Earnings Call: Q2 2019

Jul 18, 2019

Afternoon, ladies and gentlemen, and welcome to this news conference regarding Caracatec's Half Year twenty nineteen Financial Results. In Q2, we saw good progress in Kalmar and Hayab, but the quarter was difficult in macroecor. Today, our CEO, Micah Venvi Lange, will start with the group highlights, then our CFO, Micah Polakka, will continue with the business areas and the financials and outlook. After the presentation, there is a possibility to ask questions. And to start, Nika. Thank you, Hanna Maria, good afternoon, and welcome from my behalf as well to the Cargodec twenty nineteen Q2 conference call. In Q2 twenty nineteen, we saw our comparable operating profit increase by 12% to €64,000,000 We saw the good momentum in orders received continuing in Hayab and we see market softness in MacGregor business reflected in decline in order intake. The Q2 twenty eighteen was a very strong quarter for CALMAR and obviously very challenging comparison point and we saw 24% decline in Kalmar orders compared to one year ago. However, we still see the pipeline and prospects in Kalmar Port Investments to be in a very solid level. And I think this is more a reflection of the lumpiness of the business and timing of the orders. As said, the comparable operating profit increased by 12%. We saw very strong good improvement happening in Kalmar operating profit and Hayab actually had a record high operating profit by more than EUR 50,000,000. But Gregor results and performance was obviously a disappointment from our point of view. We are addressing the issues and Mikko Polakka will cover more details about the root causes for the losses in his presentation. We also saw a very important milestone passed this week with the Chinese competitive authority approval for the TPS acquisition that will now enable us to close the deal. This is a very good deal for us. The strategic rationale is very strong. With the combined installed base, this enables us to drive further growth in services with the good Matrigo services operations leveraging now those operations into the TTS installed base as well. This deal will also enable us to have a much stronger strategic position in a very important Chinese shipbuilding market with the TTS joint ventures with the largest Chinese shipbuilding companies. Obviously, the overlap of the operations, this will also enable us to drive synergies, which we estimate to be around EUR 25 to 30,000,000 on annual basis within the three years. We are obviously aware that the market situation in Marine at the moment is very difficult. However, this combination obviously enables us to address those headwinds much better than a standalone entities. As a part of the Chinese competitive authority approvals, there are certain remedies attached to that one. The two main ones are related to first of all, the need to hold certain MacGregor new equipment business separate from the TTS joint venture for the period of two years and then there were certain temporary requirements related to terms and conditions in new equipment business in China. I do not see the second one to be material in any way conditions ultimately set the terms and conditions. The practical implication of the first remedy is the fact that synergy potential synergies related to combining the MacGregor new equipment business in China with the Chinese PTS joint ventures will delay those related synergies for the first two years, but ultimately will not affect the total synergy potential. We now expect to close the deal on July 31. And obviously, from August 1, we will start the integration and joint business development with the TTS organization. Related to the market conditions, the growth continued in global container throughput and we expect that growth to continue also within the second half of this year. Overall, we still see the pipeline import investments on a very solid level and we expect further automation with the phased smaller investments continuing. However, we do not expect any larger single automation deals within this year. In High App business, the construction indicators stayed at a good level both in U. S. As well as the most of the Europe with limited few hot soft spots in the European market and that's obviously reflected in the good order development continuing in Hyab business. However, in MacGregor business compared to Q1, we clearly see more softening market. We now expect the total ship order quantity to actually decline from twenty eighteen delaying the market recovery by another year in MacGregor. As said overall orders declined, however, good focus continued in Hayab. In Kalmar, as I said, this is a more a timing question. On year to date orders, Kalmar is still up from last year, which was already on its own a strong year. Difficult market conditions in Macgregor obviously also related and reflected on the in the Macgregor order intake. Order book is however still 15% up year on year. Order book is of good quality. We also are in actually exceptional situation that we have pretty much have a full year order coverage in almost all of our product lines for the remaining of the year. Thanks to the strong order intake we have seen in last twelve months and improving supply chain situation, we saw sales increasing 12% and that's obviously driving then improvement in operational profit as well. Related to the supply chain situation, we see continuous improvement taking place, but we are not out of the woods yet. We still experience certain component shortages, especially in hydraulic area, but we see gradual improvement continuing both in high up and in calmer business. Especially pleased that the good progress in our Services and Software business is continuing. In CALMAR, we saw 6% growth in Services with the comparable FX and adjusted for the M and A we have done in the business and a strong 14 growth in High Yield Services business. Soft market condition was reflected in MacGregor with 1% decline after a couple of quarters of actually increases in MacGregor Services business as well. Total Services increased despite difficult macro situation by 6% adjusted for the FX and acquisitions and divestments. Also strong sales growth continued in Software, primarily driven by the growth in Automation Software. Overall, the Services and Software is 33% of our revenue. And on a rolling twelve months basis, our Services and Software revenue is now €1,200,000,000 and we are well on the way of the €1,500,000,000 target we have set for ourselves. With that one, I'd like to hand over to our CFO, Mikko Polakka, who will cover the business areas more in detail. Mikko, please. Thank you, Mika, and also good afternoon from my side. Let's start with Kalmar where we had very strong profit growth in the second quarter. Orders like Micah mentioned declined 24%, but one should note that in Karma business, we have certain lumpiness in the orders and the quarters are not like sisters and brothers when comparing to each other. In the comparison period, when we are looking the orders, we had EUR 80,000,000 cube more bank order in quarter two twenty eighteen. And also we had in last year's quarter two very high mobile equipment orders. But overall, we would characterize that Calmar sales funnel as we speak today is solid, good progress in this area. The order book in Calmar is just above EUR 1,100,000,000.0 and this offers of course a very good basis for the rest of the year revenues and also for the beginning of next year. Sales were up by 10% year on year, $427,000,000 for the second quarter. And this is very much driven by the good order intake in the past quarters, especially in the mobile equipment area. Services sales increased by 10% for the quarter as well as for the year to date when comparing with comparable exchange rates as well as when excluding the divestments. And the service growth is very much in line with our long term growth targets. Operating profit for the quarter was almost €38,000,000 49% year on year improvement. After six months, Kalmar operating profit is 30% higher than year ago. And the profitability improvement in the second quarter came very much from the sales growth as well as keeping the fixed costs on previous year's level. Then moving to high up, where basically all our financial indicators were very green during the second quarter. Orders were EUR340 million, 13% year on year growth. We saw solid growth in both main markets, Americas as well as EMEA. And the growth in orders came especially from truck mounted forklifts, loader cranes, demountables as well as from services. We announced also earlier today a very large truck mounted forklift order. We made the deal in the second quarter total EUR 60,000,000 and EUR 31,000,000 of this order will has been booked in the second quarter and then €29,000,000 will be booked in the third quarter. Higher sales grew by 22% and were €358,000,000 in the second quarter. Excluding the Esser acquisition, which took place end of last year, the higher sales growth would be 14%. Like Micah said, also the supply situation has been gradually improving or continuously improving in high up. But like I said, we see still potential to improve in certain areas there. We had excellent service sales growth plus 14% year on year, both coming both from North America as well as from Europe. The acquisitions did not have any major impact on service sales growth. Operating profit record high, almost €51,000,000 for the quarter, plus 29% improvement compared to last year. And the profitability improvement is very much coming from the good improvement in sales. Then moving to Macregor where the performance was unfortunately very weak. Market recovery, like Mika said, has been postponed. The orders were down by 11%. Customers are very much spending the available funds, for example, to comply with the sulfur emission regulations. Very low investments for the newbuild ships. Especially the Cargo Hunting and Offshore orders declined in the second quarter. We saw growth in rural orders even though the comparison point was also fairly low in last year's quarter two. A positive thing was that despite the difficult market situation, the service orders grew actually nicely and were 19% up from last year's level. MacReCorm sales declined by five percent and operating profit was €11,000,000 negative. There were a couple of reasons driving this weak financial performance. First of all, the low sales impacted the profitability. We had some offshore project cost overruns during the quarter. And then also the capacity utilization was fairly low in the offshore division during quarter two. And due to these reasons, we will look further cost optimization and address the productivity going forward. Then let's have a look on overall Architecture financials. If we look the six months performance, solid growth in orders, very good order backlog, like I said earlier, above almost EUR 2,100,000,000.0, very solid backlog offering good basis for the coming quarters revenues. Comparable operating profit improved overall 6% on CargoTech level and then the reported operating profit after restructuring costs and other items impacting comparability was EUR 104,000,000, there 40% year on year improvement. Our earnings per share were EUR 0.93 per share and there also 70% improvement compared to last year's first six months. Then if we look our cash flow, cash flow continues to improve Our year to date June six months cash flow is now EUR72 million versus EUR23 million a year ago. And the cash flow improvement is coming from basically three sources, improved profitability, then also we have put special actions on inventory reduction as well as on addressing overdue receivables. And then we received some advanced payments, especially in the Kalmar automation business in the second quarter. Our financial position is strong. We have currently EUR $456,000,000 unused credit facilities as well as cash at the bank. The net debt at the end of the quarter was EUR876 million. And if we exclude the IFRS 16 lease liabilities, then net debt was EUR698 million euros Gearing was 49% excluding the IFRS impact and 62% as reported. Our debt maturity profile is unchanged, so no major significant loan repayments in the coming years. Our return on capital employed was 9.1 at the June, there nice improvement compared to the end of last year where we had 8% and the ROCE improvement is coming more or less from the 40% higher operating profit compared to last year. And last but not least, our outlook for 2019. We reiterate our outlook, which we published in the beginning of the year and we expect the comparable operating profit to improve from last year's level when it was EUR242.1 million. So that's all from my side and then I would hand over back to Hana Maria. Thank you, Micha. Thank you, Micha. Now it's time for questions and we will start with the questions from Rohan. Thank you. It's Erki from Inderes. Three questions from me starting by, could you provide us with wrap up of the improvement actions and their impact regarding the supply chain issues that have that you had addressed especially in the Polish sector? Quite a few of those ones, would say, addressing many of the major areas, the supplier performance in terms of securing better on time delivery for our suppliers has improved on the last twelve months, although we still experienced some difficulties in certain components. We have been increasing our labor force and capacity in the factories. We have addressed number of the bottlenecks in the production processes and systems as well and strengthened the management in those factories. So there are multiple different things. There is not a one single silver bullet, but there is multiple process improvements that are still improving the process, but we still have quite a lot of opportunities to improve the situation further. How long do you think that these actions will still continue? Well, you will see continuing improvement carrying on throughout the whole year. Some of the improvements I think in our supply chain development are more fundamental and will address situation into the long run as well. Okay. Thanks. And then coming to group gross margin, should we look forward to stabilized already from still continuously declining gross margin on group level? I mean, are there any factors going to sales mix, etcetera, that could affect that? Yes. In a way, finally, mix is improving. Because if you look at the macro level, obviously, generally speaking, the gross margins are lower due to the nature of the business as well. The macro level was only 13% of our order intake in the Q2 as well. So you actually see mix improving by just effectively by the more profitable business line business areas growing stronger. Obviously, the services continuing growth will enable us to drive higher gross margins as well. Then again, on the automation growth and the project growth in CALMER, obviously, has a sort of a declining effect. Those margins are lower than in services and some of the key product areas. So in that sense, it's a mixed bag, but I would say that there are probably more ups upside than downsides in the gross margin development. Okay. Thank you. And then finally, about the SG and A, it seems to have stabilized quite well. Looking forward, should we expect the same level of SG and A annualized and we retain or we do retain also the fees? Yes, the proxy for the 2019 SG and A cost is approximately EUR 40,000,000. So yes, on this Okay, kind of EUR 40,000,000, thank you. Then we will continue with the international questions. Handing over to the operator. Thank you. We will now take our first question. It's Magnus Kruber from UBS. Please go ahead. Micha. Micha, Magnus here with UBS. A couple of questions from my end. So first, could you expand a bit on how the year over year demand trended through the quarter? Is there any difference between April and June? And how has July started? Yes. No major changes there. I don't see any trend other than what you see in a quarter level on the monthly level either. Okay. Perfect. And in here, mean, I adjust for FX structure and large orders, it looks like your underlying organic growth was down mid single digits. Do I do those numbers right? And if so, how did your underlying order trend develop in Europe and North America, respectively? Well, if you look at the high up, the FX had a very little impact. And I think if I remember right, Nik, about EUR 2,000,000 on high up. And obviously, one is to be careful. You can't kind of exclude the large order and make a comparison point because obviously we have a key account large key account orders in other previous quarters as well. It's not a sort of it's higher than what we have seen in the past, but we see fairly large deals happening in the market and almost in every quarter as well. So as such, excluding that one, it's not a fair comparison point either. Okay. And then finally, of course, margins were very solid in both Hyab and Kalmar. But for Hyab, I think in Q1, discussed that you would have some improvement from pricing and lower raw materials coming through. Could you discuss a little bit how you saw that coming through in the quarter? I think that primarily the drivers still in the Q2 was very much the increase in revenues and the impact of the mix and the pricing was not that significant in the Q2. Okay. So we're more into the second half on that then. Yes. Perfect. Thank you. Thank you. We will now move to our next question. Please go ahead caller. Your line is open. Good afternoon. It's Manuel Bilbo from Nordea Markets. My first question would be on the MacGregor. So you talked about the weaker market for ordering activity, then we can see it also from vessel orders. And if you look at your kind of Q2 level of activity, are we starting to be in a situation where 2020 equipment sales are unlikely to grow compared to the level where we are in 2019 given the kind of long lag from shipyard orders to your orders and then from orders to sales? That's a very good point. If we now expect the ship order quantity to remain roughly at the sort of same trajectory as it's been so far, so we probably end up with maybe 1,000 plus ships this year. That will affect me that the MacGregor as a stand alone equipment business is probably not going to be significantly different in 2020 compared to 2019. Obviously, the ballgame is changing from our point of view in terms of combining then the TPS and MacGregor combination. I still believe that we still have a good opportunity to drive further growth, primarily from services business. As Mikko was saying, we still saw a strong order intake growth in services also in the Q2. And now our capability to start to address the installed base of DTS as well, I'm more optimistic about the Services sales development this year and also moving to the next year. And how do you think around the equipment margins in the situation where then there is no growth in the top line in 2020? And I mean or the other way, I see it around this is how big is the offshore business in terms of the sales to kind of get a sense of the cost base in that business? The offshore situation is a little bit interesting. We kind of see I'm seeing for a while the increasing activity levels in there. We see dormant ships putting back to the operations, but the activity has not, as you can see from the numbers, not translated into the order intake as such. It's also good to know, of course, that the combination of TTS, our offshore exposure will go down. The offshore portion of that in the TTS business is considerably lower than in MacGregor as such. So the exposure on that side will decline. But it's really hard to sort of put a finger and I think the visibility in Offshore is a question mark for us. There are a number of things that would drive for better market development. We've seen increased activity, but the fact of the matter is, of course, that we have not seen that activity landing our order intake at least as of yet. And can you remind us how much is off shore out of the equipment sales today? In that regard, it's been varying slightly between 20% to 30%. And in TTS, it's in the ballpark of 10 percentage points. Okay. And then final question. I mean, how do you see the getting back to Magnus' question on the HIA border intake. So how do you see the HIA border intake kind of as you said, we can't exclude the large orders, but do you see that the activity remains healthy and we should expect continued growth in the second half of the year on the order intake based on the kind of demand trends you're seeing at the moment? I think the underlying market remains to be strong. Maybe the caution I would have there is that we have now landed in last twelve months a number of large fee account orders in U. S. As well, and we kind of start to see that pipeline being lower. The underlying sort of equipment business is still in a good shape as well, but potentially, we don't see such large orders in the second half as for example, we saw now on this one. Obviously, the Q3, we will still see the other half of that €60,000,000 order landing in those numbers. Okay. And then final question on the EBIT margin of the E. A. Business. So I mean, if you kind of combine the first half numbers to kind of exclude the big quarterly volatility in the Q1 and Q2 numbers, so how do you think about you had 13.2% EBIT margins in the first half of last year and then 12.5 in the second half of this year. So looking at the moving parts going into the second half of the year, so you will probably deliver more and better margin products with potentially some tailwinds from raw materials. So I mean, how should we think about the kind of half yearly margin volatility in the second half compared to the first half of this year? Yes. First of all, good to remember that the Q3 is also always seasonally weaker for High Abbey. Mean, you go and look at the past year profiles, you will always see it's the sort of the seasonality variation there. So I always sort of a little bit cautious about the Q3 numbers. But obviously, see the underlying performance improving and impacting favorably, then this precedent should be again visible in Q4 numbers. Okay. So basically, I assume a normal type of seasonality and no major tailwinds from the kind of backlog factors or cost factors or Yes. Think if you kind of look at the profile from previous years and compare that to current performance, you probably be able to sort of get fairly good at kind of understanding where we expect to land. Okay. Thank you. Thank you. We will now take our next question from Leo Carrington from Credit Suisse. Please go ahead. Your line is open. Thank you. Good afternoon. I have a couple of questions. The first on MacGregor, please. When it comes to thinking about the margin and the unexpected negative EBIT development, how much of this was due to the offshore projects overruns? And do you see a scope for a repeat of these costs into Q3 and Q4? Or is it perhaps a mix of factors? If you look at the kind of loss of roughly €10,000,000 on Q2, about half of that came from the cost overrun in Offshore. It was particularly related to one new technology introduction we did in the Offshore area. We booked expected losses in the Q2 numbers. Now obviously, the new technology introductions have always the risk factor in there. But at this stage, we do not foresee further cost overruns on that one. The other half came really from the weaker than expected sales. Okay. Thank you. That's helpful. And then on to software for the company overall. I mean, there's been good momentum, I think, with orders announced in CargoBoost, the Navis partnership with ZPMC. And generally, the growth rate seems to have picked up. How does this compare to your expectations from maybe earlier in the year? And also, do you think you'd be able to update us with where profitability in software is and how you expect that to develop midterms? The profitability in our software business is picking up. Would expect that the by the end of the year, the software business should not dilute at least in a significant way overall Hardevic business or operating profit percentages as such. And that really comes from primarily from the sales growth happening there. The sales growth in software business obviously coming from two primary sources. One is Navis and the other one is the automation related software. The main growth right now is coming from the automation. We see a very good business demand and progress in Navis side, but at the same time, the traditional Navis business has been license based software and we are more and more transforming into the SaaS subscription based revenue basis and that obviously is slowing down the growth in there, but at the same time, the percentage of the recurring revenue in the Navios business is continuously increasing as well. Okay. Thank you. Thank you. We will now take our next question from Antti Kansan from SEB. Please go ahead. Your line is open. Hi, it's Antti from SEB. Most of the questions have been already asked, but maybe coming back to Karl Mar and the order trends and the kind of the demand outlook in the mobile equipment. The order intake was weaker than in some quarters for a while. And could you just confirm that you don't see any weakening of customer activity or lower trend? And or is this something that we should take as a benchmark for H2 also? Thanks. No, I don't think we don't foresee that. I take the mobile equipment first, we had a particularly strong Q2 twenty eighteen in U. S. Related to some of the mobile equipment orders. I think part of the mobile equipment order situation is such that in certain equipment categories, we are now effectively selling March 2020 capacity. So that's not encouraging any faster order intake. That's probably one element. Their underlying demand, even I look at the data we get from sales force, is still pointing out a strong continuing demand in key categories. And also talking to the port operators, we see still a lot of activity and project acquisition activities going on. It's a timing question. There are certain deals that slipped from the Q2 onwards as well. So I see this more as a sort of lumpiness of the project business and some seasonality effect other than anything else. We have not seen any shift in the customer demand or thinking about investment at this stage. Okay. Thanks. And then coming back to High End's profitability, sorry if this was already asked previously, but if you compare Q1 and Q2, there was a big step up despite kind of ongoing production issues. So it's kind of was there something moving from H1 sorry, Q1 to Q2? And is the H1 kind of say a benchmark that we should take into account when assessing the latter part of this year? Yes. I think then Q2 was more kind of I would say normalized operation level, we still have further opportunities there to improve the margin. But then again, the Q3 tends to land lower for the seasonality effects as such. But I think then we still have obviously foresee further opportunities to drive the underlying operating margin in high end. Okay. That's great. And then last question is on the one off costs or the restructuring items that you booked for Q2, which I think were quite high compared to estimates. Is there any guidance what we should expect for the coming quarters as well? These onetime costs were related or restructuring costs were related to this company wide restructuring program and then we have some continuous productivity improvement programs in our business areas, including for example also MacRecord. So those are the restructuring costs we booked in the second quarter. For the rest of the year, we don't at this point of time give any guidance for the restructuring costs because we need to get first TTS acquisition moving forward the discussions with TTS and related activities. And after that, that we have then better visibility to the restructuring costs, which we can then also more open to the publicity. It's good to know that because we have been in direct contact with the situation with TPS, our visibility, of course, on the numbers and operations in detail is not there. After the closing, we will obviously have a chance to sort of form a better picture on the synergy plans. And then at that stage, probably are better able to give you a better guidance on the expected restructuring costs and timing of those ones. Okay, sure. But if you would exclude any potential TTS related ones and then just focus on the same thing that you have already booked costs, is there something left from those programs? Yes, there will be still some left for the third and fourth quarter as well. All right, fair enough. Thank you. We will now take our next question. Please go ahead. Your line is open. May I just remind you to unmute your line? Should it be muted Yes. This is Tom from Carnegie. I have questions for all divisions. I'll take, you know, high first and then follow with the other ones. So high up orders have been now basically flat for three quarters, signaling some countries are up and some are down. So can you please highlight where you see the biggest growth and where you see the biggest decline in order activity? Are you referring to the orders or Orders, yes. The last three So quarters are more or less on the same I guess when you look at where do you see that the market is growing and where is it falling based? I think overall, we still have seen underlying growth in U. S. I mean, you look at the orders and obviously, we will have seasonal impact on those ones as well. So the year on year comparisons are in that sense. There as well. We had a strong Q4, but we typically have a strong Q4 and then we had a strong Q1 and again Q2 on year on year basis growth. I would say that overall, the growth has been pretty evenly split between North America and Europe. Where we see weakness is actually few softer spots in Europe. In Q2, we saw certain softness continuing in Sweden, which has been an issue for a little while. And for reasons I don't actually know that much in detail, at least the Benelux had a sort of slightly softer outlook as well as in Denmark. But the rest of the Europe actually, as you saw, the overall numbers in Europe were still strongly up year on year. Okay. Then I wonder about TPS, whether you have had any chances to look into the health of the order book. It's been a very long discussion with the competition authorities and the order book might have changed a lot during this period. No. We obviously, with the competitive status and it still is in force until the August 1, we have no direct visibility in the order backlog. That's obviously one of the first things we will do after the closing. Yes. But can you give some indications about at least the sales impact now for the coming quarters? Well, I think you would probably your visibility is probably a little bit as good as mine in terms of looking at what the TTS has been reporting in the overall numbers. It's also good to note, by the way, that in TTS numbers, they have consolidated the Chinese joint ventures entirely. Our plan is not to do so. So if I remember now right, and I'm looking at my colleagues, about 30% of the TPS revenues are coming from the joint venture. We will not book that in our books on top line. And obviously, then we will proportionally book the operating profit. So what you will see effectively happening is that the proportional operating profit will go up, but the overall revenue will be slightly smaller than what the combined operation otherwise would have been. Okay. And then finally about Navis and this agreement with TED PMC. So could you help us to understand this your strategic thinking here? Because obviously, Nemez is a great argument to buy KALMAR equipment as well. I guess that was one of the reason why you acquired that. And now you try to team up with your worst competitor here. So can you help us to understand your strategic planning? Yes. First of all, the JetPMC contract was nothing new. It was a renewal of the existing strategic agreement that Navis has in place. Navis is a software business. It operates horizontal. It cooperates with all the major competitors of Kalmar. So there are a number of joint projects with Konecranes, for example, as well as JetPMC. So we are providing we are by far the market leading TOS operator and hence the interface with all of the different automation and other manual systems in there. Like any software leader, it needs to also sort of cooperate with all the major market players. In the JetPMC's agreement with Navios is especially important for us in China. There obviously, JetPMC has a very strong position in overall projects and ports and that then enables, of course, Navis to have a respectively a very strong position in the Chinese markets as well as those very large sort of Chinese dominated port programs that they are expanding to globally as well. And that enables effective to now sort of to piggyback on the ZPMC large projects globally and especially in China. Okay. And then finally, about Kalmar and order prospects in Singapore where they're moving the port outside of the city, and we have seen now many Asian suppliers announcing very large orders from this. Do you have any hopes of booking some orders as well? I wouldn't like to comment on individual customer cases, but the PSA, which is the port authority in Singapore, is a very particular operator, which has a very particular buying factors and generally very tailored solutions. And that does not represent the normal I would say, normal buying behaviors in that sense. And hence, I'm always a little bit cautious about the prospects related to those projects. Okay. Thank you. We will now move to our next question from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Good afternoon. It's Johan at Kepler Cheuvreux. Just a question, I might have missed it a little bit here. I think last year, you talked about this supply issue bringing up your net working capital by SEK 150,000,000 that you expected to be released this year. So far, have you released anything of this related to this specific issue? Yes. We have released some few tens of millions of euros, but amounts like €150,000,000 One has to take into account also that if we look overall Carbotech sales and especially the CALMAR mobile equipment as well as higher sales, all businesses have been growing also quite significantly over the last twelve months. So that growth inevitably ties up certain working capital. But from the kind of improving supply chain situation through the improvement in the supply chain situation, we have been able to reduce a couple of tens of millions of euros from the working capital. Do you think you will be able to release up to 100,000,000 this year? Depends on, of course, on the going forward working capital situation. But like Mika said also earlier, there are certain kind of longer term or fundamental changes and improvements what we can do and envisage to do also in our overall operations. And there we see very good potential to reduce the working capital. And then I think you said something about €40,000,000 annual level for SG and As, but you mean corporate overheads, don't you? Or what's the €40,000,000 otherwise? Yes, these are the corporate unallocated costs. That's okay. Good. Thank you. That were my questions. Thank you. We will now take a follow on question from Manu Rimpler from Nordea. Please go ahead. Thank you. I would have a follow-up question on MacGregor. I mean, how do you think around the full year profitability given that the Q2 saw a very sharp decline and it doesn't look like there should be expected any significant change in the level of sales for the offshore business? Should we assume that kind of stripping out the cost overrun, we should be running at the kind of similar type of level for the second half of the year in terms of losses? Then once the cost savings measures start to kick in at some point, it will gradually start to improve. But will that happen already this year? We expect the whole year in MacGregor to end up in a loss a slight loss situation, but we don't expect the profitability to be as poor as it was in Q2 in the coming two quarters. Okay. Thank you. We will now move to an audio question from Magnus Kruber from UBS. Please go ahead. Just a follow-up from me here. How do you see in here how do you see competition in The U. S. Forklift market developing now when your key peers are more competitive offering than before? We see in our market share to remain very strong and order book to remain at a very healthy level. I haven't seen any significant changes. We've been able to check here, I would say, all the major key account business in U. S. Within this year. And the recent €60,000,000 forklift order is a good example of excellent solutions that we can offer to the customers. Okay. So no pressure on pricing or anything like that that you've seen emerging? No, not really. Perfect. Thank you. Continue with a question from Rohla. Thank you. It's Ezekiel from Inderes. Again, I don't want to be a brag or anything, but coming back to the SG and A, I'm talking about the selling general administrative costs that you show on your group P and L. Is the current, say, four month run rate is something that is going to be there also going forward? Yes. If you are looking there next few quarters, that would be more or less the run rate level. Yes, that of course exclude that comment excludes any impact from the PTS acquisition. Of course. And then finally about the EAP orders, I don't know if I missed this one, but how much was the EHABER impact on the Q2 orders? Impact was somewhat 6%, wasn't it, in Q1 on growth rate? Yes, just a second. I'll check the exact number. So EHABER and you're asking quarter two impact, So the higher orders grew 13% and then excluding the Effer, the growth was 6%. Okay. Thank you very much. There are no further audio questions at this time on the telephone. Thank you. Okay. Thank you so much. Then it's time to close this news conference. Thank you for joining this. It's finally sunny in Helsinki. And future report will be published on Tuesday, October 22. Thank you. Thank you. Ladies and gentlemen, I have now concluded today's conference call. Thank you for your participation. You may now disconnect.