Earnings Call: Q3 2020

Oct 23, 2020

So, dear all, welcome to this presentation of the 3rd quarter report for OFPE for AFRI. My name is Jonas Kostasohn, and I'm very pleased that you have taken the time to participate. As always, I will do a part of the presentation and our CFO, Jozsef Paianen, will present the financial slides. And he is actually sitting in Helsinki doing the presentation. So let's see and cross our fingers that the technology works. But we hope so. So again, very much welcome to this presentation. So let's start with the first slide, the summary slide. And as we have seen it, we have delivered a solid result in a recovering market. And I think that's one of the takeaway is that, of course, on the Q3, we have had 2 months that has been kind of summer months, July, August. But what we saw in September was a clear pickup across all our segments basically. Our net sales ended up just above SEK 4,000,000,000 which was lower than last year. If you take away the currency impact, which was significant during the quarter, we ended up at 7.6% lower than last year. But if you then compare to the quarter 2, it was still a sequential improvement. Our EBITDA to 88, equal to 7.2 percent on the EBITDA margin. And I would say, in the current market environment, we are pleased with being able to deliver a solid and stable margin. Of course, we want more, but I would say that it's been a stable quarter. And of course, this is due to all the mitigation activities we have done to meet effects from the COVID-nineteen, but also, as we said, we had a currency impact in the quarter. The market across, and we'll talk more about that, we could see by end of the quarter. And again, we have also been able to strengthen the balance sheet and Jusso, you will talk more about that, giving us now the opportunity not only to focus a lot on organic growth, but also to start to look for some interesting acquisitions down the road. So we have been pleased that over the year, we have been able to strengthen the balance sheet and getting us in good shape for leaning forward even more now and looking for growth from an acquisition point of view. The currency, and again, Josef will talk about that, it affected us in the quarter. And the top line effect was some SEK160 1,000,000 roughly or negatively. And also on the EBITDA, it had a roughly SEK15 1,000,000 impact on our profit in the quarter. So the currency clearly had more negative effect this quarter than the previous quarter. But again then, I would say still it's a solid result in a market where we can see a recovery. Moving over to effects from COVID-nineteen, because clearly as we saw it in the second quarter, also the Q3 have been impacted from the COVID-nineteen. So we have continued basically to work remote, work with digital platforms to keep our employees safe and healthy and also to being able to deliver to our clients working from remote, and that had worked as good in the Q3 as in the Q2. We had some 1900 employees on different kind of short term work allowance during the end of the second quarter moving into the third. But what we have seen is that by end of the third quarter, we have been down to some 800,000,000 of course, now with ambitions to be basically down to 0 by end of November. So we see a steady ramping down on using these short term work allowances across all segments. The efficiency program that we started up by end of last year, the NOK120 1,000,000 continues the total effect in the Q3 was SEK 490,000,000 which is a mix of short term savings and permanent savings. Again, Jussuf, you will talk more about that. And the stay subsidies was to the amount of SEK62 1,000,000 then, supporting the fact that we had from SEK 1900,000,000 down to SEK 800 employees on different kind of short term work allowances in the quarter. So even the 2nd quarter, 3rd quarter then has been really affected from the COVID-nineteen with a lot of cost mitigations activities. If we look on the market, as we said, it's been affected. But overall, there is a stabilization what we feel across all segments. We can see we have talked about that the need for sustainable solutions and also more and more demand for using digitalization across all our segments. Obviously, this is something we have talked about, and we will start to invest and look even deeper into. Starting with infrastructure, in general a healthy underlying demand. However, what we have seen in the quarter, especially on the real estate side, on the private commercial side that actually affects both our building business area, but also architecture and design as well as product management, we have seen a weak quarter. However, we feel that is bottling out also in that segment. So by end of the Q3, we could see signs of recovery also in that segment. If we move over at transportation, which is rail and road, we have seen a stable demand also throughout the Q3. But clearly, we have been affected then especially from the commercial real estate in the Q3 on the infrastructure. On Industry and Digital Solutions, we have continued to felt effects, especially from the automotive and related supply chain. From the automotive segment, we felt that it bottomed out during the Q2, and we have seen a slight, slight, slight recovery from lower levels in the Q3. So if you want to put automotive and the commercial real estate, we felt automotive more bottomed out in the Q2, while commercial real estate, we could feel that it's bottomed out in the Q3. So segments are a bit different in the sequence, but that's how we have felt. We have seen a really continued strong demand in Food and Life Science that is becoming one of the more interesting segments where we will also continue to look for more investments. Process in the industry, stable demand and continue to perform well, and we can see that all the discussions about more sustainable packaging solutions using forest fiber to replace plastic is driving investments, so that's been performing well. And in Energy, even though we are driving our own repositioning in Energy, we have seen now that there is a healthy and strong demand, especially in the renewable side, and we will invest more in that side, too. And they continue to deliver according to plan. And management consulting have also been strong, especially on the energy side. We see a continued need for strategic management consulting, especially on the energy transition, And that is something that we are investing more in. So all over, obviously affected in the Q3, but there are some really interesting bright spots and feeling is that it bottomed out and we saw a recovery by end of the quarter from the market point of view. So across all our core segments, there is a stable demand, and we continue to see a slow shift then towards those segments where we really would like to invest more in. Of course, infra as such, even though we could feel the commercial real estate in the quarter, infra is something that we will obviously look even more into to get back to growth and to invest more in. Food and Life Science, another very interesting segment. The clean part of energy and also, of course, the whole bioindustry We have during the quarter a stable order backlog. If you look on the local currency, if you then the order backlog is stable and we continue to take in a lot of interesting and good projects. This is just some examples. We have taken some interesting projects. So Metzi in Finland, we have a very interesting digital twin solution for Alfa Laval in Sweden, which is really something that we are looking into, how can we drive the digital part even more. We have some interesting offshore wind in Vietnam. Nuclear decommissioning is a big topic for us and this was a project to Norway. The West Link in Sweden, another big project. And then we are also developing digital software for Wagigrid in Sweden. So a mixture. But if you zoom out and look on the project, our order backlog remains stable. So with that said, I will now leave it to Jussow sitting in Helsinki to talk a bit about the numbers. So Jussu, are you there? I'm here. Thank you, Jonas. Happy to be in Helsinki, a bit rainy and cloudy, but I think Stockholm is the same given the quarter of the year. Okay, Jusson. So net sales? Thank you. So let's talk about a bit on the net sales development. So as Joonas stated, we have the total growth is negative. If we exclude the FX, it's still minus 7.6 percent and the adjusted underlying organic growth is minus 7.8%. So if we think about and slice and dice a bit how these numbers are coming together, first of all, the FX impact is basically the single biggest impact in our total growth figure. It's roughly SEK160 1,000,000 and it is coming mainly from 3 of our major currencies. We have euro based, we have Norwegian Crown based. And then Brazilian real has had a major impact due to very big swings in the Rail. It's more than 20% down compared to previous year. We have then the continued impact from COVID, especially in automotive and then we have in the real estate segment a bit. But if we now think about these ones and we see how the net sales is coming, we have the automotive impact, then we have the commercial real estate estate impact, but actually bigger than the real estate is the reposition energy. We have chosen to reduce part of our portfolio and we see then that in the relative margin. So that part is coming from our own actions. And then despite all of these ones, it is very good to remember and know that material part of our portfolio is actually growing, delivering solid double digit results and generating more revenues and also winning in the hiring side. So we are having offerings in food and pharma, most corners of process industries, management consulting. Also, for example, nuclear and energy, we are going steadily and quite aggressively actually forward. At the same time, if you look a bit future, which the order backlog is a good indicator, it remains stable at local currencies. Obviously, also the order stock takes an impact from the FX volatility, but if we look compared to our kind of operational production capacity, it is stable, it is good compared to the start of the year or previous year Q3. So looking forward, we have many growth pockets, we have many solid pockets, but we have also automotive. It's not a surprise. It's not a new thing. Like Jonas said, it is sequentially improving. It has been bottoming out in Q2. We have the real estate or especially the commercial part of the real estate that explains pretty much whole organic development. Sorry, Jussow, which seems to have a technical problem, surprisingly enough. Yes. Apparently, we don't hear in teams, they don't hear you, so. So we have to look into that. Okay. They don't hear you, Jusso. So what's your proposal then in this, which is a surprise since Jusso, I hear him loud and clear. Can we ask him to go to our screen on YouTube? Like the voice from YouTube and then basically the screen from Teams. Okay. My sound is working on Teams. I guess you on Teams, you hear me, but you don't hear our CFO from Helsinki. Well, I guess believing that a reasonable simple thing like Teams would work. So what's the proposal, guys, in this? So we are checking that. So give us a couple of minutes to see if we can get used to work also on teams. Okay. So could we get somebody to say, Jussi, could you try to talk now and see? Probably it works at Teams now. So could you continue? -I can hear you now. Can you hear me? Okay. Now it works, Juss. So maybe you could just quick repeat what you said, Juss, in a super summary from the sales. Okay. So super summary, we know that we have issues in automotive. We feel and we see from data that it has bottomed out in 2nd quarter. We have had emerging issues during Q3 in the real estate, especially the commercial part. But at the same time, current data suggests that it is bottoming out in Q3. Then we have own choices, energy repositioning, which then you can see the impact on top line, but very favorable impact on the bottom line. And finally, from those negative parts, we have actually material part, bigger part of the portfolio is growing. We are talking about process industries, management consulting, food and pharma, water and environment and so on. So we have many reasons to be really happy on where we are going, but couple of these negative parts of the portfolio are now a bit overshadowed on that one. But looking forward, all the backlog in local currencies at a stable level, which is already a positive indication of the future. Then we go over from sales to the EBITDA part, and I agree with you. If you look, there are many bright spots, but obviously, we have some work to do in some areas. Then moving over to the EBITDA part. So then we can take the next slide. So pretty natural from revenues to expenses. So we have continued our efforts to protect our profitability. We have been taking down expenses further. And what we can now see, we take the view from Q2 to Q3, these are now including the FX impact. So once the revenue has gone significantly down, also the expenses have gone down. So SEK160 1,000,000 roughly, revenue down, SEK145 1,000,000, expenses down from the FX component perspective and EBITDA by roughly SEK15 1,000,000. But what is important in here is that we actually see from our action perspective that the proportion of the indirect expense savings is increasing compared to Q2. And that is also pretty natural when you take actions in personal expenses, IT facility, traveling and so on that you accelerate as you go. So the lead time from action to impact is always a bit longer than in the revenue part where the correlation is pretty much 1 to 1 than the direct project expenses are reducing. So I'm happy and also proud how we have been able to mitigate probably the worst GDP drop since 2nd World War, especially if we are talking our core markets. But from that said, let's go to the EBITDA development And we are having a net adjusted EBITDA margin of 7.2%. That is 0.4 percentage point down compared to previous year, which is a sequential improvement from 2nd quarter. We delivered SEK 288,000,000 of adjusted EBITDA. So it is fair to say that especially if you look around the world, see what has happened, we are delivering stable margins despite the revenue decline. Then if we take first a bit of the negatives, we have the automotive impact obviously in there and that one you will see in the divisional results on the Industry and Digital Solutions. We have the FX impact is roughly SEK15 1,000,000. That is especially coming from Process Industries Energy and Management Consulting, which have more foreign currency part of the portfolio compared to other operations. At the same time, we have a solid development within infrastructure. The margin remains stable despite losing on the top line. Process Industries, a bit down in margin levels, mainly due to normal volatility normal seasonality, I would say, in Q3 and a bit of COVID impact. Energy and management consulting, energy very favorable margin development and also management consulting, especially if you put it into the context of not having material contribution from the success fee related business during Q3. So all in all, I would say that it is a stable, solid, good performance with many highlights also in the portfolio, Process Industries, Food and Pharma, Water and Environment, Transportation, Management Consulting and so on. So I'm fairly happy given the circumstances on the margin development and how we have been able to mitigate the loss in volumes. So then if we go a bit further into EBITDA bridge, we can see here in absolute terms how we are being impacted from 345, 7.6 percent to previous from previous year to 288 on 7.2% current year. Infrastructure, so basically, mainly coming from the real estate segments, SEK10 1,000,000 down. As said, we have strong solid performance from transportation, water and environment segments especially, but the commercial part of the real estate is taking this a bit in the wrong direction. Industrial and Digital Solutions, we have the automotive part. Process Industries, actually material part of that 11% decline is coming from the FX rates. We have very solid performance in most of our key pockets, especially Latin America and the Nordics. We have energy, absolute value stable, relative margin improvement. This is coming from the energy repositioning. I'm happy to see how it has been going. But at the same time, we have taken the last repositioning related items affecting comparability within the division. And we are now good to say that we are accelerating forward in the future. Management consulting, solid performance. There is the normal volatility within that one, but 12% profit, especially in a vacation driven quarter is really solid performance. And group common EBITDA volatility in there, but then we are driving SEK 288,000,000, 7.2 percent in the EBITDA. If we then a bit view the divisional part, growth and profitability on the following slide, We can basically see that our growth components, we have the infrastructure. If we slice and dice this a bit, the real estate part of the infrastructure is explaining pretty much the whole negative part of it. So we can say that other parts of the portfolio are more or less stable or some parts even improving. Industrial and Digital Solutions, the automotive asset has been based on our view bottoming out in Q2. Now in Q3, we are seeing improvement from the very low levels. We even see that there are some offerings within the automotive that are now having scarcity of resources in the market. This is related to especially the software part of the automotive development. Process Industries, solid organic growth going forward, strong performance, Nordics, Latin America being hit basically with Brazilian real especially. And that also explains part of the relative profitability going from 9.5 to 8.4. Part is normal seasonality in Q3, but part is also that when you have a very strong offering, Latin America and the FX rates goes 20% plus down. The relative weight of that overperformed unit declines a bit in the portfolio. So you see it also in the relative margin level. Then going energy heavily down, we need to remember that the energy part is coming from the repositioning, which is our choice, EPC project, which creates due to our way of working in their volatility, we do it only on our own terms and conditions. We don't want to take whatever we see. So we see the decline in the revenue side. But at the same time, the margin is going 160 basis points up, which was exactly what we targeted with the repositioning. Management consulting solid growth, solid profitability. And in the context of not having success fees or material contribution from success fees. I would say that this is a good performance. So from the divisional part, let's go to net debt and the balance sheet. This is the other part, which basically we are happy to see that we are now at the adjusted net debt to EBITDA at 2 levels. This is excluding IFRS 16 and then including the protocol rolling 12 months. That's more for the comparable periods than anything and excluding items affecting comparability. So we are from balance sheet perspective in a fairly good position to go forward to take moves, especially in the M and A markets. We have SEK4.3 billion, almost SEK4.4 billion of available asset available liquid assets and unutilized credit lines. So with this type of a balance sheet, we are geared for growth going forward. But of course, we want to also address the organic growth part of the portfolio. So solid performance from operating cash perspective, 3rd quarter is always difficult from cash flow and we have been able to remain stable on the leverage ratios. So really good, really happy to look forward on what moves we can make. With these words, handing back over to Jan. Thank you so much, Juss. Well presented, I will say. And then I will just try to wrap up then. And I would say we are now some 7 months into an environment that is affected from the pandemic. And when I see how we have performed over the last 6, 7 months, I would say that I'm proud of the fact that we have improved the balance sheet, which has been, of course, moving into a crisis, something that you always need to keep as a very high priority. We have been able to continue to deliver to our clients. Yes, we have had our pockets that has been affected, automotive, private real estate like airport build out has been one segment that we have seen effective from COVID-nineteen. Same time, we see some very interesting focus being stable and even growing. And being able to deliver a stable margin, I'm pleased with. Of course, we would like to have better growth. And of course, that is something that we will address moving forward, having a platform now where we have taken out a lot of costs. So of course, now our focus moving forward is, 1st of all, to operate in the current environment, dealing with the pandemic, be flexible but go for growth. But we early outlined these 3 quarters just looking on quarter 2 then when the pandemic really was hitting us. And of course, that was a lot of reactions. We took out the SEK 500,000,000. We used, of course, the governmental program. We had a big hit in automotive. We saw some segments like automotive bottling out in the Q2. And at the same time, we also started in the end of the second quarter to look on the strategy ahead for Eifree, keeping two thoughts ahead at the same time, both acting on the current environment, but where are we taking the company. So that started up. Now the Q3 came in. And as we said, stable result, margin stable. Of course, we would have liked to have a better top line. But also given the currency effect, it is still stable. We have taken also in the Q3 a lot of measures. We are using short term work allowance that we need now, and we are now getting our employees back on assignments, meaning that we will not use those to a large extent moving into the Q4 then, at least from end of November. We have seen a stabilization by end of the quarter clearly across all segments. And I would say the last point, we have now an organization that STEP now is set to meet the market demand. That means, of course, that with a significant drop in automotive, we had to take measures in readjusting. And that has also partly driven our repositioning. We are doing it in Enyod, we are doing it in Automotive. And of course, now our infra team is working a lot to get the right structure for setting up our infra business for future growth. So moving into quarter 4, first of all, we need to continue to operate with perseverance in the ongoing pandemic. Obviously, nobody really knows how it will play out with the disease, with the COVID-nineteen. But we have now a structure with working from home, working from distance using digital tools where we can operate. So now we will continue to make sure that our employees and the structure works to because we believe that we need to get prepared to work partly from home, partly in the office in the next coming time. There's still an uncertainty in the market, but we can see that there is a strong underlying demand in those core segments where we also want to invest. And based on now the more and more efficient structure that we are getting in place, we have to remember that it was 2019 when we were joining forces with Pori and started a big integration. And of course, we worked a lot to take it to cost synergies in 2019 and we're continuing in 2020 also to deal with the pandemic. I feel and we feel that we start to get a lean structure in place. And of course, now it's all about getting into growth mode. And those growth pockets where we have seen a good development, we will invest more in. And then coming to the point that we have a balance sheet that would also enable us to go into acquisitions exactly on those pockets where we believe there will be a long term growth and also where we can see this underlying demand for sustainable solutions. And that's actually the last point and that very strategically we will use our balance sheet to look for complementary acquisitions supporting our growth journey. So that's where I would like to end. And by this, then open up for any questions that me and Jussow will answer. So Edba, you will moderate the Q and As. Yes. Thank you. And our first question comes from Erik Paulsson at Nordea. Please you can go ahead with your question and don't forget to unmute. Yes. It's Erik Paulsen at Nordea. I had a question here regarding the price development in contracts during the quarter. How has that been? And what do you expect for the following quarter now in Q4? Thank you so much. Jusser, would you like to take that pricing? It's been an extensive discussion in our team, too, pricing. And you are maybe muted, Jussum, or we don't hear you. No. Can you now hear me? Yes. So basically, thank you, Erik, for the question. I will first reiterate what I've been saying during the earlier quarter reports on the pricing. We don't have a single market where we can talk about single pricing. So there is not kind of an for everything that would be equal. We have booming strong markets where we have a strong pricing power. We can talk about processing industries, food and farm and etcetera. And there, basically, we see continued normal solid development. Then if we take such areas like the commercial real estate where we have seen decline in demand and maybe even a bit of increase in supply then to the public side of the commercial or public side of the real estate, then you can see that the price pressure is there. So we have a mixed bag. Then if you take the relative pricing in total from the whole portfolio level, the biggest impact in the price per hour that we are gaining is coming from the FX. But excluding that one, we are on a portfolio level on a very minor number down. It is reflecting the tougher competition is especially in the markets where we see that the demand has been going down significantly due to the pandemic. All right. So is it possible to break down the organic growth component into volume and price in this quarter? Yes, that is a good question. The bigger part is volume and minor part is the pricing. So but as said, this is then something that we have a mixed bag. So taking it from the portfolio perspective, it is, let's say, not that value adding calculation. I will also add to that also agree on that the major part is volume and of course the FX rate that impacts the top line during the quarter. Okay. Thank you very much. Thank you. Okay. Our next question comes from Johan Dahl at Danske Bank. Please go ahead, and don't forget to unmute also. Hi, Johan. Hi, there. Good morning. I hope you can hear me there. Can you just talk a little bit about the order intake and the order book, how it has developed absolute numbers compared to last year and sequentially? Just weak top line here, obviously, but just trying to distinguish what these problems in delivery and what is really a market demand problem. So we very much appreciate some comments on that, please. Yes, I can start and then Jusso to complement. I would say in general, as we said, Johan, our order backlog, if you look on the big CapEx projects in Process Industry and Energy and I would say also on the infrastructure and even in Industry and Digital, for example, on the for the Life Science, are remaining stable and we have been able to get some very interesting orders during the quarter. So I think the weaker top line, as we also knew that we would have because, of course, the dip in quarter 2 driven from automotive and some others, like we had some architecture work to hotel change or the airport products, We have we knew they would carry into the Q3. Yes, on the commercial real estate, which is more shorter assignments also, we could see a weekend, probably also affected from the fact that we had 2 summer months. So July, August, I think we and also summer clients used the vacation a bit more. But if you'll zoom out, also, on the different segments on the order backlog, it remains stable. What would you say, Jusso, when we looked on each of the core segments? Yes. So first on the kind of request to get absolute numbers as we don't disclose them in our quarterly report and obviously I can't disclose them within this call either. But what I can say is that first of all, if we take the first comparison point, which is Q4 2019, we are actually slightly above that one. When we adjust for currencies, we are slightly below if we don't adjust for currencies. Then if we take Q3 2019, we are very, very much rounded to same number, but slightly below. And then that's part of the view how you would like to see the order stock is the portfolio level. Then if we take a bit more segment view, we can basically say that we are stable in infra. We are slightly down in process industries when adjusting for currencies. Energy is slightly down and then actually, industrial and digital solutions are going up. And that is also, to a certain extent, natural when you see that we are gearing from the professional services, which is very much of the short order stock type of work into the projects, which is then a longer order stock type of work. So all in all, those combined, we are seeing stable development in the order stock slightly above Q4 2019 and slightly below Q3 2019. That is given where the world is quite a good achievement, I would say, I think that we have been positioning ourselves well in the market. And at the same time, we see that the order pipeline, the prospect pipeline remains also stable. But like we comment in the report, we see delays in decision making. This is not maybe an optimal time to go especially on the CapEx decisions and this type of a postponement we've seen earlier. And basically what we see is that the decisions are being made and the markets are stabilizing like we also putting even in our header of the report. All right. Much appreciated. Thank you. Just a follow-up also. I think you talked, Jonas, about repositioning in 3 divisions: Energy, Infra and Industrial. When do you think that deliberate actions from OFPER to sort of reposition the portfolio will stop being a headwind to growth? That's one question. Can you set the point in time where you sort of have completed this? And also can I also ask you, you had 800 people on furlough ending the quarter? You talked about redundancies of 250 something. Is it your view now that this will be sort of that will there is enough work here for after November to actually maintain this sort of employee base? Thanks. Thank you, Johan. Well, first of the repositioning, it's a good question. And obviously, I would say, Ennio that we started well ahead of the COVID-nineteen pandemic is delivering according to plan. And now let's see how the pandemic might have affected that segment. But I can tell you, we see also a lot of interesting demands on the clean part of energy. So I think when will that start to be? We have a plan. And based on the market, we believe that we will start to get back on growth on that. And then I will say that if you look on OOF and since 2017, we have talked about a constant repositioning from more professional service into more and more product and value delivery. Now due to COVID-nineteen, we took a hit in automotive quarter 2, pretty hard one, as we have talked about, because they had to stop operation and they have rethought their R and D portfolio. That we have taken in now. So when we see also in quarter 3, it's much lower volume, of course, compared to a year ago. And that we are bringing in now, and Robert and the team are adjusting to that. Now in infra, clearly, we saw we saw the commercial real estate part affected. And of course, now we are looking how do we deal with that? What are the areas we believe is just a hiccup? And where do we believe also here that we should continue to invest? Obviously, we have had some big airport build out and have been some hotel things. So I can't say it, Johan. But clearly, what I like now, what we are doing is that we are taking this crisis to really take actions, some of them we thought before, to kind of, okay, let's make it now and then get a portfolio and a structure that's geared up for growth. So I mean, it depends a lot on how the market will develop. But obviously, 2021 will be a key year for us then to get back to growth in those segments. At the same time now, of course, the pockets where we have seen a stabilization, like we talked about food and life science, we talked about clean part of energy, we have talked about the bio industry, we have talked about transportation and the part of infra where we have steam stable, we want to invest more in. So I think it's both to get those repositioning segments back to growth after taking the hit and over invest even more in the segments where we have seen a stable development. So that's and you had a second question, Johan, maybe I forgot that. What was that? Do you see a need here as furlough regime expires I think in your main market November here, 800 on furlough and you've only take or you've taken out €250,000,000 something. Is there you can identify need here to do something more. I don't know whether we're correct in identifying that. What do you think? No, but that's in our plans now that with the SEK 800,000,000 in this short term leave, then we need to understand that they are different. We have employees that only have 20% for term work. So there's so what we are saying is that from now and by basically end of November, we should be back to only a handful. So we believe that with growth in in Food and Life Science and Transportation, etcetera, and the belief that we have seen a bottling out on some other segments that we will be able to bring those employees back to assignments that we will be basically not needing these governmental support by end of November. That's our plan, and that's what we still believe in. And I will say that the stability and signs of recovery that we saw by end of the Q3, of course, have given us strong indications that, that will be possible. So that's our plan and that we are sticking to for sure. Very clear. Thank you. Thank you, Johan. Okay. Our next question comes from Erik Elander at Handelsbanken. Please go ahead, Erik. Thank you. Hello, Erik. Yes. Hello, guys. Thank you for taking my questions. Actually, it's 2 questions. So first of all, it's kind of related to Johan's question on infrastructure. And I mean, you mentioned that you have a problem in the real estate market, but it does not seem to be a billing ratio problem since the margin hasn't changed year over year in that segment. Rather, it seems to be a recruitment problem since the number of employees has gone down both quarter over quarter year over year. Is that correctly understood, 1st of all? And also what is going on here? Why, if so, people are leaving this segment for you? Well, thank you, Eir, for the question. I think, first of all, when we talk about real estate, we are including not only the building business area in Eefri, we also include project management as well as part of the architecture and design work that we are doing for that segment. So it's not only one business area when we look on the client segments. 2nd, of course, we have also in this segment due to a bit weak and used to short term work allowance in that segment. As a consequence. And obviously, you said less employees and why are people leaving? Well, I think the fact is that in some areas like transportation, we have seen the market picking up. But in these private driven or commercial, as we said, airport build out, etcetera, we have seen a weakened demand and that's why we have been using forklift allowance and not recruited to the extent that we used to do in that segment before we know how it plays out. Okay. So mostly of the short of the work allowance has actually been compensated because that's the thing here is that the margin is kind of good. I mean, if you compare it to last year, but the growth is weak. So that's kind of the point that I want to give an explanation on. But I mean, Erik, you are putting the finger of A3, obviously. We are shrinking 7.6% organically, but the margin is 7.2%. And in a quarter where we have a vacation, also historically, the margin is not that bad. And compared to last year, it's 0.4% unit below. So we are able, with short term work allowance, with cost mitigations, to mitigate. Our challenge has been that in some of these segments, like we have presented, that the demand in the 3rd quarter for our service offering has been weaker. And when you slice commercial real estate, again, it is a real estate it's a segment that is fairly big for us and impacting more than one business area. So clearly now we are working a lot how to get back to a solid growth because that going back a couple of years, that's been driving a big part of the Afri infra growth. If you look on Norway, where we have a big project management company called Advancia, They were leading the Garda Mowry build. That's a project organization geared up a lot both to public buildings, but also to commercial. That has been affected. We have seen it a bit in Switzerland. We have seen it in the Nordics. So when you slice that segment across A3 in the Q3, taking into account we had 2 vacation months, that was weaker also than we thought. Now part of the compensation on the margin has been to cost mitigate, not hiring as much as we have done and using the short term work allowance. And this we need to get out of moving into the Q4. And you also hear maybe if I can complement quickly. So basically, of course, number of FTEs are going down. But then if you actually take a step forward from that one and think what has happened, actually if you take headcount perspective, we are not going down in the similar manner because in the portfolio, what happens is that step number 1, you use all of the old flexitime balances. So you put your you make overtime earlier and then you save part of that one to be used when maybe you have time to use it. Then you use all of your vacation balances and old vacation balances and only after that one you go to the short term work allowances. And these type of actions are now visible in the FTE numbers. So maybe earlier, you got an average of 1.0 3, 1.04 times kind of the hourly output from employees. Now we are closer to getting maybe 0.98 or 0.99. 0.99. And this is then something that is, from our perspective, really flexible because then we are quite quickly adjust our capacity. So then not all of this one is related to short term work allowances, but normal strong and good resource management and workload management that is part of our business logic. So just to kind of highlight that we are not losing in the recruitment front, we are not losing in the people side of the path. We have these type of pressure valves, if you like to call them, that in these type of market situations are then releasing a bit of this oversteer that maybe has been boiling in the whatever kettle boiler you want to call it. So that's the logical answer. So I wouldn't draw conclusions on losing on the people side with the numbers you see. Thanks, Jeslo. Yes. Because actually, like if I just want to summarize this question is that you state that the market is good in infrastructure, but the growth is actually declining from quarter to quarter, like it was minus 6% this quarter and was minus 1% or 2% last quarter. So that's like kind of the thing that I want to really understand here. But you're right, Erik. And if you take infrastructure as a general topic, we all it's a huge segment. It includes a lot. And we have seen that if you look on water, environment, rail, road, I would say part of public buildings, the digitalization, it is remaining strong. And we also believe that the demand for sustainable solutions will continue to be stable. We all know, Erik, that the green recovery that is talked about in Europe and also in the Nordic will remain stable. However, we have not been able to get growth, especially when then you look into the commercial building or real estate. And that clearly affected us in the Q3. So you're absolutely right, we are not happy with our top line development. But at the same time, in for as a segment, we see what everybody else see. It remains stable and a promising segment. And of course, now it's up to us then to gear our portfolio even more towards those segments where we see this underlying demand. I think that's the background, Erik, that we state that infra as the overall segment remains stable even though we had a hit done in the Q3 in one of the slices that affected us a bit more. I think that's the background why we say as we do. Yes, that's very clear. Thank you. Thank you, Erik. And then just a short question also because believe it or not, we are kind of close to the next year now. And I mean you have a target of 10 percent margin and also growth around like 5% -ish organically. I mean, it's obviously impossible to tell whether it's going to be true or not. But I mean, how are you guys within the management discussing next year in terms of growth and also margins? That's a good question. I agree with you. It's remarkable how quick next year looks like it's coming. But I would say this year, we know we are taking a hit on the top line. I mean, nobody was taking into account that the pandemic would come and that we would have a big hit in automotive and all of that. So we are eating a top line hit this year. Clearly, and we are adjusting accordingly. You said it yourself, Erik, our margin remains reasonable stable, meaning that we are taking activities into that. 2021 will all about getting back to growth. We believe that the segments where we have taken a hit in the second and third quarter have bottomed out. Commercial Real Estate, automotive, others, they have bottomed out, and we are adjusting. But on the other hand, we have some really promising segment, the bio industry. We believe in the clean part of energy. We believe in food and life science. We believe in big part of the infra. How can we grow more organically, but also through acquisitions? So our battle plan is, of course, even in the for get back to growth, but we know that we need to eat this decline that we have taken in some segments. But then 2021, if you ask how the discussion is, how can we increase growth more in the segments that has already started up to pick up, but also how can we now get back on track on those segments where we have taken a hit. At the same time, I guess we all need to be humble working in a world that is affected from the pandemic, and we don't really know how that will play out. We are absolutely I'm absolutely confident that on the operational point of view, we have a cost structure and the flexibility that we can also meet 2021 independently because it's one thing that we work hard with is to get our lean structure in place. And that I think we have shown now on keeping the margin stable. But of course, Erik, we are spending a lot of work now on getting back to growth as a company. Okay. Thank you, Jonas. And Jussi, that's very clear. And that's all for me as well. So have a good week and you both. Yes, thank you. And you too, Erik. Thanks a lot. Thanks. Okay. Our next question comes from Dan Johansson at SEB. Please go ahead, Dan. Hi, Dan. Hi, and good morning. Just a quick follow-up from my side to Johan's earlier questions on the EUR 270,000,000 permanent reductions. Did you take cost for that also in this quarter? And will benefits come later? How should we think about it? And I guess all these reductions are related to automotive or Yes. I think the majority of the reductions we have taken on fixed employees is driven from automotive, but it is also some pockets all over where we have adjusted according to what we believe will be the new normal going back to track. And the cost has been taken in the quarter as we go, Jussur. Any comment from your side on that? Yes. And actually then if I take the items affecting comparability, the other three items affecting comparability are all coming from energy and related to repositioning material part of the costs that are related permanent layoffs in automotive have been taken order in Q2. We had a minor delta in Q3, but it is in a manner not worth mentioning in the total numbers. So pretty much the costs have been taken and we see that going forward then. Obviously, when you have less people who are not having a stronger growth, then you don't have the personal part of their expenses going forward. So that's in a way the benefit if you are looking forward. Okay. As there are no more questions, I hand over to Jonas for some closing remarks. Go ahead, Jonas. Well, then I would just like to thank all of you for listening in to this, and I'm happy that we could pull it through with bearing in mind that we did it through Teams and YouTube. Sorry for the small problem we had with not hearing you, but I think we managed in then. Again, it's been a quarter where we had to face effect from the pandemic. I think we have met it in the best possible way. For sure, we would have liked to have a better top line especially, but we are working a lot on that. And I feel confident that we will step by step improve also the top line getting back to growth. So I would like to thank you all for listening in. And I would like to remind you for sorry, I missed that, to sign up for our Capital Markets Day, which we have invited to on November 24, starting at 1 to 3:30, and it's an online event, obviously. There will be a press release sent out, I think, next week. So I hope you can all be there, and then we can dig in even more how we are planning to take Afreep to the next level, obviously looking on areas like sustainability, digitalization, how we use our lean platform, how we are planning to improve and invest more in growing segments like infrastructure, the whole bio industry, the clean part of energy and food and life science. So I think we have an extremely exciting future ahead of us where we will do everything we can to take A3 to the next level. So again, thank you so much for listening in, and I wish you all a great day and a fantastic weekend. Thank you so much.