes already some price effect that we were able to transfer to the market. Asia Pacific Africa, here the consulting institutes have found a 48% reduction. China weighs a lot in this, because we have seen China markets go down quite strongly, but we're able to compensate some of that with very strong Australia, South Africa, and India performance. On trailer markets, the market had developed with a +12%. JOST overall had only a -1% in that region compared to last year's Q3 . I think overall, we can be very satisfied with the JOST development in those market conditions, and Christian will lead you through more details about the regions. Christian.
Thank you very much, Joachim. Good morning, ladies and gentlemen. Also from my side, welcome to our conference call. As usual, I would like to, or I have the pleasure to go with you through the different regions of JOST and, then speak about some balance sheet related items. First of all, we start as always with Europe, our strongest and biggest region in terms of sales. As Joachim pointed out, we have achieved a very high turnover of EUR 146 million in Q3, and that brings us already for the year-to-date figures to EUR 460 million in organic or in sales.
That converts to an organic growth compared to the obviously pandemic-ridden year-to-date Q3 2020 of 30.4%. The strong sales growth in Q3 was achieved despite a significant reduction of the truck production volumes due to, as you probably all know, the semiconductor shortages. That led to some very abrupt disruptions of the production in our plants because truck OEMs were canceling or postponing call-offs at very short notice. Sometimes these notices came a week before the actual pickup would have been.
The trailer demand remains very high as the chip shortages really affected more the truck OEMs, and the order intake continues to be rather strong in both transport and agriculture. Our result, our adjusted EBIT grew by 12% to EUR 10.4 million in the quarter, and year-to-date we have achieved an 81% growth to EUR 41.3 million, the nine months of 2021. As Joachim mentioned already, we have implemented price increases with all of our customers to compensate for the sharply rising material costs. With this, we specifically at JOST are talking about steel. This is our main ingredient for our product and our main component. However, we all know that the development has not ended.
The prices continue to rise, and this will place also a burden on Q4. On top of that, we are seeing supply chain constraints, especially with transports from China or the Asia Pacific region in general to Northern Europe, to Europe, and especially also to North America, where there's a strong demand for all sorts of products, meaning containers to be put on ships. It makes it challenging to receive all the goods needed to fulfill the high demand that we're seeing. It's not only the disruptions in the supply chain, but obviously the high demand goes hand-in-hand with extremely strong increases in transport costs. This is especially for our agricultural business, a significant burden.
Overall, I think 81% growth compared to the year before, and an EBIT margin now at 9% for the region Europe, which please bear in mind, this region covers most of the headquarters costs. For us, it's a very positive development, and we're happy to see that. Now we would go to North America. Joachim pointed already out that with a growth of 60% in the nine months or 63% in the Q3 , we're quite happy to see that. We are benefiting in this region certainly from our growing market position and that is supporting our development.
Here, I think it's also necessary to point out once again, in a lot of discussions that we are having, everyone's talking about our truck market position. However, bear in mind that we have a very, very strong, and we're the clear number one in terms of landing gears in the U.S., and therefore, with a growing trailer market, we would benefit from that as well. Sales grew, as I said, 63% to EUR 67 million. The strongest growth was achieved in the transport business, again, and there more trailer than truck, because also in North America, the truck OEMs were suffering from material shortages, and therefore, the growth on the truck market was not as high as it was on the trailer market.
The result grew by 152% to EUR 6.4 million, and therefore outpacing sales, and the margin improved to 9.5%. Bear in mind that Q3 2020 was probably the quarter in North America that was mostly affected by the coronavirus, where we saw extended summer shutdowns with most truck OEMs, and therefore, you see this very, very high growth compared to prior year. The aftermarket portion in North America went slightly down compared to prior year, not unexpected, because last year most significant higher portion of our sales went into the aftermarket, close to 30%. Now we're about 27%, and that's also contributing to the very positive margin development.
Last but not least, our region, Asia Pacific Africa, with basically a two-sided picture. We were talking about the Chinese market. We said already beginning of the year, we knew that with the new emissions regulation, China VI, going into effect on July 1st, we would expect, first of all, we did expect and we did see significant pre-buy efforts by our customers in the first two quarters. That went hand-in-hand with a significant drop then in Q3, as you can see, where the truck market significantly went down compared not only to the Q2 and Q1 , but obviously also compared to Q3 in 2020.
China, 2020, with the exception of Q1, was a rather good year or a very good year, to be honest, because China was the first country affected by the coronavirus, but was also the first to come out of those restrictions. Q2, Q3 and Q4 in 2020 were very strong in China. Our reported sales declined by 1% overall in the region, and that was specifically caused by compensating higher sales in the other countries. All other countries we saw sales growth with the exception of China, but the biggest contributions were coming from the larger countries like Australia, South Africa and India. Looking at the adjusted EBIT, the adjusted EBIT declined compared to prior year by 19%.
Year-to-date, we are still 71% higher than we were a year ago. The margin is in line with the nine-month margin of the last year, pretty much so, we were last year with the margin somewhat with last year. Overall, it's the highest margin that we have by region. The main reason for that is that here we are selling significantly higher portion of off-road and heavy-duty couplings, which are always coming with a higher margin than the standard on-road couplings. Let's look at the group. The group achieved now a year-to-date sales number of EUR 783 million. This is a record number for JOST, and Joachim will speak about the new guidance.
You see, we've already achieved more than three-quarters of a billion EUR in sales this year. Our outlook is quite positive. We have seen the typical summer seasonality for the group. As I said, we have seen the very much expected downturn of the Chinese market. Overall, our sales grew by 26.5%, and our results grew by 20% in the quarter. Overall for the year, we are seeing year-to-date 82% EBIT growth amounting now to EUR 84 million. As we said, we have implemented price increases to all of our customers, and we need to bear in mind that since those price increases usually are implemented with a time lag, we will not see the full-year effect before next year.
Next year, we will certainly see the full-year effect of those price increases. On the other hand, we are still seeing continuously rising material prices. This is really the picture on sales and profit. Now let's talk about some of those other bridges that you're known. Our development of net income, you see, we have had, well, first of all, significantly higher income taxes, starting with a net income of EUR 34 million, which is much higher than EUR 5 million we achieved last year. We've had much higher income taxes, which are natural. Our finance results went down slightly from EUR 7 million to EUR 5 million.
Main reason for that is obviously we're paying slightly lower interest rates because the leverage at year-end and also throughout the year was better than we had last year. The other thing is we are enjoying some unrealized foreign exchange rate gains, especially from the deterioration of the Swedish krona and the British pound. That brings us to an EBIT of EUR 46 million. You see the usual adjustments, depreciation and amortization of purchase price allocation related results is pretty much the same as last year, EUR 21 million. You've already seen that number, EUR 13 million of extraordinary expenses for the sale of our JOST U.K. business. We have only EUR 4 million less of other exceptionals.
This compares to about EUR 13 million of exceptionals in the last year, which were related to the acquisition of Ålö. Overall, we achieved an adjusted EBIT of EUR 84 million, as already said. We do the normal walk. Finance result is the same, EUR 5 million. We have to apply a pro forma tax rate of 30%, with it, which would convert to EUR 24 million, and therefore our adjusted net income is EUR 55 million, and that is now 203% higher than last year. Look at some more financial KPIs. Our ROCE improved from 12.2% at year-end last year to 17.6%.
The improvement versus Q3 2020 is even higher because there we've achieved an 8% growth from 9.6% to 17.6%. It's also higher than in Q2 and therefore a very positive development. The equity ratio that is the threshold is basically 30%. That's something like a margin that most banks like to see. We're at 30.8%, and that's 3.5 percentage points higher than last year, despite the fact that we paid a EUR 15 million dividend to our shareholders. The net debt development's also quite positive. We're below the 1.5x EBITDA threshold, so we're now at 1.47x. Overall net debt amounts to EUR 206 million.
You are seeing that we are constantly deleveraging. Basically, our business model with very high cash flows is still absolutely intact, although I need to speak about the cash flow on the next slide. Overall, it's positive. Leverage improved significantly, and we're quite happy with this deleveraging, bearing in mind that only a year and a half ago, we had taken on over EUR 200 million in additional debt for the acquisition of Ålö, and now we're already at a level of 1.47 net debt. That's quite good for us. Our cash conversion is pretty much in line with the prior year and previous quarters, so we're at 85.3%.
Last year we were at 83%, that is in line. Free cash flow. The positive thing is free cash flow with EUR 18 million is a positive again. After Q2, we were basically breaking even only. This is despite a very strong increase in working capital. In working capital, what we're seeing there specifically is a very high increase in our inventories. This goes hand in hand with what I've said before. When truck OEMs cancel at the very last minute, we will definitely see a much higher finished goods inventory, and this is what we are seeing. The planning is less possible, and this goes at the expense of inventory.
Another thing that goes at the expense of inventory increases is the fact that we have supply chain disruptions. Sometimes we are missing some parts, and if we miss the parts, then the semi-finished product cannot be finalized, and therefore, we're also seeing a significant increase in semi-finished parts. This is the negative trend on the inventory. I can assure you we are working on this and overall with the EUR 18 million we're happy to have the positive cash flow, but it's not what we would like to see in a normal year. This is not a normal year that needs to be kept in mind. CapEx with EUR 4.6 million is absolutely in line with last year, it's the exact same number with the higher sales.
Of course, the percentage of sales is going down. We're now at 1.8%. CapEx is something. We obviously have the goal and target to be below or at 2.5% of sales. CapEx cannot be planned within a flip of the switch, so it takes some time, and we have a certain CapEx plan that we're sticking to. We are also assuming that we will probably not achieve the 2.5%, but this is not negative, but okay, we're saving the cash for next year. The net working capital is now again below the 20% mark at 19.4%.
In Q2, we were at 20.3%, and I've already spoken about the development of inventories, and basically net trade receivables and trade payables are increasing in absolute terms because of the growth in sales. Overall, it's still better than before. It's better than last year. We are confirming our target to end up below 20% of sales for our net working capital. With this, I would like to hand it back over to Joachim, who will speak about the outlook for the remainder of the year.
Thank you, Christian. Let's look at the market outlook for the full calendar year 2021 as compared to 2020, which, as we all remember, had obviously a COVID impact included. We do see overall growing markets compared to last year, even though the growth rates that you see on this slide are a lot lower than what you saw three months ago. That is because of the already mentioned restrictions that we see in the global supply chains and especially in the semiconductor supply chains. Overall, we expect for the year in Europe, a truck market growing by 10%-15%, and that's less than the trailer market due to the mentioned semiconductor shortages. On trailer, 20%-25%, and on tractors, 5%-10% on agricultural tractors.
North America, even higher growth rate. There used to be estimates of about 40%, for truck and trailer. Now the estimates are between 20-25 for truck and 25-30 for trailers, and 15-20, quite significant, for agricultural tractor, which usually is a much more stable business. APA, for the market, the expectation is that they contract by 10%-15% for truck and by 5% to more or less flat market in the trailer business. With that market outlook, and the performance that we've seen up to Q3, we would like to adjust our guidance and our outlook for the overall year 2021.
As already mentioned, we expect sales to grow more than 25% year-over-year, and if we don't see any shutdowns due to semiconductor or COVID issues with our bigger OEM customers, we are targeting the EUR 1 billion mark for this year, first time in JOST history. Our adjusted EBIT will grow more than sales, so that despite the material cost increases and the supply chain challenges, we expect to increase our adjusted EBIT margin over the 9.2% that we've had in 2020. CapEx will be around the 2.5% of sales, with the growing sales, maybe a little shy of that. That's for the new guidance. I would like to come to the overall executive summary of this call.
We had a strong Q3 in 2021, despite the already expected market decline in China and the semiconductor shortages that have been affecting mainly the truck production volumes. The logistics disruptions and the sharply rising steel prices did affect us in Q3, but we were able to compensate that, partially offset it, with the price increases that we forwarded to our customers. North America was our strongest region, repeating the benefits of the strong market share growth that we have had in the past.
The net debt leverage and equity ratio improved considerably, and I think that's a real good win, especially taking into account, as Christian said, that we've only closed the JOST largest acquisition in January of last year, and we are back to a net debt leverage of below 1.5 x and an equity ratio above 30%. We are looking optimistically into the remaining fiscal year despite the challenging environment and therefore have raised the guidance for 2021. With that, I would like to thank you for your attention, and we're open for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a telephone question may press star followed by one on their touchtone telephone. Participants on the webcast can write in their questions in the Ask a Question box. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a telephone question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Jorge Gonzalez Sadornil from Hauck & Aufhäuser Privatbankiers AG. Please go ahead.
Hello, good morning. Thank you very much for taking my question. I was wondering if you can give us some color on the normalized revenue for the APA division. As we have seen this year, there have been a lot of different effects because of China VI and also the supply chain issues and because we don't have a split of the weight of the different countries in that division. I think it will be interesting to know what you consider a normal year for this business.
Also another question will be if you can give us also some color about the implications of the backlog that you have now, what it means in terms of price increases for next year compared to the current situation and what we are seeing now in the P&L. Should we expect material increases of prices next year for the trucks and the trailer business? Thank you very much.
Okay. Jorge, thank you for your question. Let me start with the first part, your question about a normalized revenue for Asia-Pacific Africa. That's quite challenging to answer. Maybe because the region is very diverse and the economies within the different countries are not going hand-in-hand and in tandem. It's very challenging to tell you what is a normalized revenue. What I can tell you from the past is that China, on average, over the last four or five years, made up roughly about 50% of the APA revenue. So the remaining 50% were split between. The big countries have been traditionally the ones that I already mentioned during the call, and that is South Africa, Australia, and also India.
We are always seeing a good contribution also from our Southeast Asian business, which covers Indonesia, Thailand, and Singapore. As I said, once again, the Chinese market contracted this year. There was a sharp drop in Q2 or after Q2. Overall, this year, China may not be 50% of the overall revenue, but going forward, I would expect China to come back next year. I would also expect that China will probably make up about 50% of our APA sales. That would be our normalized assumption for the APA region. We are hopeful and very optimistic about the development in the Pacific part.
That is New Zealand and Australia. They've recovered from rather weak sales in 2019 when there were a lot of bushfires and a lot of business interruptions. Despite COVID, they have been doing quite well in 2020, but even better now in 2021. Also, South Africa has been very strong. South Africa is for us, that is where the sales are generated. However, we cover basically the whole sub-Saharan area out of South Africa. All the parts that are sold into other African countries, which are sub-Saharan, those will be accounted for in South Africa. That's with the African continent also, with the growing demand there, it should potentially increase.
I hope that gives you a good indication, but you know as good as, or as well as we do that the APA region is quite volatile and there are lots of fluctuations in sales and therefore there is no real normalized revenue. With the other question, I would like to hand it back over to you, Joachim.
Jorge, your question concerning price increase. Maybe before I come to that, just adding to the China. The expectation for China for next year right now is that it still will be below this year. That's because we had a very strong first half year in 2021, which was about four times the volume for trucks that we are seeing right now on a monthly basis. That is the current expectation. For the normalized, as Christian said, the 50% of China, that is, that's probably what we would normally calculate. Concerning the price adjustments to our customers, you asked for the impact on the backlog.
The backlog is not really that relevant, because typically we do not have fixed prices when we take the order, but we have fixed prices for when we take the order, but with a linkage to a delivery date. So we don't have the cases, and I think that's what you may have been asking for, that we have frozen in the price until, you know, mid-next year when we are taking the order. The biggest impact anyhow are the OEMs where we have material escalators agreed. There we have the typical delay, and Christian mentioned that in his presentation a little bit, that we will be seeing also in Q4 still, the fact that we have not totally forwarded the price increases because the adjustments are done over an average period anywhere between six weeks and six months.
That means the full price impact on material prices will only be transferred beginning of next year. In Q4 we will still have only partial price impact transfers to our customers. Overall, as I mentioned earlier, this will always be a partial impact only, even though we're doing I think a quite good job in negotiating in a very fair and open way with our customers. We also have other impacts like inflationary impacts, especially freight costs, but also energy costs in North America, also labor costs that we cannot automatically transfer to the customers. That will be a longer period of price negotiations to bring that back to the normal levels, or to bring the cost down if that happens earlier.
Thank you very much. Please allow me a quick follow-up on the APA region revenue for next year. Is the rest of the business outside China, well, has the rest of the business the same mix? So are the margins similar in the rest of countries for that region?
No. They're no. The margins are very different. We have different market price levels in all regions. As I mentioned, for instance, the Southeast Asian business, that is predominantly heavy-duty and heavy-duty couplings come with a much higher margin than the standard on-road couplings, which we typically would sell in China. Also keep in mind that China itself, we had spoken about that last year a lot of times in China, we had another norm going into effect that would ban 3.5-inch couplings from being allowed to sell for on-road transportation. We are still selling 3.5-inch couplings in China.
We are still not certain if and when this will be totally banned, but obviously the Chinese government is not enforcing that regulation. Also in South Africa and especially in Australia, we are selling a lot of those heavy-duty couplings, and that means that the margins are quite favorable there compared to the strong on-road business in China. There's also, China is certainly not our highest margin country. That needs to be said.
Very much.
Okay.
As a reminder, if you'd like to ask a telephone question, please press star followed by one on your touch tone telephone. If you're dialed into the webcast and would like to ask a webcast question, you can write your questions into the ask a question box on the webcast. Next question is from the line of Nicolai Kempf from Deutsche Bank. Please go ahead.
Yes. Hi, good morning, and thank you for taking my question. My question would be on the production disruptions we've seen in the Q3 . We hear from OEMs that October is improving, and I just want to know if you can confirm this.
Your question is if it has been improving?
Yeah. Yeah.
It's a tough question, but I would say not really. I mean, we are seeing less of the really short-term call off changes, but we just recently, at least here in Europe, have received adjustments that will hit the next coming weeks. There may be a slight improvement, but overall, the situation is still very volatile for our truck OEM customers, and they transfer that volatility into their supply chain, which we are part of.
Okay. Understood. Just one more on trailer side, which was quite strong in the Q4 . Do we expect a downturn here, or do you think that they can continue to grow in line with higher truck sales next year?
Well, I think the trucks will probably have more opportunity to fill up what they have missed this year. Also the trailer market and the feedback that we get from the trailer customers will continue strong for 2022. Right now there's all the signals from the trailer market, and that's North America and Europe, are for continuous strong market throughout 2022.
Understood. Thank you. Very good results.
Thank you. Thanks.
Next telephone question is from Alexander Wahl from Stifel. Please go ahead.
Yes. Good morning, and thank you very much for taking my questions. The first one is just a clarification on your Q3 results. Could you maybe elaborate a little bit on the different components adding to your top line growth, specifically volume versus pricing? So how big was the pricing tailwind? Is basically my question. The second question relates to yeah, sort of re-getting reimbursement for higher costs, specifically when it comes to those costs that are not covered by price slide clauses. So my question to you is, for which sort of or kind of reimbursement you're actually going for, or how the mechanisms usually look like.
So do you aim to get any immediate monetary reimbursements for costs such as higher logistics, energy, et cetera? Do you expect to receive compensation from OEMs, in the form of better pricing conditions on future contracts that we might only see in one or two years' time? Thank you.
Yeah. The first question is a bit hard to estimate, but an overall rough estimate would be that the pricing impact or the benefit from higher prices, not volume dependent, would be in the Q3 around EUR 15 million. Mind you, in the first two quarters, that was only marginal, so this is more or less the same number that you would see for the first nine months. As I said, the real price impact, part of it will be in Q4, but unfortunately, also on the price side of the suppliers and then the full transfer will only happen in 2021, 2022, I'm sorry. Your second question was?
If we're getting lump sum payments from-
How we are able to transfer the rest of the cost increases. I think you have to distinguish between the OEMs. For the OEMs, where we have long-term contracts, we are right now only able to adjust the material impact of the price impacts that we're seeing. That's on our OEM business, where we have dealer business and that is around 30%, and also on some of the smaller OEMs, we have annual negotiations, and in those annual negotiations, we will bring these price impacts in.
You know, overall, I would guess that in 50% of our volume, we are right now only able to address the material impact, and in the remainder, we are addressing all impacts that we have in the negotiation. That does not mean that we will be able to transfer the full impact to those customers.
Okay. Understood. Thank you very much.
Okay. Thank you. Thank you, Alexander and Joachim. I think we are now, because we do not have any more phone questions, we will now move on to the webcast and see what questions we have there. The first question is coming from Pierre Castella, and I think this would be for. So his question is: Are you seeing some of your competitors dropping out of the race on the back of all the issues, logistic, raw material prices that you talked about? It seems that your market share gains are accelerating, in particular in the U.S.
Yeah. Thanks for the question. No, we don't see our competitors dropping out of the race on these issues. I think we have a very good market position and, of course, we are benefiting from that, especially in times where you have limited ability to get the attention of your customers. It's hard enough to get it on all the price discussions that we have, but it's also probably hard for somebody else to attack us if the customers, and that does not only mean OEMs, but also the end customers, the users of the trucks, have other things to do, so they just take whatever they have and what they have good experiences with.
I think we are benefiting from a strong market position from our reliable products and also from a very good customer relationship, but I don't see anybody else dropping out at this point in time. In the U.S. especially, I think, as I mentioned, the growth has a considerable amount already in price impact. A part is not volume growth, but is price growth, but there's also a volume growth due to the market and probably also some market share gains and upselling where we are selling higher value components than in the past.
The second question is also coming from Pierre Castella, who's asking regarding the lack that seems to be a worldwide issue of truck drivers, what are the short-term implications for the transport sector?
Yeah. That's, right now, there has not been as much of a discussion, but I'm sure that discussion will come very quickly, because in North America, we have already an issue with labor in general, and also in Europe, the older generation of truck drivers is retiring. Right now, with the lack of equipment, that has not been so much of a discussion, but that discussion will come. The implications will be that the drive for more comfort in the systems and more preparation for autonomous systems will continue. That's why it's so important that we have new products in the pipeline and that we have launched the new KKS system, which is the first step to an autonomous coupling.
The customers that are using those systems, they see next to the efficiency gains that they have, they see a big benefit because they are able to retain drivers that are older, that are not as capable, also female drivers that may not, that do not like to get up and down and open the coupling, which is a very heavy task to do. From a technology standpoint, that will be driving technologies that give more comfort and safety to the drivers.
Okay. Thank you very much, Joachim. I believe there is a follow-up question on the call, so we can take that now.
Yes. We have a follow-up telephone question from the line of Jorge Gonzalez Sadornil from Hauck & Aufhäuser. Please go ahead.
Hello. Thank you for taking my follow-up. I was wondering if you can comment a little bit more on the exposure of your agriculture business in APAC. Well, I understand that this is something that maybe you are going to tell us more during the investor day, but I was wondering if the percentage of the exposure you have for revenue is still below 1% or if you have progress in this field. Also, taking into account that you are reducing your net debt position strongly, and next year is potentially possible that you are at 1x net debt to EBITDA or even below. Are you considering to make any acquisition to complement the agriculture business in Asia?
Okay. Yes, on agriculture Asia, it's currently not an active market for us. When we started with our agricultural business or when we did the purchase of Ålö beginning January of last year, they were only active in Europe and in North America, and that is still the case today. We've been focusing on gaining market share there with existing customers, but we have not entered the Asian market. Yes, we are still below 1% of sales in agriculture for the Asian market. We've always said that South America and Asia are target markets and that we are planning to enter in those markets, and that could be via our own activity or using an M&A opportunity. These are still the both options that we are still considering to do that.
With regards to your question on the net debt development, obviously we're hopeful that we can continue the deleveraging for the near future. I mean, it is part of our business model, I don't see any reason why that wouldn't be the case. We have not yet discussed any dividend distribution, but I assume there will be another dividend next year. Therefore, we are generating cash, and like Joachim said, M&A is not out of the picture.
We are constantly screening the market, but not only on the ag side, but there are also potential targets on the transport side and we are actively looking into that, but I can assure you, we will be as prudent and as careful to make an acquisition, and we are not willing to pay every price. This has been the case with Ålö. We have made a good acquisition there, and we will exercise the same caution and prudence with the next acquisition that may come. This is what our plans are, and I believe we will continue to deleverage at least for the time being.
Thank you very much.
Yeah, you're welcome. We have another follow-up question, also on the web. It's coming from Tristan Steenkamp. The question is, are there any other regions or countries that are considering regulation around trucks or trailers that would be beneficial for you?
Yeah. There are two answers to that. Regulations, we are waiting for many years now, for a change in regulations in India, where you can actually register truck and trailer separately. That would allow a big improvement in productivity when it comes to logistics. That today is not the case. Knowing the Indian government and the Indian processes, you know, I'm not expecting that to happen, this year or next year, to say it like that. That would be one regulation that would really change the utilization of transport equipment in India.
Other than that, I do see an overall trend that may or may not be reflected in regulations, but an overall trend to more safety and to more comfort, especially we've mentioned already the drivers are getting older and it's important to attract new groups as truck drivers and therefore comfort and safety will play a bigger role. Automated systems, remotely automated systems or even autonomous systems, will gain market share.
I don't know of any country who has a regulation change, as far as legal regulations, but we do see it from companies themselves that chemical companies, for example, force their logistics providers to use sensor equipment, when it comes to coupling to ensure that the vehicles are safely coupled when they enter or leave their premises or when they drive around their premises. We see a lot of that on a local level, but not necessarily reflected in legislation.
Okay. Thank you very much. I believe there are no further questions, either on the web nor on the telephone.
That is correct. There are no further questions, and I would like to hand back to Joachim Dürr for any closing comments. Please go ahead.
Okay. No, nothing left but to thank you for your attention and, we're looking forward to continue the story in Q4 and to complete the year as guided in this call. Thanks very much for your attention. Stay healthy.
Thank you very much.
Bye-bye.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.