Welcome to Cavotec Q2 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CEO, David Pagels; and CFO, Joakim Wahlquist. Please go ahead.
Good morning, everyone, welcome to this webcast. My name is David Pagels. I'm the CEO of Cavotec. With me here today, I have our CFO, Joakim Wahlquist, who has now taken over the role from Glenn Withers as of May 1st. Today, Joakim and I will present Cavotec's Q2 report, 2023. You are then most welcome to ask questions by clicking on the link at the bottom of your screen or over the phone, and we will see all the questions on our screen. We will today first present the performance of the quarter, both from an operational and from a financial perspective. We'll look a little bit to the outlook, what we see coming, and at the end, we will open up for the Q&A session, as I just said.
In the second quarter, we reported revenues of close to EUR 46 million, up 44% compared to last year, which is very satisfying. The order backlog decreased slightly in the quarter to EUR 140.3 million, down 8% from the same period last year. I will explain a little bit later why that is the case. In addition, the increase in revenue, we also continue to see improvement in our operating profit. EBIT in the quarter was EUR 1.2 million, up from EBIT EUR 0.3 million in the previous quarter. Up from EUR -0.9 million in the same period last year. Go over now to slide six. First, in our Ports & Maritime division, the order backlog has slightly decreased, mainly due to three reasons.
Higher on-time deliveries, we are delivering out our products in a, in a higher speed as we, than we did before. We also had one big order in the-- that was won in Q2 in last year, which was a big one, EUR 50 million, and of course, that as a comparison, is, is a big, big balance. Also the timing of the orders that we expect in the quarter, that some of them fell into Q3. Not really fell out, we didn't lose them, but they are just timing effects in the quarter, which we need to just understand. There is still a very solid pipeline of orders and opportunities, primarily for the PowerFit, which is the retrofitting the PowerFit on the existing container vessels and power solution, as well as the Motorized cable reels.
The revenue increase is especially strong in the Ports & Maritime division, with an increase of 65% to last year and close to EUR 29 million, and I'm very, very pleased with that outcome. For our Industry division, the order backlog increased with more than 7% in the quarter to EUR 31.5 million. The revenue increased by almost 90% to EUR 17 million compared to the last year. The revenue growth for the Industry division mainly came from deliveries of Motorised cable reels systems, Spring reels, and collectors, especially within EMEA and the Americas. Now over to some highlight regarding our organization and strategy. First, our service business continues to play an important role in both divisions, and it will continue to do so as our installed base continues to grow.
In addition, we also focus on increase the number of service level agreements to maximize the performance and availability of our product in order to satisfy our customers, that's a good strategy which I'm pleased with. Secondly, here, in order to establish one efficient global production and sourcing function across Cavotec, we have recruited Jörgen Olsson to head our Global Operations. Jörgen has an extensive experience from sourcing and production and will join us August 21st. Initially, Jörgen will focus on establishing a strategic sourcing function with global commodity management structure, an important piece in order to improve the performance of Cavotec.
In July, we also made a strategic decision, a strategic decision, to set up an assembly site in Chennai, India, which will support our global sourcing initiatives, and this will also give us an additional manufacturing capacity for PowerFit and charging products outside China. There is also a strong demand from our customers to localize in India. In addition, India is a very hot market and have a very clear agenda to develop their ports in a sustainable way, and that's why we need to be there. Lastly, another important change is within engineering. We have already structured our product management by products, and as a natural step, now we organize also our engineering and R&D in a corresponding way. Jim Andriotis, who has a long experience in Cavotec, has been appointed as Chief Technology Officer and will be leading this job and transformation.
Slide eight. Let me now hand over to Joakim to talk more about the financials in detail.
Thank you, David, and good morning to all of you. I will continue to build a bit on David's comments regarding the order backlog, the revenues, profit, and the cash situation within Cavotec. I will start with the order backlog. The order backlog is year on year, as you saw earlier, down 8% with the explanations that David gave earlier. On top of that, also, the fact that we are more, a little more, maybe a bit more restrictive now on taking in orders with low profitability. We also see very good increase in profitability in the actual order book. Down versus Q1, it's only 6.3%. David also outlined a bit of the timing, so there's a few big tickets that are falling into Q3.
We, we still see a very strong continued demand for the solutions, and we have a very good pipeline of new opportunities that is also continue to increase. I myself is also very pleased to see the growing order intake for the services business in both divisions. There is continue to be a really strong demand for our solutions, not only driven by the awareness in, in our markets, but also the growing legal regulations. I feel that we're well-positioned here to, to capitalize on this development. To talk a little bit about the revenue then, David has already said that we're very pleased with the, with the increase versus last year, 44%, up to almost EUR 46 million.
If we compare that, we're also looking at the divisions, we, we can see that we're, we're extra pleased with, with the Ports & Maritime division. I think a 65% increase versus last year speaks for itself. Profitability. We have an EBIT in Q2 that is EUR 1.2 million, and that's corresponding to a margin of 2.6%. These are, of course, profitability levels that we're not satisfied with yet, but we can now see a very clear trend of improvement, and that is satisfying. This is a direct effect of a number of activities that have been taken to enhance the financial performance.
As a new CFO in Cavotec, I've also made profitability, a profitable growth one of my top priorities, and I can see a lot of untapped potential in our group. I believe all of you have also read the report fully or partly. As you can see also, we have not only improvement potential to do then on, on the, or above our operating profit, but also below the operating profit to increase our earnings per share. There, we also have a number of activities that are already launched to address that. Let us now take next step to cash flow. Here, we are still, of course, in Q2 here, we have a negative cash flow, EUR 4.6 million in the quarter.
What we are seeing now is a stabilization in the inventory levels. We're also improving the collections, and here we still have a bit of untapped potential, and we have normalized the payable situation. I believe that we, in the very near future, will see a similar trend here to our revenue and EBIT. My last slide here, I will tell you that I have now been on board since the eighth of March and took over the pen from Glenn on the first of May. During this month, I've had the opportunity to make a very clear list of priorities and for Cavotec as a company to increase the financial performance. We have already started to implement a number of activities.
I'm very convinced that the focus areas that we have chosen will make a big increase in the financial performance of the group. I am just like David here, very eager and determined to roll up my sleeve and get things happen. To finish off, I want to say also that we have had a very good dialogue with our lenders during Q2, and they can also see the positive trend for Cavotec, and they have therefore also granted us a relief of the covenants for the rest of 2023, which will allow us then to focus full energy on our improvement areas. With those words, I will hand the relay stick back here to David.
Have we now slide 15 on the screen, I think? Thank you, Joakim. Just to summarize a little bit of the conclusion before we move into the Q&A session here. In summary, we saw and continue to see a very strong revenue growth and also very strong demand for Cavotec solutions in the second quarter. We are in the right spot in terms of our product and, and in the market and the trends, with an increasing demand for sustainability solutions, and also to continue to accelerate on the decarbonization agenda.
Our growth is fueled by our excellent product portfolio and services, and we continue to work close to our customer, but also then, as I mentioned, the increased awareness by corporations and governments across the world to shift for more sustainable solutions, in order to make sure we have a better world going forward. Our decision to expand our manufacturing capabilities in India and the increased focus on strategic sourcing will be an important component in the future success, and also the shaping up the performance of Cavotec as a company. I'm really pleased that we are now taking, taking clear steps in that area. We're not talking about a massive investment, we talk about ramping up in a small scale.
We have already a couple of guys on the way to be on board in India in order to do the job there. It is very satisfying to see that we are making progress. It's been hard work, and it's still a lot of hard work remains, but we are turning and determined to turn Cavotec into a profitable as well as growing company. It's important here that we, that we continue to focus on, on profitable growth and not just growth for the sake of it. That is something which I think is now well understood across through the entire organization. That concludes the official presentation from our side, and we are now opening up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead.
Thank you and good morning. Just on the first question is on the comments there regarding a bit of hesitant activity, and you mentioned delays. Just a bit curious here, what you see in the market and why it's perhaps more of a delay rather than a declining market sentiment.
Okay, thank you, Karl, there. It's clearly we see, we see, okay, there is a lot of uncertainty out in the world economy that, that we all know, and, and it's a little bit turbulent, areas with increased rates, interest rates, and so on and so forth. Of course, the customer are a bit more reluctant to place the orders. They are, they are waiting. We have big investments for the shipping line and the vessel industry at the same time as the, as the tariffs for the shipping industry goes down. Of course, that makes them a little bit hesitant to actually press the button. Therefore, we see a little bit of a slower speed in the, in the, in the opportunities that is coming up, or actually the decision that they are taking.
They are waiting a little bit more, think one more time before they press the button and go ahead. However, we see a strong increase in the opportunities, and also we have now two big shipping lines that has just launched two big, two big tenders for PowerFit, which is the retrofitting for shore power on the vessels, on the existing fleets. There are two of them that just launched two big tenders that we will submit within the couple of weeks here. Most likely, that's not going to go down to one big order. It's going to be split in several orders.
However, there, India is also playing a vital part in that in order to make sure that we can demonstrate to our customers that we are able to, to deliver in dual source, dual supply, so to say, by de-risking only delivery for one side, so that we don't end up in a similar pandemic situation, et cetera. It's a little bit of a slowing down, but at the same time, the, it's a continuous. It's slowing down on the decision rather than slowing down in the, in the market. That is what I would say.
Okay, understood. Then, it's still early days, but, not too long ago, at least it seems like the EU, further kind of clarified the deadline for shore power in European ports. I'm just curious if what you have heard on the, port side in, in recent months, regarding such investments.
Yeah, it's, it's a good point. Good question there. We, we see, we see a clear trend. First, we all knew, and we discussed that before, that on the West Coast of U.S., there, where they started, naturally, they are, they are the one. It's now spreading over to the East Coast, also in Europe is now coming, and it's coming for various reasons. Coming also with a, with a legislation, so it, it will be, penal, they will be penalized if they are not able to, to connect to shore power. That legislation is coming. It's also coming, a, a clear interest from the ports themselves, primarily the ports on cruise terminals, because they are normally located quite close into the city center, and there is a lot of tenants coming up now, around Italy.
The, and, and that is, that is also something which we see strong interest in, and we are playing a good role. We are located in Italy, and we, and that's, that's, of course, a good news. That there, there will be a lot of opportunities coming, and the whole, to say, regulation wind is blowing in the, over, over Europe as well. Finally, it took some time, and it's coming. Also then we see that, as I mentioned before, also India, which is a huge country with a, with a, with a long coast, but they are also determined of, of playing according to the book here and then fully fulfilling their, their sustainable agenda when they are modernizing their ports.
Regulations or not, there are worldwide regulations, but they also drive from the countries and the cities themselves.
Understood. Then, now, as you ramp up sales and continue to increase in deliveries, and then maybe a bit of a short-term hesitant activity on new orders, perhaps. Your view on kind of, are you still pretty comfortable with the level of coverage you have from your backlog, in terms of just your ability to continue to grow, not only this year, but the next ones?
I think we have now, and that is also why we are, why we are starting up India, in a way, is also that we are preparing ourselves to have dual locations where we actually can, can, produce and supply to the market. I think we have capacity to do. We have capacity already in China today, where we can produce our PowerFit, but we won't have additional capacity in order to meet there. It takes time to build up capacity. We're not going to do it with a big investment.
We're going to wrap it up, at the same time, it's, it, it builds, it takes time to build up the capability and in order to make sure that we deliver high-quality products, and the customer shouldn't really notice if they are coming from one site or the other. That's, of course, what, what, what we are, what we are. It's very, very strong requirements from our side. I, I, I think we're well positioned for that. We still have a capacity to grow, we're also investing slightly for the future and preparing ourselves for more volumes to come.
Understood. Then I, I have, three more, if I may. I was just a bit curious. You said that service was growing, for a couple of quarters now, it doesn't seem to have been disclosed, at least. I was just curious, how, how large share of your business is service today?
Not big enough is a good, is a good reminder to that one, Karl, but, somewhere, somewhere around 20%-30%.
All right. Understood. Then on, on, on the profitability side, margins have now improved kind of quarter by quarter for two quarters now. Just going forward, it seems like profitability has improved in Ports & Maritime, while Industry is more on kind of the same level. Are there different drivers that need to happen for the two divisions to show an improvement in, in margins here?
I, I would say within Ports & Maritime, we had, we had an order backlog a year ago, or when I came on board, that was, that was quite long in time, naturally. The Industry business is more of a flow business, meaning they don't have the same outlook or, or horizon in, in the order backlog. We, we had margins in our existing order backlog for Ports & Maritime when I came on board a year ago, which wasn't really at the level where we expected them to be. We are now delivering out on that one, as we said before, more and more.
So the portion of not enough satisfactory margins are drastically reducing. On top of that, we're also then seeing that we're now bringing new orders with better margins and on the right level. Therefore, I'm very confident that we will see a continuous margin improvement and profitability improvement on the Ports & Maritime side. On the Industry side, it's more of a flow business, which is where they don't have the same horizon or time frame on the orders. Therefore, it's a little bit more difficult to predict exactly what is going to happen. It's more a fighting to make sure or fight.
It's more a hard work in order to make sure that we continue to work on improving the margin there. On the Industry side, I think we have a lot of initiatives going on right now in terms of lowering the material cost. It has been a very booming market, and also a very inflationary economy on the material supply side. We now see that we're able to catch up on that one. We have also increased our price levels a couple of times, and we're now starting to see the effect of that coming through the system as well. I'm quite optimistic that Industry is going to catch up as well here.
All right. That's, that's good to hear. My final one was just, a bit on, on what.
Okay.
What you mentioned, Joakim, on cash flow and working capital. Sorry.
We, we lost you a little bit, Karl, there.
Okay. Hello? Do you hear me now?
Yep. Now we hear you. Yes.
Okay. Final question on working capital, if you could just clarify how you see the timing of, of payments, will it be more kind of towards the end of the year, or can we see improving working capital effects already in the third quarter?
I think we will see some improvements already during Q3. Majority of effects also coming during the later part, the later part of the year. I think just like I said, there, we have normalized the payable situation, and we are improving collections. That takes a bit of time to get that process as efficient as it should be. We're seeing clear improving trends.
We have also stabilized the inventory, but of course, we also need the contribution from the actual operations, and here we're seeing that, that the margins in the order book, just like David said, they, they are, the projections there are that they're going in the, going in the right direction, and that will also in itself then help us to, help us to turn, turn that trend around.
Understood. Thank you. That is all for me.
Thank you, Karl. I think we have quite a lot of questions here. Okay. Okay, the first, there is a question here from Rasmus, "Regarding the revenue increase, what is the mix between growth in volume versus price increases?
I would, I would say that the, the, the majority, it, it, it differs a little bit between the two divisions as well. On, on the Industry side, it's more, there we, there we increase the prices. On the, on the Ports & Maritime side, it's, it's more bigger tenders that we are, that we are bidding and, and winning, and so on. So I think, it's, it's not easy to talk about the price increases because we don't deliver always the same item, item on the Ports & Maritime side. We are, clearly, aiming for more profitable orders, and we're not just, for Ports & Maritime, and we're not just winning orders for the sake of it.
Therefore, we've been a little bit more reluctant to take on more of those because we don't we want to have a more solid order backlog with, with good margins in. We also see the effect of the price increases primarily then on the services side, as well as for the, as well as for the Industry side. I think one, one important, one important aspect of that is also, the changes that have been done to, to the order intake process, where we are also getting better at pricing ourselves. It is, to some extent, they're hard to, to answer the question straight out, what comes exactly from price increases and what comes from, from, from, from volume.
Then we go over to a question here from Johan Ewaldh. "Hi, thank you very much for your presentation. What is the, what is the cash level, and what trend are we seeing there? Could you please outline some of the priority areas he wants to focus on to improve financial performance? Will the remaining investments made in India, CTO and Chief Sourcing Officer, be expected to generate positive financial contribution bottom line in 2024? Then the earlier low margin orders still in the order book, how many quarters will they still hurt the margins?" Okay, we take one question at a time.
Yep, good questions. Maybe I can start a bit with the financials there and what we're, what we're looking at. One, one of the important things here is, is it starts, everything starts with people, and we're doing some organizational changes here to increase our capabilities in already done changes, actually, in the financial control, business control, and also the treasury and tax management. This is important changes that have already taken effect, and we're continuing to increase the capabilities there. We're also looking at a system environment that needs to be needs to be upgraded a bit to make sure that we're support automation, but also making sure that we can make better financial decision making. This is, this is a big area for us.
David said here also, earlier with the that we're continuing to, to work with, with our order intake process, to, to make sure that we are correctly priced and that we take in the orders, the orders that will contribute with the right margin to our operation. That was the priorities. We also, of course, we have more specifically then, of course, we have, we have a number of, number of projects, you could say, for each and every line in our, in, in, on our cost side, but also on a, on a, if you're looking below EBIT, of course, we also have a number, number of activities launched there to make sure that the earnings per share is going in the right direction.
Yes. Then, there was a third question there, from there: What will the investments in India and the CTO and the Chief Sourcing Officer be expected to generate a positive financial contribution, bottom line, 2024? The answer is definitely yes. We would probably not see much of effect in 2023 because we have lead time, et cetera, in the system. In terms of India, and there is another question of India, so I can take that at the same time, we are not doing a substantial big investment. We're not building a new factory. We are renting a factory, which we're gonna fit out, and then we're gonna ramp up.
I've done this in my previous job in India, in my previous company, and with a very successful outcome. To building the structure and then grow with a profitability as we ramp it up. It's not going to be a brand-new factory with 50 employees standing there waiting for volume. We're gonna ramp it up and grow with business. We actually don't expect any significant investment in India. We're gonna ramp it up, and we're probably gonna be some kind of cost neutral with it already during Q1 and Q2 next year. It's a slow ramp-up there rather than a big, big investment. Financial contribution, bottom line, 2024, definitely. There are the low-margin orders in the order book.
How many quarters still are they gonna hurt margins? It's a little bit difficult to say because some of them are spread out over quite a long time, so there will probably be some portion of it, deliveries in 2024 and perhaps even in 2025. However, it's, it's like a long tail, so the further, the further we go in the future, the portion of those orders will, will shrink and play a smaller role in the total, total revenue. At the same time, we have then also new orders coming in where we have better control over things, and, and we have better margins, so that will then also not only the, the effect that they're gonna shrink out the old ones, but they're also gonna increase the, the, the balance of the better ones.
I'm optimistic in that view, that we will see the effect of that, already over the coming quarters, and it's gonna gradually increase over time with the better margins, especially on the Ports & Maritime side, where we have a little bit of that problem.
Yeah. I think, that one probably, leads us into the second question that we have here also, what margins we will see, in 12 months' time, and I, I don't think that neither I nor David would like to commit to a number there, but the only thing we can say in this meeting is that it's, it's definitely going up.
Yes, and then, Could you please give some more CapEx guidance on your expansion plans in India? We talked about that. I think that is already done. We expect actually to have the opening the facility, we have signed the. We have agreed now with the landlord this week, and we will, we plan to have the open, and the guy who's leading it has personally himself determined that he will assembly our first product before the end of the year in our new facility. That's, we have ambitious plans for that, but again, we're doing it in a cautious way, of course. What specifically are the untapped possibility to ensure profitable growth mentioned by the CFO?
Okay, I will take that. I will take that one. There. I will take that one, and there's a number of things here, and I, I think part of that also, I said earlier on here, is everything starts with people. We have real untapped potential here when it comes to our material costs. Establishing, there's a reason why we want to establish and put some extra effort into the sourcing area. That's a clear untapped potential. We have done the investments to some extent here also already in our premises.
To utilize those premises better is, is a, is a potential that we, we really have been working with extensively, the productivity in our existing facilities. We have some, some areas to address, of course, on the on right-sizing the organization, making sure that, that, that we are the right amount of people at the, in the right in the right locations and, and, and at the focusing on the, on the right tasks.
I think also, like I addressed earlier, everyone that reads the report can see also that we have an untapped potential when it comes to the, comes to the lines below the operating profit, also to make sure that we get a better earnings per, per share. There we have launched also activities to address the lines down there. As profitability improves, of course, we also know that it's, it's, I mean, in today's society, money costs money, but we have an opportunity there to reduce that cost quite significantly. Okay, we, we, we scrolling down here in the, in the list of questions. Here comes a question from Per Collin.
You hint to continue margin improvement as you look at the different cost lines in the P&L, where do you expect the biggest leverage? Materials, procurement, direct labors, et cetera. What is behind the decision to invest in India? Is the pure capacity needs relative to cost? Okay, good, Per, good questions here. First of all, we see a bigger potentially in the materials and procurement side. It, it is definitely one of those outside finance, but untapped areas inside Cavotec, where I think we can do a lot. We don't have a commodity structure today, meaning we have, we have spread out our volume bundling power versus the cable suppliers, for instance, is spread out among between the sites and between several procurement people, and in certain, in some places, not even procurement people.
Of course, what we're going to set up there is a commodity structure, meaning there will be one person inside Cavotec who is responsible for, for cables, for instance, there will be one person responsible for, for castings and gearboxes, and they will be responsible at Cavotec, versus all the sites. This is just common sense. This is a structure, it should have been there from the beginning. It hasn't because it's been a little bit of other things and priorities here. There I see a big potential on us, structuring that way.
That is where Jörgen also now is playing a vital role because he's been involved in leading these kind of commodity management structures in his previous company, working for Xylem or Flygt, and also then working for the, for the, for the railway industry at Bombardier. I clearly see the bigger benefit there, of course. The decision behind India, I think we talked about it a little bit more. I can dwell a little bit more about it. It's, it's twofold here. First of all, India is, is, of course, a good and rapidly growing country in terms of best country sourcing. I'm not saying no customers sourcing anymore, where, where we have a big potential of capable suppliers, and we see a lot of international companies moving the facilities to India in order to, to capture that.
From a sourcing perspective, it's also going to be we need to have people on the ground who actually can feel, touch, and smell and secure that it is on the right level before they ship it to the factories that we have across the world. I've done it before, and that's the way it has to be done, so we need to have people there in order to do that. It also has to be people with a mindset that understands what are the requirements that we have and our customer have on the goods. It's just not something that. They shouldn't see the difference if a certain component is coming from one country or one factory or the other.
We need to have high levels and high standards when we are, when we are qualifying our suppliers and, and setting that up. On top of that, we also have, as I mentioned before, in absolutely too much of single sourcing. That is also now what we need to make sure that we, we build up, that we have dual sourcing so that we can shift the volume and we can secure both redundancy purpose, if there are any disruptions in terms of the supply chain, but also then to make sure that we can use an efficient volume bundling and negotiation tactics versus our suppliers.
It is clearly a, a sourcing perspective for India, but as well, on top of that, it's a, it's a really booming market in terms of developing India right now. A lot of companies in, in Chennai by itself, I think, Apple decided to move one of the factories from China and set it up there, and a lot of automotive industry in the area and so on. It's, it's a lot of, lot of companies, setting up there, and, and therefore, it's, it's, it's the perfect space, place to be, also close to the port, and that's why we selected Chennai.
And then, and then, of course, there we have customers today, if you talk about a couple of Swedish mining companies, for instance, who have facilities in India, and they expect us to be supplying to them from our local factories in India in order to reduce the carbon footprint, of course, and also to secure quick deliveries into that. It's, it's a mix of supply chain, hot market in India, with on the port side, as well as also having a lot of international companies already setting up there, and we need to be able to be there in order to serve them. Okay.
Any other questions there?
Any questions there?
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
Here is the, this is a perfect question for you, Joakim, here. When will the negative cash flow be turned into positive? Crystal ball.
Yeah.
during the second half year.
Yeah. I mean, we are looking at the clear improvement during, during the second half of the year, and I think we have a very positive outlook for 2024.
One more question here. Any news on the Mega Charger, when do you expect it to reach the commercial phase, and really, really being marketed? Where will it be produced? Okay, regarding the Mega Charger, which we have now delivered to the site, to mining customer in Australia, it's been delivered, and it's going to be commissioned now during August, September. It is a prototype installation there. Clearly, from their side, they wanted to buy a prototype in order to test the facility before they go into the commercial setup. We're having discussions with that customer now about the next step and the next phase.
But also in addition to that, the Mega Charger and the MCS Connector, that is already now in good discussions with big mining truck companies, also on the Ports & Maritime side, with e-ferries, a big product coming up in New Zealand, where they want to buy the Mega Charger connector, and the cable, and the cooling system. And we are building from that also within the within the within the quarter now. So there is a lot of interest on it. When it comes to the actually, where it will be produced, we are preparing India for it. We also have capacity to produce in Shanghai to produce those. Depends on the scope, which will be our scope of supply in that case, and also when it comes.
It's, it depends a little bit where we see the customers, but it is, if we talk about complete mega charging solutions, then we're talking about containerized solutions, meaning we build the equipment into, inside containers, and therefore they are fairly easy to ship across the world where they should be. The initial test series of the MCS connector and the cable, you know, the liquid cable, the liquid-cooled cable and the liquid-cooled MCS connector will be produced in Germany initially, in close cooperation with the cable manufacturers located in Switzerland.
Where the, where the seal production and the big production is going to happen, if that is going to be in, in Europe, or if it's going to be in, in India, or if it's going to be in China, that is to be seen where, where we see the volume is growing. What have we missed here? There are a couple of questions here, which I don't really, CapEx guidance on India, we, we talked about, that is, it's very low, actually.
We covered, I think we covered everything here.
We covered everything here. Otherwise, anyone wants to reach out or raise their voices if we missed anything here? Okay, any further questions?
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
In that case, thank you very much for listening in and the good questions here. I'm, I'm sure you are as clearly Joakim is, and I am also very, very excited of continuing the journey and driving Cavotec into a profitable growth. It's a lot, it's a lot of job, and there are a lot of things in each area, but both Joakim and me, we are, we are triggered with the challenges and see the opportunities here. I must say, I'm also very pleased that we now are starting to really see one Cavotec approach across the company. It's much more discussions about what's in it for us, rather than what's in it for the each individuals in each countries and each site.
Therefore, I'm really pleased now with, with, we have a new site manager in Nova facility in Italy, who's been on board now for three or four months. He was over visiting our facility in Shanghai a couple of weeks ago, and they are starting to share the best practice and, and lessons learned and how can they work together in order to improve and take the best pieces of each site. That is also the reason why we are now, under Jörgen Olsson, there will be those four sites, five with India, reporting directly to him.
He will make sure that we increase the cooperation between the sites, and the divisions we concentrate on, on, producing the perfect product portfolio, selling to the customers, and executing, executing deliveries there, in order to make sure the customer is happy, but they shouldn't really be worried about the supply chain operations or source aspect. That will be dealt with in MO, like, like normal companies are normally built up, let's put it this way. I'm optimistic that we will see the, see the benefit of that, and therefore, I'm very excited about the journey that we are just, we just started here, Joakim, and me, and the rest of the organization. Thank you very much for listening.
Thank you very much.