Welcome to this news conference regarding Cargotec's Q3 2020 results. I kindly ask you to pay special attention to disclaimer. This call is to discuss Cargotec's Q3 2020 results. Securities laws in the United States and in other jurisdictions restrict Cargotec from discussing or disclosing information with respect to the contemplated merger with Konecranes. Information regarding the contemplated merger can be found at sustainablematerialflow.com. Until the completion of the merger, Cargotec and Konecranes will carry out their respective businesses as separate and independent companies. The information contained in this presentation concerns only Cargotec. The merger and the merger consideration securities have not been and will not be registered under U.S. Securities Act and may not be offered, sold, or delivered within or into United States except pursuant to the applicable amount of, or in transaction not subject to the U.S. Securities Act. Moving to actual Q3 report.
Mika will start with group-level development, and after that, our CFO, Mikko Puolakka, will continue with business areas and finances. Please, Mika.
Thank you, Hanna. Good afternoon from my behalf as well, and thank you for joining the Cargotec Q3 presentation. Overall, I'm satisfied with our performance in quarter three considering the market situation. The recovery in our businesses continued throughout the Q3 and especially the demand in Hiab and in Kalmar mobile equipment developed well throughout the quarter. The services have stayed stable throughout this crisis and are actually down only 4% year-to-date, and that decline is primarily coming from Kalmar crane upgrade projects and Hiab installations. The core services have actually fared very well throughout this crisis. Our relative operating margin stayed actually at the same level as last year. This is primarily thanks to the temporary savings that we have put in place, and those temporary savings are now more and more moving towards the permanent savings as we move towards the Q4.
Also, the good margin development in all of our businesses continued. This is thanks to the sourcing activities we have been able to do throughout 2019 and 2020, as well as the pricing efforts we have done in all of our businesses. Also, the stability of our core services maintenance spare parts has helped to maintain the profitability at the good level. This also shows that we are able to manage the company throughout the crisis without sacrificing too much of our profitability. I'm also very happy to see MacGregor back in black numbers and the great effort that has been done by the MacGregor team heading towards the profitable business again.
Despite the many savings we have done to ensure our profitability, it's good to note that we have continued to invest into our R&D, and our R&D expenses are up again year-on-year in driving our eco-efficient product portfolio, electrification, robotics, and automation. It's also good to note that despite the decline in many of our product areas, our eco-efficient product portfolio has actually grown more than 8% this year. As said, the relative operating profit stayed at last year's level, and we have seen a good profitability development continuing throughout this year. The coronavirus pandemic impact was clearly less significant already for us during the Q3. The temporary savings have continued throughout the Q3 and to a large extent will continue also throughout the Q4. Also, we are moving from more temporary savings to more permanent cost savings in many of our businesses.
Behind the good result is the continuous productivity improvements we are doing in all of our businesses, and our headcount has declined so far year to date with more than 800 persons. We see a good demand recovery happening, especially in Hiab and in Kalmar mobile equipment. Customers are still clearly cautious about larger investments such as the port automation. Our delivery situation is back to almost normal situation with no major issues with our component suppliers nor our own manufacturing units. In terms of the activity, today, obviously, we have a very large number of connected equipment that gives us a real-time online visibility on the activities in the different sectors of the logistics. The activity increase has continued throughout the Q3, and in many areas, we are today close to the pre-COVID crisis.
The red balloon here shows the Kalmar mobile equipment activity level and the blue, the Hiab crane activity and truck activity in these areas. As you can see, the development has continued. We are still overall somewhat short from the pre-COVID crisis and last year levels, but that varies from one sector to another and country to another. In some areas, we are already over the activity levels that we had pre-COVID, and in certain areas, we are still well below those activities. Quite a lot of variation in that activity level. Overall, direction is clearly up in all of these areas. In terms of the market environment, obviously the Q3 was still a difficult one in many areas.
The number of containers handled and the container flow was still obviously down in Q3, but is expected to increase already in Q4, and the estimates are that the next year container traffic volumes will grow roughly seven percentage points. Obviously, also construction activity has been down, but now we are seeing signs of turning, and for example, in the U.S., the Housing Market Index in September was at the record high level. In Europe, the construction activity is a fairly mixed bag today with a large variation between different countries. The market environment in MacGregor continued to be difficult one, and we have seen almost record low number of new ships ordered so far. However, the market is expected to start to recover with the Clarksons estimating about 900 ship orders next year, which is still well below our normal year level.
The orders received have bottomed out during the Q2, and especially good development we have seen in Hiab, especially towards the September, which was a strong order month, as well as in Kalmar mobile equipment. The recovery have we also started to see clearly in the U.S., especially during the September where we had a good order intake happening both in Kalmar as well as in Hiab, also in the U.S. market. Also good to note that Hiab order backlogs has now actually turned back to growth. In Kalmar, the mobile equipment order intake has developed well, but we have seen postponements in the larger investments, primarily around the port automation. However, the backlog and the pipeline in port automation is solid.
We have not seen any cancellations on those ones, but we have seen slowdown and postponements in some of those decisions with the buildup in the pipeline happening as we speak. In MacGregor, obviously, the low market situation has caused the backlog to go down, but we still have more than one year delivery of equipment in the backlog in MacGregor as well. As said, operating profit trend has been good. We have seen clear absolute operating profit improvement quarter-on-quarter this year, and we've been able to maintain a comparable operating profit margin at the same level as last year. The service business has been very resilient throughout this one, and even though we have seen some decline in there in Kalmar, that decline has almost solely come from larger crane upgrade projects, and the core services have actually maintained their good level in there as well.
Also in Hiab, the service decline has primarily come from the installation and ancillaries, which are related to the new equipment and truck deliveries as well, and the core services have maintained a good level in there. We have seen decline in MacGregor services, and this is primarily related to the access for the ships and the capability to maintain them, as well as the low level of the dry docking activities there as well. However, overall, the services and software have maintained a good level. We saw some decline in software sales. This was primarily related to large license deals in Navis and the timing of them, where we actually saw a number of relatively large deals in Q3 last year. This year we didn't land any, but we saw good opportunities to actually close some of the license agreements throughout the Q4 this year.
With that one, I'd like to hand over to Mikko Puolakka, who will cover the business areas.
Thank you, Mika, and also good afternoon from my side to all you on the lines. Let's go first to Kalmar, where the mobile equipment was nicely supporting the overall Kalmar financial performance. Kalmar orders were down by 17% year-on-year. This was mostly coming from automation and projects division, where customers were holding back bigger investment decisions. As Mika mentioned, no order cancellations, customers cautious in making big investment decisions. Looking Kalmar orders further, in mobile equipment, we saw actually very small decline in the orders, and actually the mobile equipment orders were improving nicely from the low quarter two levels. Kalmar sales were down by 14%. The automation and project division sales grew very much supported by the orders which we have won in 2019 and which we are now delivering.
The sales in mobile equipment services and software declined, but also a bit like in orders, also in those businesses sales, the decline was clearly smaller in quarter three compared to quarter two. Also there, an improvement visible. The Kalmar absolute comparable operating profit declined very much driven by the sales decline of EUR 60 million. Then we had some costs related to the Kalmar automation and projects division operating model reorganization. When we looked the comparable operating profit margin in Kalmar, it was almost 9% and very much supported by the strong mobile equipment performance in quarter three. Then also the continuous productivity improvements, what we have done in Kalmar, as well as the cost reductions. Looking at Hiab, also their order decline, but again, very similarly to Kalmar, the order decline in Q3 was much smaller what we experienced in the Q2.
In Q2, the orders went down by some 30%, now 11%. Sales were declining 17%. Also here in Hiab's case, the decline was clearly smaller than what we saw in the Q2 year-on-year comparison. Hiab delivered a strong comparable operating profit despite a EUR 53 million sales decline, only EUR 3 million decline in the comparable operating profit. Also the comparable operating profit margin clearly increasing from last year's levels to 12.22%. The comparable operating profit margin improvement is very much coming from the continuous productivity improvements also in Hiab as well as cost reductions. Currently, we have approximately 480 persons smaller headcount in Hiab compared to last year's situation. Looking at MacGregor, where the heavy actions what we have done in TTS integration as well as overall MacGregor restructuring are bearing fruit. Markets, like Mika showed earlier, are already still weak.
Customers are optimizing their cash, which is very much visible in the orders as well as in sales. The bright spot in MacGregor is clearly the comparable operating profit, which is now EUR 2 million for the third quarter, and also there, very much coming from the heavy actions restructuring TTS integration. We have approximately 340 persons smaller headcount in MacGregor compared to the situation 12 months ago. The TTS integration and the restructuring is progressing actually better than what we anticipated in the beginning of the year. Due to this, we have increased the savings target for this year from the original EUR 15 million- EUR 20 million. Out of this EUR 20 million, we have now already so far delivered EUR 14 million in the first nine months. Few words about our key figures. Our total sales EUR 777 million for the third quarter.
This is EUR 124 million lower than a year ago. This kind of sales decrease has led to approximately EUR 40 million lower gross profit. To kind of offset this gross profit and sales decline, we have reduced our SG&A costs by EUR 24 million. This has enabled us to maintain the comparable operating profit more or less on the same level compared to last year's Q3, 7.3%. We had EUR 11 million of items affecting comparability. These are mainly related to the previously mentioned restructuring programs in MacGregor, in Hiab, and in Kalmar. Our net income, despite EUR 124 million sales decline, net income was almost on last year's level, EUR 27 million, and earnings per share was EUR 0.41 per share.
Cash flow was strong in Q3, very much supported by the good performance, both in Hiab as well as in Kalmar, especially in the mobile equipment. In addition to that, we have been able to reduce the net working capital from the Q2 levels, especially in inventories as well as in receivables. Our financial position is strong, and liquidity is on a good level. Our gearing was 66%. This is 12% units higher than at the end of last year. Roughly 9% of this increase is coming from the dividend payments what we have done during this year. The liquidity is at EUR 830 million, so very strong for the good current situation. No major changes in our debt portfolio. If we look our outstanding debt maturities, we don't have any major debt repayments coming up in the next 18 months time.
Our outlook, if we consider the current market environment as well as the supply situation, we expect that the second half comparable operating profit increases from the first half when it was EUR 82.9 million.
Thank you, Mikko.
I hand over to Hanna-Maria.
Thank you, Mikko, and thank you, Mika, for the presentation. Now there is a possibility to ask questions, and as a gentle reminder, this event is not to discuss the merger with Konecranes. Handing over to the operator, please.
Thank you. Ladies and gentlemen, just a quick reminder, to ask a question, please press star one on your telephone keypad. We will now take our first question. Please go ahead.
Hi, this is Antti from SEB. Thanks for taking my questions. Firstly, on the demand trends you're seeing in Hiab and Kalmar. Sorry, there's a bit of an echo in the room, so bear with me. Could you comment on the demand improvement where you ended up end of Q3, start of Q3, and how should one think about the near-term demand considering the seasonality, the recent virus outbreaks, and is this driven by robust underlying demand or some kind of a pent up after a quite weak springtime? Thanks. Just a bit more color on the demand recovery.
Sure, Antti. Maybe I start and Mikko, if you have anything to add on that one. Started with Hiab. We saw a month-on-month improvement, actually, the same trend that we saw on Q2 continued throughout the Q3 as well. Actually, it accelerated towards the end. September was already a strong month for us. No large individual orders, so it comes from the fairly normal activity. The difference between the previous months and then towards the end of quarter was that we saw the US activity starting to pick up, actually surprisingly well as towards the end of the quarter as well. We see both the European and US market actually showing now good signs of demand. Whether it's a bounce back from Q2, and obviously it's hard to point out specifically where it comes from.
If I look at the Hiab equipment activity levels, for example, in the main markets, they actually are surprisingly strong in many of the U.S. markets. For example, the truck activity index is actually at the same level or in some cases up from that one. My guess, what we look into the data is that the construction activity has re-picked up on that one. Now, obviously, the low interest rates and stimulus packages, et cetera, are partly probably driving that one as well. In Kalmar mobile equipment, we actually seen a solid demand there as well in terminals, e-commerce, logistics obviously has been pretty hot throughout the quarter as well. Again, same thing as in Hiab, we have seen a strengthening demand throughout the quarter in U.S. market where, for example, the terminal tractor activity was at a very low level on Q2.
It has started to pick up again on Q3, and we have seen destocking happening by the dealers and new orders coming in on that one.
Okay, thanks. Maybe follow up on the Kalmar Mobile side. Could you remind about the situation regarding the electrification of your product portfolio, where you stand today and how do you think this will evolve going forward when you will be selling mostly electric equipment on that side?
It has gone well, and we haven't slowed down. As I said, we further accelerated still our R&D investments, and we have announced that all of Kalmar Mobile equipment will be available next year, if I remember correctly, on electric format as well. The major demand we see today is around the forklift trucks, those who are operating maybe in the warehouse or logistics yard environment as well increasingly so in the terminal tractor side and really led by probably key customers where the efforts or the focus on sustainability is pretty high. Partly also driven by the regulation where the import port areas, for example, the diesel engine usage is to be banned in many of the areas as well.
I think obviously we will see diesel engines in many of the developing countries in some other areas where the lack of grid will be a key issue for years to come. We have seen the pickup and the demand actually continuing strong and strengthening continuously in the electric vehicle side.
I would perhaps add there that if we look the overall Cargotec level, our eco-efficient or the share of eco-efficient sales has increased from last year's 20%- 24% now.
Okay, thanks. Lastly from me, looking at the backlog decline and duration in the more project-heavy divisions, Kalmar and MacGregor, how should we think about it when we are getting bigger issues regarding workload and the length of the backlog? Maybe will the upcoming merger with Konecranes have any impact on what type of savings programs or restructuring are you prepared or planning to do with Kalmar project if that demand doesn't come back in the next few quarters?
When I look at the backlog on that one, let me start with the MacGregor there. Obviously, backlog is down, it's good to remember that when you look at the MacGregor revenue, so much of that one is now services. Effectively if, let's say, simplify that the MacGregor revenue would be at EUR 600 million level on annual basis, EUR 250 million of that one is services today. Today, the backlog extends well into the 2022. There is no short-term issues regarding that one. We do expect that ship order recovery starts throughout the next year. We have seen record low levels today and the Clarksons estimates now that we should go up to roughly 900 vessels next year, really driven by just simply by the replacement cycle.
One additional point on the ship market, one sort of positive thing that we actually have seen throughout this year is that the shipping lines have been, I would say, extraordinary profitable this year, and it's good always when your customers are making money as well. Hopefully that gives some encouragement on that area as well. Regarding the Kalmar, obviously the mobile equipment we see now the demand returning and well. I'm not worried about that one. For the larger automation projects, we have a backlog and the revenues that extend into the mid-2021. We do need to start to see some of these orders finally realizing by summer next year if we want to maintain roughly the current revenue levels. There is a very solid backlog in there. These projects that we've been entertaining for quite a while have not gone anywhere.
Very clearly the customer decision-making has been disappointingly slow on that area.
We will now take our next question. Please go ahead.
Good afternoon. Thank you very much for taking my questions. It's Artem from Credit Suisse. My first question is around your comments on cost savings and maybe moving more of the temporary cost savings to a permanent bucket. Could you maybe give us some color how much of the temporary savings you did in Q3, how much you expect for Q4, and out of the temporary savings this year, how much do you think could be retained next year?
We have made roughly EUR 10 million per month with the temporary cost savings. The main months have been July and August. We have lifted some of the reduced work time savings now in September. There are still some personnel groups which are having the shorter work time. I would estimate that in quarter three, more than EUR 20 million are coming from the temporary cost savings. What comes to the more kind of permanent savings, we have done already during the last 12 months time, continuous product improvement. As mentioned already during my part in the presentation, in Kalmar, we have roughly 220 persons lower headcount compared to 12 months ago situation. In Hiab almost 480 and in MacGregor 340. We have been continuously doing productivity improvement.
No kind of major restructuring program, but here and there improving the operations, which has been then contributing to these relative comparable operating profit levels in our three businesses.
Thank you. Just to confirm for Q4, do you still expect the savings to remain at EUR 20 million per quarter?
Some of the temporary cost savings we are converting into permanent cost savings. We continue some temporary savings. For example, our traveling activity is almost zero at the moment. We are minimizing our external services usage. We have used in the past also external persons to compensate workload or cover the additional workload. Now when the volumes are lower, we are doing that work by ourselves. Some of these savings continue also in quarter four, but we don't disclose the exact amount for that.
Sure. Thank you very much. The last question is about Kalmar margins. Could you maybe talk a little bit about the impact of reorganization of supply chain on margins and whether it was a one-off impact in Q3 or whether we should expect any further headwind in the future?
As Mikko was saying there, first of all, mobile equipment business margin was at a very good level in there. We are reorganizing the supply chain. Some of that is one-off type of cost. Some of that is caused by the COVID situation. A practical example on that one, for example, is that some of the project implementation was estimated to be done partly by visiting Chinese personnel from our joint venture operations. Now due to the COVID situation, we actually have to compensate for that labor with the sort of hiring local subcontracting in places like U.S. and Australia, and that obviously has increased cost. While those travel restrictions are placed, some of the project costs are higher than we initially estimated. Some of that will linger into the Q4 as well.
The good news from my point of view, that if you look at our profitability development so far, we have done that against a sort of negative mix or the proportional part of the MacGregor and Kalmar project business has actually increased as a part of our revenue. The revenue in Hiab mobile equipment declined faster throughout the Q2 and part of Q3. What we now see in order development is actually a sort of a faster rebound of the Hiab where the order backlog is already higher and a good recovery of order in taking mobile equipment. We actually see that mix now turning back to more favorable for us.
Just would it be possible to quantify the impacts of those incremental costs?
Not in the detail, no.
Okay. Thank you very much.
Thank you.
We will now take our next question. Please go ahead.
Hi, Mika, Mikko, Hanna. Magnus here from UBS. Just a couple of follow-ups from me. If we could look at the growth progression in Hiab specifically, did you grow orders in September at all in any region?
Yeah. Actually, the September ordering taken Hiab was stronger even year-on-year. We had a better order intake in September 2020 than we had in September 2019.
Lovely. Thank you so much. Would you favor us with a number there? Is it 5% or higher, 10%?
Yeah. It's a very healthy growth. Good growth. It's been fairly steady growth as well. All the way from April, it was the low point, we have seen steady month-on-month improvement, even throughout the holiday seasons. Obviously then September being a kind of back to normal, you saw a higher number. The number was even higher than it was a year-ago, so good strong development there.
Excellent. Thank you so much. With volumes coming back also, I think faster than anticipated on the terminal throughputs globally, I think you commented on a 7% growth in 2021. What do you expect on the quotation activity? Have you seen any pickup there or is it still very muted on that side as well?
On the larger terminal projects, the backlog is solid in a way that we have not seen anything disappearing on that one, but obviously a disappointment for us is that some of the projects that are already beyond the quotation phase, we haven't been just able to close them with some reasons are quite practical due to the COVID and travel bans. Some of them are just careful decision-making process from the customer side. As such, if I look at the existing deals that are on the table at the moment, and I look at the prospects going into 2021, there is still a solid prospect list on those ones available.
Okay, got it. Another follow-up on the Kalmar and the mix there. Did you say you expect the mix to improve into Q4?
Not necessarily into Q4, but if this development continues, we should expect to see the mobile equipment ratio to increase moving into 2021.
Okay, got it. Would it be possible to quantify the impact you had on that in Q3 specifically?
No.
No.
I'm not sure I would be able to even if I know.
I can try. Thank you so much.
We will now move to our next question. Please go ahead.
Hi, Erkki from Inderes. My questions have already been mostly answered, but anyway, production guidance, it's relatively loose. You will need only EUR 26 million of EBIT in Q4 to reach the low end of the guidance. Why is that, and where do you see the biggest risks now in Q4 absolute operating profit?
Yeah. This was a consideration from us. At this stage, we see things actually moving along quite well. Obviously, the COVID situation is quite unpredictable, and I could see risk, for example, with the cluster of infections in one of our manufacturing facilities that could stop our production potentially up to two weeks or so, and that could impact then. We have taken those risks into consideration in the sense that we wanted to give you guidance that we are comfortable on even in the case of certain negative surprises. We have not seen any of that one happening at the moment, and the underlying trend is quite strong. Obviously, there are still risks available due to the COVID situation within the Q4. Those risks, I think, are primarily related to the sudden interruptions in the supply chain.
Okay, thank you. Coming back to Q4 gross margin, the Kalmar question was already posed, how about Hiab? Will the improving Hiab demand already show in Q4 gross margin?
Not necessarily. It's good to remember that regarding the Q4, the Q2 and Q3 beginning order intake was lower. Obviously, now we have seen September coming back quite stronger, and that will have a certain impact on the Q4 there as well.
Okay, thanks so much.
We will now take our next question. Please go ahead.
Hi. Hello. It's Aurelio from Morgan Stanley. Thanks for taking those questions. I've got a couple, if I may, please. The first one is more kind of bigger picture. Now that we've seen MacGregor turn into black again, what do we need in terms of sales to see the business doing, let's say, 5% margins? I think if I remember well, you mentioned that you would need north of EUR 1 billion of sales so you can now see 10% margins back in that business. I guess what's next from here?
I think next from here, obviously, first of all, the savings activities and productivity activities we have seen are flowing through. Some of that is fully visible only next year. That certainly helps us even in the relatively low situation. Even with the low ship order activity, I'm still pretty comfortable with the MacGregor situation, primarily driven right now by the cost-saving activities. If we now assume, and I think that's almost sort of clear that ship orders can only go one way, which is up from here. Nobody knows the speed of the recovery or scale of the recovery, but we are able to manage that one. What we have said in the past is that with roughly EUR 1 billion of revenues, we should be in the double-digit operating margin situation. My view on that one has not changed.
The speed of the recovery obviously is a question mark. We are in a much more comfortable situation now that we are back in the black numbers, and we can manage then the business and cost levels depending on the demand.
Okay, thank you very much. I guess the second question is around some of the different dynamics that you've seen in construction. I think you mentioned that September was already quite strong in the U.S., and we've been getting, I would say, mixed messages from the U.S. especially, where the resi side is very strong, but we are starting to see a sharp deceleration in non-resi. I guess, do you see any impact from that or any risk from that, or are you more heavily skewed towards resi?
We are more heavily skewed towards the residential and building than the commercial side on that one. Typically, the applications of Hiab are more applicable for the residential build out on that one.
Great. Thank you.
We will now take our next question. Please go ahead.
Hi, this is Johan at Kepler Cheuvreux. I think you promised us when we spoke the last time an update on the Navis divestment now in the quarter. I might have missed it, but could you give an overview of what's happening with the Navis divestment? Are you still having interest, and what sort of price levels are we talking about?
What we said, I think, 1st of October, if I remember correctly, we issued a separate release saying that we have restarted the process with Navis. We are now in the middle of looking at the different options for the business as well, and that process is ongoing as we speak. Depending on what the conclusions of that process are and where we end up, we will then update you when we have more information. The interest towards the Navis overall from the market has been exceptionally high.
Okay. Thank you very much.
We will now move to our next question. Please go.
Thank you very much for taking my follow-up. Just on FX, I think with recent devaluation of U.S. dollar, could you maybe give us some comfort on the fact that Hiab shall the rates stay where they are at the moment, that Hiab will not see any material negative FX transactional revaluations on EBIT?
Of course, we don't have the crystal ball how the US dollar/euro develops. So far, during these first nine months or in quarter three, the US dollar/euro impact on Hiab results was, I would say, single millions, EUR 1 million-EUR 2 million at the maximum. No major impact from there.
Okay. Thank you. My second question was about TTS savings. Could I just check, please, that EUR 20 million target for this year, is this just acceleration of the overall program or that's an increase to overall targets over the next three years?
The overall target stays as it is. We have been able to execute the savings in a faster speed than originally anticipated.
Okay. My last question, I guess you mentioned you wouldn't like to discuss the merger till you try with the ports business. I guess my question is, could you maybe talk a little bit about where the overlaps with the Konecranes side and whether markets should be concerned about potential antitrust issues?
Like I said earlier in this call, we cannot discuss any topics related to the merger with Konecranes. We cannot, unfortunately answer this question .
Okay. No worries. Thank you very much.
Thank you.
As a final reminder, to ask a question, please press star one on your telephone keypad. We will now take our next question. Please go ahead.
Hi, this is Tomi from DNB. Unfortunately, my line was cut off, so I have to come back to the guidance comments, which I missed, unfortunately. Was there something specifically weak you are guiding for the fourth quarter, as you are just referring to the second half being above the first half? Just a little bit of clarity on that, please.
What I said is that we just wanted to kind of be comfortable that there are risks obviously related to Q4 that are primarily around the potential disruptions in supply chain. Let's say that we would, for example, have an infection cluster in one of our manufacturing units or one of our key suppliers would have a similar situation. We want to sort of give a guidance that we would feel comfortable would be able to take some of these hits. None of that is visible at the moment. Actually, the development has been solid so far, but obviously with the sort of continuously moving COVID situation, the risks are still there.
The guidance, let's say, who knows what is the level of improvement? Are you, let's say, trying to say that the fourth quarter could be below the third quarter level, or is it more likely that it is flat or up compared to the third quarter?
As we said, the second half is better. I'm sure you already done the math regarding that one. As said, there are sort of the risks related primarily on the supply chain side. We have not seen any of those risks or we don't have any of those in sight at the moment. Overall, the underlying development has been good, but you never know. There are two months left here and much can happen as we have seen.
For example, also in quarter three, we have been quite successfully been able to advance the project. Some of the commissioning persons have been able to travel. Should there be more kind of restrictions again for travel or entry to the country, that can also impact our top line. That's why we have the guidance what we have given.
Yeah. We agree that it's a cautious guidance, but it's a high-risk environment at this stage, and we just wanted to make sure that the guidance would also cover the potential risks in there.
Okay. Thank you.
There are currently no further questions.
Okay. It's time to thank you for active discussion. Our financial statements review will be published on February 4th. Stay safe and healthy.
Thank you.
Thank you.