Earnings Call: Q1 2021

May 12, 2021

Thank you, and good morning, everybody. This is Lars Kornelluson speaking. Thank you for listening into this presentation on our Q1 results 2021. And if we start on Slide too. As you can see, we're very happy to report that it was the best Q1 we've had to date. We saw Unit sales in Russia CIS, up 31% in a recovering market. Despite very strong currency headwinds in all our markets actually, but mainly so in Russia, We produced a record Q1 operating result and margin. We saw growing aftermarket sales in Germany, And we continued our investments into Service Network and Organization. We also had strong cash flows as working capital remained low. And we renewed and expanded our credit facility with Nordea. So all in all, we had a 13% revenue increase, 57% operating profit increase at a 6.3% operating margin. And our net income and EPS increase by 176%. So if we turn to Slide 3. A bit more on financial highlights. So as I said, revenue up 13% to SEK 1,267,000,000. In Russia, CIS revenue was actually up 54% year on year, but That translated to 20% in Swedish kronor due to the very sharp decline in ruble. So we ended up with SEK 1,000,000,000 kroner in Russia's EAS in revenue. Equipment sales were strong, obviously, in local currency, 57%, but 22 ending kroner. Aftermarket sales were actually flat in kroners. However, It was up 28% in rubles, meaning that we actually absorbed the full depreciation of the ruble in our aftermarket sales, which I'm very happy about that. And we saw good continued expansion of our contracting services with an increase of 55% in kroner. In Germany, Revenue was 2,000,000, which was minus 6 year on year, was more or less flat in euro, 61% from truck sales, 32% from aftermarket and 7% for other equipment sales decreased by 16%, while aftermarket sales increased by 21% or 28% in euro. So that then all gave us a operating profit by of SEK 80,000,000, which is an increase then by 56%. Russia CIS operating profit increased 55% due to higher revenue lower SG and A. In Germany, despite higher gross profits due to higher costs, The operating profit declined to SEK 14,000,000 compared to quarter 1 last year was, however, better result than in Q4. So group operating margin increased from 4.6% to 6.3% year on year due to an increase mainly from the operating margin in Russia and CIS from 7.2% to 9.3%. And as I said, lower working capital and strong cash flows Left us with a net cash position in the end of the quarter of SEK 33,000,000. And then we turn to Slide 4, more on Russia CIS. The markets started recovered well in the quarter. It was 26% up year on year. Several factors there, easing COVID restrictions, obviously pent up demand and strong commodity prices. Some concerns about the supply chain and expectations of the potential increase then in the so called utilization fee Could potentially temporarily boost the demand. As I said, our new Construction Equipment unit sales grew 31% 2 97 units. We increased sales of multi callers, excavators, wheel loaders and forestry equipment, Had an average sales price increase of 25% in local currency. And again, aftermarket sales quarter of ruble depreciation, which is a result of very good workouts by our team, but also supported them by our digital sales system that we're really seeing bearing fruit in our aftermarket sales. Contracting services, we Had 2 new projects or an expansion of 1 project and a new project mobilized building up during the quarter. And These two projects were affected by very extreme weather conditions on the Apto sites. However, other projects went on well. And production continued to grow. And as you saw, 99% growth in rubles, giving us more than 50 percent growth in Swedish krona. So all in all then that left us with an aftermarket share of revenues declined to 22%, whereas contract in service increased to €0.16 of in the revenue mix. If we move on to Germany on Slide 5, also there the market started to recover or recovered by 10% year on year and was 7% higher than in Q4, mainly driven by the tractor segments, both on economic recovery, but also in Germany on pent up demand, obviously. Our sales area represented 17% of the total German market. It grew more slowly than the rest of Germany at 4%. And our truck sales in units actually declined to 136 units. And partly that is the reason. As customers, actually, we're waiting for the new Volvo product line models that were the first ones were supplied to the market in April. Good to see in Germany that our aftermarket sales is growing. That's a very fundamental part of our strategy to reach sustainable profitability in Germany is to expand and grow the aftermarket sales in our territory. And we saw a 21% increase in SEK 28% in Euro. In those numbers, we have one additional workshop, which we have acquired in full journal in our books, so to speak, from January 5. We increased gross margin to 11 point 6%, obviously, as a mainly as a result of increase in aftermarket sales share of the revenue. If we talk a little more about business development on Slide 6, we are continuing our efforts to increase, improve and expand our network in Germany. We have announced 3 acquisitions of 3 workshops then in Fulda Nordhausen and Limburg. We have announced a greenfield project in Hanover. We are continuing this function, and we will expand further in our territory going forward. We also continued working with the organization and changing processes, improving processes. And one step here is we have appointed a new country manager for Germany in February. Talking about Russia CIS Contracting Services, I mentioned these projects, it's a ramp up at the platinum group metal mine site in Norilsk. And we are then also expanding our cooperation with JV Gold, one of the major gold miners in Russia in a project in Northern Irkutsk region. In our machine and component rebuild center in Ekaterinburg. We expanded the capacity in Q4 of 2020, and we're now using that extra capacity and steel production slots are filled until October, both for internal then mainly Contracting Services customers, but obviously also external customers. And very exciting news for us It's obviously that we became the dealer for Sanddep Mobile Carches on screen in all of Russia, and that is effective from April. On Slide 7, there is a summary of the expansion of the network So far in Germany, when we have the numbers for Fulda, Limburg, Nordhausen and our new Service and Sales Hub in Hanover. You can see the amounts. You can see the revenue that they've had and the Roughly, the EBIT margin of the workshop we have taken over. And again, Our task and aim is to expand further and grow aftermarket sales in order to reach a sustainable profitability for us. In Germany, increasing customer satisfaction and take further market shares. Then on Slide 8, very quickly on the economic development around us. We actually in Russia, the GDP continued to decline in Q1. We saw in March, however, a small positive number. And the expectations for 2021 is 3.8% GDP growth. Inflation has started to tick up a little and it was 5.8% in March compared to 4.9 last year. And as a response to that, the Central Bank has increased the key rates by 75% up to 5%. And as we have talked about and As has affected and is affecting our operations a lot, obviously, is that the ruble depreciated 29 percent on average and then 11% on the end of period rates in Q1 2021. So that is obviously, headwind that we I think we have dealt with in a very good way, and we will continue to do so. Kazakhstan, similar numbers, 1.6% GDP decline, Betz deal also growth expected for 2021. Similar numbers in Germany with 1.1 GDP decline in Q1. Most for costs point out to 3.6% GDP growth, hopefully then picking up after or during the summer when hopefully the restrictions there are still in place very much Hopefully, we'll be lifted. But obviously, the Germany the prognosis or that the Germany economy will come back quite strongly this year. On Slide 9, you can see our long term upside potential in Russia also showing the resilience that FerroNordic is showing in bad times. And hopefully, the leverage or not hopefully, but showing the leverage that we get when things get slightly better. And we have then index. The market with the black line here back to 2011. And the market today is around half of what it was back in 2011 to 2013. You saw you see the drop from 2013 to 2015, which was actually a drop of 83% in the total market. You see the gray line that during that period, our turnover reduced but didn't decline obviously as much, thanks to our focus on the aftermarket development and new services. So it was reduced by 40%, whereas our operating profit. They more or less didn't move at all. And as the market then since 2015 has come back slightly, We have seen a very strong positive leverage on our operating profit, and we are today at a level which is 3 55% higher than it was back in 2013 or 'eleven to 'thirteen. So still. The market is, as I've said, only 50% of what it used to be. So we see a strong potential for further growth in Russia. Okay. Then I'll hand over to Erik to go through a bit more in detail the numbers. Thank you very much, Lars. If we then move on to Slide number 10 for a closer look on the income statement for a start. I I'll start by reiterating that currency effects are important when we're comparing year on year numbers. 29% on the average rate of the ruble versus the Swedish krona Is what we use basically to convert the income statement. And then with regards to the balance sheet, it's also an 11% move in terms of weakening of the ruble and the assets we have therefore in the books in Russia. And the Kazakh Tenga has moved similarly To the Russian ruble. In euros, although less volatile, also actually a 5% strengthening of Swedish krona versus the euro on average and 8% if we look at the end of Q1 versus last year. On the slide, you will see a table. And to your far right, two column. You see the Q1 of this year for the group and the year on year change. And then you will see also the respective segment. In 2020 and in 2021, so you can see the dynamics in the, again, segments reported, but also for the group as a whole. Speaking of the group as a whole, how we performed as a group, We see that revenue then stood at about SEK 1,300,000,000. That's Up 13% versus last year. And now we can compare actually like for like. In last year, We had then the situation where we can't compare it without Germany versus previous year, but this is now with Germany included. So that 13% is then made up of a 20% in Swedish krona increase in Russia CIS versus a 6% decline in Germany in, again, Swedish krona. If we look at the composition Of the group revenue, then we see that 80% comes from Russia CIF. That was 75% a year ago in the Q1 of 2020. So Russia sales has increased over the year as a share of revenue. If we look rather in the group from revenue screens, then we see that equipment and truck Sales is about 62%, aftermarket 24%. That a year ago was 26%. So slightly lower and that would Tend to lower the gross margin given that the margins in the aftermarkets are higher. Contracting services on a group 13%. Again, in Russia CIS stand alone, it's 16%. But for the group, 13%, and that's up then from 9%, so becoming a more meaningful share of the total group revenue indeed. Looking at the gross margin, we are Slightly higher than last year, 0.7 percentage points at 17%. That is an effect of 2 factors. On the one hand, that increase in the share of Russia CIF revenue And that share coming with a higher gross margin, but also an improving gross margin in Germany itself, which as Lars has mentioned was very much driven by the increase of aftermarket share of revenue in Germany. SG and A as a percent of revenue stood at 10.3%. That's down from 11.5 And similarly a factor being the bigger share of Russia where SG and A as a percent of revenue stood at 8 point 7%, which is meaningfully lower than last year when it was 11.1%. And then again that being a bigger contributor to the group balances. And therefore, we see a lower level overall. If we look at the operating margin, also an increase versus last year to 6.3%, consolidated versus 4.6%, An increase in Russia there. And again, the contribution effect with that being a bigger part drives The average in Germany, we did have a lower operating margin than last year. Worth noting that in Germany, we had SEK 2,500,000 of restructuring costs related to the changes in the organization, so layoffs basically, but also SEK 1,100,000 in terms of acquisition related costs, So related to the expansion of the network that we are currently engaged in, in Germany. So if you put those together, that's 3.6% and you compare the operating profits, they're actually more similar year on year rather than the decrease that we see on a nominal basis. For the group then, operating profit still Despite the negative contribution from Germany of SEK 14,000,000, we stand at SEK 80,000,000 consolidated. That is the best operating profit for a Q1 that we've shown for the group. And below EBIT, We see lower financial costs and that's on the back of lower net debt balance. If we then move on to the next slide, you will see a summary of the key changes In the operating profit versus last year, so year on year. And what we can see on this ladder graph, as we call it, is then that the big really driver year on year was the increase Gross profit from Russia CIS. And as we've noted on this call, a lot of it when we compare to the Q1 last year of the equipment sales and especially new equipment sales in Russia. But aftermarket also catching up with last year and then, of course, also an increase in the contracting services contribution. And if we look at then the cost side, OpEx or SG and A, That also has a positive contribution to the year on year effect, a combination of cost control that we introduced also facing the uncertainty brought on by the pandemic last year, But also getting some help on that side from the ruble actually, given that a lot of the costs in Russia CIFs are ruble based. In Germany, Also a positive contribution from gross profit, that being driven by the higher share of aftermarket, Whereas SG and A was bigger, so the OpEx there having a negative effect. And we split that part here in this graph Between the, if we say, recurring and what we could consider less recurring, and that would be then the restructuring and the acquisition related costs I mentioned in the slide before. If we move on to the slide after that. We look at the more long term trends of revenue and margin development. We can see that Russia Again, contributes to the overall growth of revenue for the group. Last 12 months revenue at 3.8%. So that is that growth of 20% that we saw in this quarter. In Germany, then although We were actually flat in euro terms, more or less minus 1. In SEK, again, we had a lower contribution. So that also Led to a decrease when we look at the last 12 months contribution. In margin trends, We see on the higher one of those dotted lines there, you will see the gross margin trend and an improvement in this last quarter. And as we said, that must be driven by the higher gross margin in Russia and the Big share of that, but also the improvement in Germany that we saw versus last year on the gross margin level. The consolidated operating margin also up then a bit and much driven by the higher operating margin that we achieved in Russia as a combination of the better gross profit and the lower cost base that we had. If we move again forward to the slide thereafter, that would be Slide 13. In the deck, what we show here is the long term SG and A development trend. And here, mind you, we're looking at last 12 month numbers. We can see that for the group as a whole, we see a decline there also. And when we look at the individual markets, then a meaningful decline in Russia, if we can compare it to last year, But also actually quarter on quarter when, again, we looked last 12 months. And in Germany, then a slight increase. But here, we Do include all operating costs. So those nonrecurring, as we would refer to them, are also captured in this metric. In return on capital employed, we see that we're at 21% in Q1 of this year. And that's then if we see versus the last quarter and improvement, but year on year, we're slightly lower. If we look at this quarter specifically, it is driven by the higher operating come in Russia CAS and somewhat offset by the negative contribution from Germany. If we then move on to the next slide after that and take a look at cash flows. Then we can see that we had slightly lower cash flows than in last year, but still very strong cash flows as we would see it. The decrease being driven by Germany where we both had a higher working capital and also then a negative operating profit. We had a negative effect from higher tax payments, which of course is an effect of rather higher profit. At the same time, we paid lower interest because we carried less net debt in the quarter. Cash flows from investing activities increased, and that's, to a big extent, driven by the acquisition activities that we saw through the quarter and the payments that went through for Fulda, one of the workshops that Lars mentioned previously in our efforts to expand and improve our network in Germany to grow our footprint there and capture more of the aftermarket business. Worth mentioning also is that we had an addition of contracting services machines of SEK 55,000,000 in Q1. This, as we disclose in all our reports, is not going through CapEx because it is marked as a transfer from inventory to PPE, and that is a noncash transaction. But again, that was the size of the transfer from inventory to PPE in the quarter. And that went to, again, to 42 to PP in the quarter. And that went to again to Contracting Services to increase the fleet and replace If we look at cash flows from financing activities, we see an increase in Russia's shares and Germany. In Russia's AS, we're currently debt free when it comes to bank debt. But partly related to our activities in contracting services, we are increasing our leasing commitments there. If we then move to the next slide and take a quick look at the balance sheet and start from the top, looking at property, plant and equipments or fixed assets, then there is a slight decline versus last year. That is partly driven by the ruble depreciation, which has that effect. Otherwise, again, we have increased assets in Germany through the acquisitions there And also increase the contracting services fleet in Russia. But of course, we're also facing depreciation. So these factors brought together Lead to this slight decline. In Russia CIS, we saw a further decline in working capital from 3% to 2% of last 12 month revenue, mainly the result of higher payables. This is below the historical average and a 5% to 10% range that we would probably I consider more normal, and that's worth pointing out. When it comes to Germany, by contract, we saw a small increase In working capital from 9% to 11%. And if then we look at the group as a whole, We moved down from 5% in last quarter, so the last quarter of last year to 4%. And low working capital, of course, contributes 2, the strong cash flows that we saw in the quarter. And that in terms contributes to a further decrease in net debt or rather the net cash position that we sit in. We were at 20 net cash at the end of the year, and now we're at minus or sorry, at SEK33,000,000 in terms of the net cash position. So a negative metric on net debt to EBITDA. This is before, of course, the dividend that the AGM votes on at the AGM today. Lars mentioned the credit facility with Nordea, which we renewed and expanded to EUR 70 €1,000,000 That's split between a term loan of €30,000,000 and a working capital facility for the group overall of €40,000,000 And with that, we can move to the next slide, which looks at our new financial objectives and dividend policy. We introduced new financial objectives in Q4 when we released that in February. And that's what we start tracking here. And if we look where we are, then We're just starting our journey towards those objectives, which we set ourselves for 2025 when it comes to revenue. So we're still at the 2020 level when we look on a 12 last 12 months basis. If we look at operating margin, again, last 12 months, 7.5 percent, it was 6.3 percent in this quarter, but again, last 12 months, 7.5 percent, so staying above the target. And net debt to EBITDA, we are indeed at a low level there versus the limit we set ourselves when it comes to our leverage level. And with that, Lars, I would hand back to you for some words maybe on the outlook. Yes. Well, obviously, the business environment remains somewhat uncertain and mainly perhaps as regards to supply chain constraints. Despite this, then we expect our markets to continue to recover in the remainder of 2021. In Russia CIS, We see higher commodity prices. We see increased activity in the so called national projects, somewhat moderated by risk of potential increase in utilization fee. In Germany, we see a broader European recovery, boosting demand most likely. And obviously, in a longer perspective, we see strong underlying fundamentals business opportunities in our markets. And to move to the summary slide again. Basically, with a 13% revenue increase, 57% operating profit increase with a 6.3% margin and a net income increase of 176% compared to Q1 last year. So by that, We're opening up for questions, I believe. Thank you. Our Our first question comes from the line of Victor Hansen from Nordea. Please go ahead. Your line is open. Thank you. Hi, Lars and hi, Erik. It's Victor from Nordea here. A few questions from me, please. So first off, I'm wondering if you have enough Incoming supply in Russia to keep up with the strong yearly demand there. We do have our production program that we have planned for the year. We seem to have that impact. Obviously, everybody knows that there are issues with the semiconductors and other components. I think this is not a problem or an issue that is related only to Volvo. It's for everybody. We see strong demand in the market, and we expect to be able to perform according to what we had planned. Although obviously, the demand right now is exceeding supply, if you put it that way, as we speak. Okay. And what's your view on the potential impact in the quarter and ahead from the utilization fee that you touched upon? In the quarter, well, I mean, it's very difficult to see. I mean, there has been rumors, as we mentioned in the last quarter report that there would be quite a significant increase in the utilization fee. We haven't seen that coming it's very difficult to estimate if there is some kind of pre buy effect due to that in 4 to 1. There is potentially that, but I can't quantify that, I'm sorry. But clearly, there have been rumors about it. There are still rumors, but we don't know if and we don't know when that will come. And we Certainly don't know the level of increase. Hopefully, that might be less than we previously expected. Okay. Fair enough. And moving over to Germany. How's the situation there looking now since deliveries of the new truck model started in April? You been able to close the sales gap versus the market that you mentioned in the report? Well, first of all, I mean, the new models, we have gotten some now in April, and we have delivered them. And Customers are very happy with the new models. Obviously, going forward, I mean, we want to Be able to supply as many as we can in the quarters to come. There are, I mean, you have some shortages as well and some delays in deliveries. Guidance also well known. But hopefully, we will be able to deliver what we have planned to do during the year to catch up a little with a new model. I mean, German customers are demanding in that aspect. They are very driven forward driven, if I put it that way, and then looking forward to new modules and new technologies, and I appreciate that. So we hope we should be able to do that. Okay. And just a follow-up to clarify. So in Germany, would it be possible for you to grow equipment sales more in line with Volvo's relevant deliveries in the near term future? Victor, you want to repeat that question? Yes. So in Germany, your sales differentiated compared to Volvo's relevant deliveries, So heavy and medium duty trucks. Will this be more similar in the future, your growth and theirs? We should definitely move in I mean, we should move in that direction. And hopefully, we should format direction. That's why we're making all the investments and growing the network in order to take market shares and improve customer satisfaction. So yes, We should be able to do that. Great. Sounds good. And just a final question for me, please. So your employees are up by 8% quarter over quarter, And this is due to more employees in Russia. And I'm wondering, is this related to your contracted services? Or is it something else perhaps? And do you see a need to keep hiring substantially more people to satisfy the near term growth from current projects? The answer to the first question is yes. It's mainly Contracting Services. And to the second question is yes, We need to hire more people to for the new projects that we are expanding and developing, yes. Okay. Sounds promising. Thank you for the answers. The talk from me. Thank you. Our next question comes from the line Kenneth Tull from Carnegie. Please go ahead. Your line is open. Yes. Thank you. So going to the Sandvik business of crushers and screeners. How much sales did that business have last year? Well, Sales numbers, I can't really tell you, Kennen. We know unit sales, etcetera, but we don't know the turnover numbers of the previous dealer. So I can't answer that. What we have stated is that we over time, we hope that, that should Sandvik should be able to represent 5% of our revenue in merchant CIS, and that's what we're aiming for. And when we look at the spare parts and aftermarket part of that business, Is it comparable to the construction equipment? Or is it a little bit less or a little bit better? I think The split of the revenue mix is fairly similar to Construction Equipment, yes. Okay. And do they yes, okay, great. Then on SG and A costs, They are quite low and especially at share of sales. Do you see that mainly well, in Russia, I mean that. Is that is it more due to the COVID-nineteen that makes it tough to travel? Or do you see that the organization you have can sort of handle higher sales volumes? I think COVID, if we look at those effects, I mean, if it comes Travel and marketing, those are COVID related. Those expenses have been lower. But Kenneth, they're not sort of a big part of the SG and A. There's the biggest part is people. When it comes to people, We did, I think, optimize the organization through the pandemic to brace ourselves. And I think as we come back from that situation, we will rehire, but not maybe as much as it were. We I think ways to maybe operate a bit more efficiently. I do think we can probably support bigger sales from maybe a tire care organization. But some of the costs will inevitably come back. And then I think also Worth bearing in mind that in the split between our revenue streams, aftermarket new sales and country services will vary between quarters. And especially depending on how big the new sales is, which tends to be the more volatile part. And then you will see swings If you look as a percentage of revenue also of the G and A. So yes, this organization we have now can support some more sales, but that sales We'll also go up and down a bit between the quarters. Okay. And then on competition in Russia, Sure. You said that demand is higher than supply right now. So I guess that Create a good environment for pricing. So how do you see pricing in the Russian market? And do you see competitors being more aggressive? Or I mean, you take market Just being more aggressive or I mean, you take market shares, obviously, but can you talk a bit around pricing and competition in Russia, please? Yes. I mean, there are 2 contradicting forces here, Kenneth, and that is that you have a strong demand from the market. At the same time, you have a depreciation of the ruble of 29%. And obviously, It's a mixed baggage of customers that can absorb 29% or more price increases. Some of the hard currency driven companies like gold mines and forestry equipment, It's one game. And when it comes to road construction and companies that have their revenues in rubles, It's a different game. So those two factors are unfortunately hedging each other out. Obviously, we hope that we will see zone that this demand will realize in price realization in the market. But it is, At the same time, very difficult to absorb close to 30% depreciation. I mean, we need to realize that And that's where we are. Yes. Okay. And it's no big changes on the competition side And in the way competition acts, I mean, they also struggle or increase prices as much as you do. Well, I mean, I think everybody is trying. I don't think we've seen a major change in the competitive landscape in terms of price positioning, etcetera. I mean, we as we have communicated, we are price leaders in the market, and we're trying To stay there, for sure. And that goes hand in hand with having the highest brand image as well, which we have. So We haven't seen any major changes from our competitors, no. Great. And then in Germany, This is a difficult question, but I mean, how much left is there to do? I understand that you're never done in the market. If you look at when you started in Germany and the sort of the plans you had for When you feel that you have a satisfying situation, is there still a significant Increasing in the network that you need? Or how will you sort of be in a more stable situation or how I put it in towards the end of this year. Well, I mean, let's put it this way, Kenneth. We've communicated and that's our belief. And we still believe that we want to break even by the end of this year. That's not enough. We should have a sustainable profitability in Germany. And in order to achieve that, we will need to continue our expansion and investments into the network. But not only that, I mean, we need to continue to Improve the current processes and improve the current performance of the workshops that we have. And also as we need to increase sales of new trucks. We need trucks to be to serve them in the future. And so it's a mixed baggage of different things that we need to do. But for sure, we're not stopping the expansion of the network now. We will need to continue and we will need to We get a footprint that covers the territory in a good way so that we can, so to speak, the full aftermarket potential in the territory, and that includes more investments and more expansion. So could the network be double the size compared to where it is today in, say, 2, 3 years? We're not giving numbers of that, but for sure, we're going we will expand, but not a question about it. But this is the start of a journey and we have just started. I think we can add something maybe to say there also. I mean, this is You know, something we started in 2020, and it will go on in this year and the next year. And probably you see bigger changes In the early phases and then you move to more fine tuning the network optimizing it. So it is a process that Of course, we'll be ongoing forever, but in terms of really putting that footprint in place. Yes. That's good. Do you the second question is then, I mean, you have a strong balance sheet. There are some cash needed for expanding the contracting services. But still, you have a strong balance sheet. Now Germany is, yes, on track. You are doing things there to improve. Would you think that it's soon as time to maybe expand into a new market somewhere? Would you have the management resources to And another market, say, in 2021? Well, I mean, on the Right now, we're focusing, Janet, on expanding in Germany, expanding contracting services, building business for Sandvik up in Russia and expanding further in Kazakhstan. So I think at the moment, that's where we are focusing our efforts on. But again, we are always I mean, we're always in a dialogue with our main partner, and We don't exclude anything, but we see opportunities to improve the business in mainly in Germany, obviously, but also to grow the Sandvik business and Contracting Services. I think right now we're focusing on that. Okay. Sounds great. Thanks a lot. Thank you. Our next question comes from the line of Adrian Galani from ABG Andal Polyester. Please go ahead. Your line is open. Hello. This is Adrian from ABG. And I have a couple of questions. First of all, regarding the Contracting Services, which obviously saw very impressive growth this quarter. Could you Give us a bit of an outlook for Contracting Services and the specific projects for the coming quarters. I think Adrian, thank you for the question. I mean, what we can say there really is that we have Two projects that we're currently growing, and that's the one that we press released back in September in Norway. And then there is an expansion of the Ikhuz JV Gold 1, which we also provided some information on. So they are still in probably some ramp up phase and we continue to grow them. And you have guidance there on what we Trucking services. What we do say and I think fairly can say is that this is a strategic objective of ours. We see this as a part of how the industry is developing and part where we want to develop and grow. But more specifically, it depends on when we take on new projects and when we win projects. The market in Russia, CIS is still not as mature in some other markets. So when it comes to these tenders, we want to make sure that we achieve hour required return on capital when we go into them. So we set up our, how do we say, offers accordingly. And it's hard to say which of these projects we will win and which we won't. So what we can say there is, I think, again, this is an area where we want to grow and where we're ready to allocate capital to. But the exact pace of it is a bit hard to say. Okay. But you did mention that They grew very much despite some extreme weather conditions. And would you say that, that in any way changes your guidance And some of the ramp up that we would have seen in Q1 maybe pushed forward to Q2 instead. I think we did well in the Q1, Rather that we managed to grow production despite these weather conditions and maybe These weather complications brought more, obviously, costs with the expansion, logistics, Getting machines in place, getting people in place. But again, we did expand as you can tell from the numbers. There is still more growth to come In these projects. But I think, again, we did well in terms of growing and delivering on our commitments to our customers. Okay. Also, you talked a bit about uncertainty uncertainties regarding the supply chain issues in your report. Are these mainly in the near term? And if so, how are you working to sort of combat those? So for example, you talked you've already talked a bit about pricing, but Could supply chain shortages be another factor of increasing air prices towards customers? Well, I mean, there are concerns about the supply chain in the whole I mean, globally and not only in automotive and construction input. So whether they are short term or long term, it depends on how you define that, I suppose. But They are here and all our OEM partners are working very hard with where fixing that situation. So now we as we say, I mean, we have made plans for the year. As it looks now, we are able to fulfill those plans as We have I mean, the demand right now, particularly maybe in Russia, is higher than supply. Again, I mean, we are doing what we can to maximize, obviously, what we can get out in the market former price leading position. So the We have hopes though that, I mean, these problems will be solved going forward. And we don't see a big risk for what we have planned for the year in terms of production. Although obviously at the moment, delivery times for machines and trucks are very long. And the good thing with that is that you obviously have a good foresight into what comes in the remainder of the year. If these problems do not get worse than they are today, But it's very difficult to say whether they will or not or they will improve. So at the moment, we don't see big risks connected to this. And we are making sure that we get as high prices as we can out in the market. But again, in a market where the ruble has depreciated to 30%, There are different factors weighing into this, unfortunately. Okay. I I had a final question regarding the new unit volumes in Russia CIS, where obviously, again, very impressive growth. But Should we see this as a bit of a catch up effect from pent up demand? And if so, can we expect this to fall off a bit and the coming quarters. I mean, we do see we expect a recovery in the market going forward. Our task is obviously not to lose market share, and we're working hard with Volvo in this case and other suppliers to make sure that we can keep up with the recovering market. And usually, I mean, if you look at seasonality, etcetera, Q1 is usually the lowest, weakest quarter in terms of deliveries. This year, it was quite strong. But hopefully, we will be able move in at least in the similar direction as the market. That's what we're aiming at. Okay. Thank you. That was all the questions for me. Thank you. Thank you. And there are no further questions at this time. Please go ahead, speakers. Yes. We have Two questions coming in online. And 2 of them are quite similar. So addressing the same thing, it's with regards to Kazakhstan. And most people are asking for basic and estimate of how much Kazakhstan is contributing and how we see its growth if we look on a stand alone basis. And if I start, maybe Lars has something to add to it. We don't report Kazakhstan separately. And I would say to some extent, much like we don't report Siberia, one of our business areas separately. And they have similarities. And in terms of how we operate the business, it is in other region, although it is a separate jurisdiction, we manage it much in a similar way. So we don't give separate information on the performance of Kazakhstan. What we can say, I think, is that we are very pleased with how Kazakhstan is developing. We are putting the network in place. We have an organization in place that we're very happy with how it's working. And we feel that we're getting traction With clients, customers and capturing some of the market potential in Kazakhstan. It is also a different market in terms of competitive situation. And to some extent, of course, it is a commodity economy like Russia, But there are also differences in the operating environment there. But again, we would say that We're happy with how Kazakhstan is developing. Anything to add or no? We also have a question with regards to the digitalization tool and a question referring to what extent that Could also have potential for the truck business going forward, not only the construction equipment? Yes. And there is definitely potential to apply this also in the truck business. And the main issue here, obviously, is that the tool is then reading signals from telematics systems and making proactive, but also predictive actions to be taken in order to service the machine hopefully, before it breaks down and making sure that we are there when we should. And that has taken off very well in Russia. So yes, We see possibilities of applying this in the truck business as well. That's the answer. And those were the questions we had from online. So operator, are there any more questions waiting or in line? There are no further audio questions in line. Okay. In that case, we thank everybody for their interest in our company very much and encourage Juhi, if you have further questions to reach out to us, we'll try to provide information as we can. And also, of course, we refer to our Web slide also where all our reports are and presentations are available. Thank you very much. Thank you very much. Bye bye.