Earnings Call: Q4 2020

Feb 18, 2021

Thank you, and very welcome to this presentation of the year end report. This is Lars Korn Eliason speaking. If we start with Slide number 2 and summarize the Q4, We saw strong equipment sales and strong cash flow. We had Russia and CIS unit sales up 17% in a market that started to recover. We had strong organic revenue growth, which was then offset by a weaker ruble. We had operating margins lower on revenue mix and ramp up costs in Contracting Services. Germany was affected by COVID restrictions and restructuring costs. And our strong cash flow led us to a net cash position by the end of the year for the group. And the board updated the financial objectives and proposes a SEK 7.5 per share dividend. If we then move over to Slide number 3, and talk a little about the full year 2020, when We believe that we had a very strong performance in very challenging conditions. Russia and CIS actually delivered its Best results ever and cash flow. We saw our unit sales up 15% in Russia CIS, whereas the market for our main products declined 4% and obviously then to quite some market shares. We had the operating profit in Russia CIF increasing 10% to SEK 394,000,000 Kvaerner with an operating margin of 10.8%. We Continued our development and of contracting services. We initiated a component and machine rebuild center in Greenburg, which we then later actually expanded by the end of the year due to demand. We increased our used business Healthy, and we continued our expansion in Kazakhstan. Also during the year, we started up our In Germany in January, and obviously, we made investments into network development, into organization into implementing new processes in both the aftermarket and sales. However, Germany was indeed affected by COVID restrictions, and we also took restructuring costs to make sure that we, going forward, can reach our target of turning the operations profitable by the end of this year. We had due to the costs in Germany, our operating profit decreased 8% to SEK 3 SEK 28,000,000 and the margin declined from 9.5% to 7.1%, still within our of financial objectives. Working capital as a percent of revenue actually declined from 20% by in the beginning of the year to 5%. And we had then a very strong cash flow from operations of almost SEK 700,000,000 And thereby, the net debt of SEK 593,000,000 return into a net cash position of SEK 20,000,000 by the end of the year. And as I mentioned, the Board has then updated financial targets. We will come back to that later in this presentation and proposes a SEK 7.5 dividend per share. If we then look at the Q4 group financial highlights, revenue was up 23% to almost SEK 1,200,000,000. And in Russia and CIS, our revenue was up 34% year on year in rubles, but that actually resulted in a 0% growth in Swedish kroner due to the sharp decline in the ruble, which then on year on year on the quarter year on year was actually 34% decline in the Russian ruble. Equipment and Contracting Services revenue increased 5% in SEK, 40% in rubles and 15% in SEK, which is spent 54% in rubles, respectively, while aftermarket sales declined 16% in Swedish kroner, but was up 12% in Russian rubles. German revenue Mozart, SEK 233,000,000, which has been slightly up quarter on quarter with 62% coming from truck sales, 27% from aftermarket and 11% other. In the quarter, we saw truck sales increasing 8%, but aftermarket sales declined 11%. And this led to a group operating profits of SEK 65,000,000, which is a decrease of 31%. In Russia CIS, we invested for our future and The decline was 5% in the operating profit year on year, partly at the slower share of aftermarket sales in the revenue mix, but also on lower margin contracting services, mainly driven by the ramp up costs and use of subcontractors in our new big projects that we started up in the quarter in Norilsk in far north of Russia. And as we mentioned, Germany partly affected About COVID restrictions, new COVID restrictions and restructuring costs. And then we had an Operating margin in the quarter of 5.5 percent and then mainly due to the negative contribution from Germany. But again, lower working capital and strong cash flows and a net cash position. If we look a bit more on the market for Russia, we saw a recovery in the market for our Main Product Groups, if we measure it in units by 6% in the quarter. We saw uncertainty easing. We saw commodity pricing prices coming up and we saw investment programs Restarted or actually, in certain cases, accelerated. Our new equipment Sales, we grew 70% to 89%, obviously, gaining market shares. And We saw customers continue to demonstrate resilience in their operations, and they maintained investment programs. We saw increase in Arctic haulers sales, but also smaller excavators and wheel loaders. So then we get an average ticket, which was 5% lower in SAIC, but still 20 7% higher in Russian rubles. Aftermarket revenue share declined by 5 percentage points to 22, whereas our Contracting Services business increased to 13% of our revenue in Russia CIS. In Germany, we also saw a recovery in the markets In Q4, up 4% year on year and 17% quarter on quarter. And it was mainly driven by the tractor segment. Our sales area in Germany is approximately 19% over the total market. And it grew 6% year on year and 13 We said broadly on quarter on quarter, so that's broadly in line with the overall German market. We sold 100 and The 2 new units, which was then 7% higher than in the previous quarter, Mainly due to renewed lockdown restrictions, we saw a decline in aftermarket sales by 11%. Gross margin 7.7%, down from 9.8%, mainly as It's a revenue mix effect mainly on that. And obviously, we remain alert to the risks Of the epidemic, we keep focusing on customer and employee health and safety, while aiming to continue to deliver great and uninterrupted customer service that we have managed to do throughout the year of 2020. And I think we should We're proud of what we have delivered. We have tried to make sure that we don't leave customers alone out there despite restrictions or severe restrictions in some cases that we have seen. A little on business development. In Germany, We are continuing our sales organization and process restructuring. We're picking up good speed there. We have expanded the network and we are continuing to improve our network. We have announced 2 acquisitions of to extend the network and our intention is to as we said Previously, we want to extend, we want to improve and we want to take a bigger part of the aftermarket business in our territory, which is one of the ways to reach a good sustainable profitability in our business in Germany. If we move to Russia CIS, we saw in Contracting Services robust performance, Very challenging conditions, many hinders on the way When our operators are moving back and forth to the sites with quarantines, with lockdowns, It's been very difficult really for Contracting Services, but they performed extremely well under these conditions. And in Q4, as I mentioned, we launched the new project for palladium mine site in Norilsk, which is far north in the Krasnoyarsk region of Russia, where we're taking on a general contractor role, which includes road construction, Drilling and Blasting Overburden Removal and Site Preparation for sites process plant for palladium. Part of the project is subcontracted, and We started up in Q4. We will see more revenue and benefits coming from that project going forward in 2021. Also very we're happy that our machine Component rebuild center in the Ekaterina that we initiated really in the early 2020. We already expand capacity and that was completed in Q4 2020, where we actually Recycle components and rebuild machines and giving them new life and using resources to extend the life of both components and machines. And that is also we Stores the machines and components both, of course, from our contracting services business, but obviously also from external sourcing from our customers out in the market. So by that, I hand over to Erik Donnermar. Thank you very much, Lars. We'll move on to the next slide then And start off a bit on the macro side, what we see in our markets. In general, as you would expect, we have seen a slowdown in the economies where we operate Due to the effects of COVID-nineteen in general and more specifically on the Russia Kazakhstan side also due to the oil price decline. But the general consensus seems to be to expect a recovery in 2021. Of course, depending on how the pandemic develops going onwards with Mutations and other corollaries of this pandemic. If we look at the market separately, Russia minus 3.1% in 2020, that was less Then what was anticipated in terms of decline, so a smaller decline. And we expect then for 2021 more or less an equal size increase, Be it from a slightly lower base. And when it comes to inflation, we have seen an uptick lately. The Central Bank did take down rates fairly aggressively. And then of course, in the last year also the Weakness in the oil price had the implications on the ruble, which would see some imported inflation into Russia. As mentioned already and an important factor for us in our operating environment, looking Year on year from the end of 2019 to the end of 2020, we had a 36% depreciation of the Russian ruble against our reporting currency in the Swedish krona. Kazakhstan, slightly more Shallow decline and also more shallow increase or recovery expected next year. Germany, steeper decline and slightly bigger increase than We expect to see in Russia and Kazakhstan. If we move to Next slide, number 9. And look at our markets. Lars has already mentioned We saw, so we did see a decline in our market or in our main product groups in 2020, which puts us in a lower position This is where we have been in Russia. So what we see now is a market that is only 52% of the level that The market was in 2011 and even lower if you compare it to the base of 2012. And this is something that we come back to because we don't see 11% or 12% as necessarily a cap The potential of the Russian market. So we are still quite optimistic on the long term potential of the Russian market, even without national projects. But as we have noted in our report, We do also see increased activity on these national projects, and that's also encouraging. Even though we are still 52% of only of what the market once was, our revenue is up 51% and our operating profit even more so 3 20% higher. So again, we see we continue to be quite optimistic and see great potential in this market. If we move on to look at actually the income statement, Lars started by giving the headlines And speaking to the business development we did in 2020, it was also a year of protecting ourselves in the situation of the But also seizing the opportunities that we could and building for the future and that's something that We think that we've done quite successfully. If we look again in financial terms on the year in P and L, then we can see that we ended up with a revenue of SEK 4,600,000,000. And to get a In terms of the distribution, we're then 79%, so about 4 5th In Russia CIS and 1 5th in Germany. And if we look at the split across the revenue mix, Then you see 63% being the equipment and truck sales and then about 1 quarter being the aftermarket and 10th of the total being our contracting services activity. On your far left of the graph or of the table, you will see Russia CIS in 2019. There is a small consolidation of Germany at the very end, but that's more or less Russia as it were. And to your right, you can see Russia standalone and then Germany standalone and then you have the group together. So comparing the leftmost two columns, You will see that we ended up with a slightly when it comes to Russia CIF, smaller revenue, Again, significantly driven by the weaker ruble that decline, But also a slightly lower gross margin. And even so, given the cost Controls we put in place partly driven to brace ourselves for the potential implications of the pandemic. We did keep costs in check and that's one of the reasons in addition to actually the very strong sales results we had In this year that we're very proud of that we allowed us to produce a higher operating profit in Russia CIS And a stronger margin as well. Group if we look on a group level at The G and A expenses as a share of revenue were still down in 2020 versus And that's even though we then take on a higher percent of revenue from Germany. A decline in the operating margin and that's driven by the negative impact from Germany in 2020, the Russian standalone operating margin was higher than it was in the previous year. Operating profit then on a consolidated basis, they increased 8% to SEK 328,000,000. We also did, as mentioned, not only in terms of translation, but also had some direct FX losses resulting from the Weakening of the ruble that impacted the net income in 2020. Moving on to Q4 on Slide 11. And here again, we can see similar relationship in terms of A split between Russia, CES and Germany are 2 segments. Worth noting that we have a lower share of the aftermarket and that's something that That Lars has pointed to when he discussed the operating results in Russia Aftermarket did not grow in pace with contracting services and the equipment sales, So making up a smaller share of revenue and similar in Germany as it were. So 23% aftermarket in Q4, That compares to 26% in Q3. So that's a decline and that's one of the factors that impacts the Gross margin in the income statement. SG and A in Russia, again, holding firm on the costs And then seeing the, so to say, upside of the weaker ruble, so a decline of 23% there, although we had a slight increase quarter on quarter. And as a share of revenue, again, we are lower year on year in Russia. But when we put Russia and Germany together again given the operating losses we had in Germany, we end up with an operating margin at 5.5%. That's Consolidation of the 9.5% we had in Russia and the negative contribution from Germany. That puts us at an overall operating profit, which is down 31% to SEK 65,000,000. And if we move to the next slide to get, I think, a sense of the key drivers of that Results operating results then what this Particularly, we're looking in Swedish krona. So we in the 4th quarter see stable revenue, but a lower gross profit, As mentioned, driven much by revenue mix and to some extent also the start up costs that we had in contracting services as we increased and launched a new project there. So lower gross profit coming through from the revenue and then we have the cost savings that we have pushed through in this year, which raises our EBIT. And then we have a negative contribution from Germany In the business itself, again, there is also there a factor of lower aftermarket. And in addition to that, we have Restructuring costs in Germany and items that we would classify as one off and not recurring to the business. Briefly, we usually give an overview of the long term trends, Revenue and margin development on Slide 13. And we can see that Russia Last 12 months revenue, that's what we're looking here, has been relatively stable. That is in Swedish krona. Had we looked In rubles, it would be a different picture, of course. And the red line then capturing the non organic, So to say increase that we get from the German assets, SEK233,000,000 in Q4 and just below SEK 1,000,000,000 in 12 months. Margins have come down in this quarter as discussed. It goes for gross margin for the reasons that we have Touched on and also on operating margin when we consolidate the negative operating margin that we took in from the German operations as we work to restructure that and get our network In shape there. If we move to Slide 14, we will see the cost development And the return on capital employed and to your left there you have the cost. And as touched on, we have had Strong cost control in Russia. There is again the help from the ruble there as well, But we did put programs in place to brace ourselves for this year and have found efficiencies there that we believe we can also Keep going forward. So even though we bring on a high level of SG and A to revenue from Germany, we're still Lower as a group because of the savings and efficiencies that we've created in Russia CIS. To the right, the return on capital employed. Here, Of course, again, the contribution from Germany, which drives down the operating profit, but also the assets that we have Added to our balance sheet, especially in Germany, if we look incrementally, that has the negative effect on the return on capital employed, which then came out at 20% in Q4. Quickly on cash flows, which was one of the strong Themes of 2020 overall, but also in Q4 2020, You will see in the columns there that Russia CIS again generated quite healthy NOK 206,000,000 whereas Germany was Negative 27,000,000 and it is a tale of opposite directions there, a declining working capital in Russia CIS also lower interest and income tax paid in Russia interest coming of course from not having the debt that we had last year. In Germany, it's the other way around. We actually increased our working capital That's what drove the cash flow there. We did hold back on CapEx. I draw your attention to as We disclosed in the footnote here that there are investments going into contracting services, but when they come out So what is initially taken on as inventory, it goes through movements in working capital. But you see there in Q4, we had SEK 29,000,000 So going through the cash flow statement. Looking at the balance sheet, We can see some of the reasons for again the cash flows, but starting just on PPE, Of course, worth bearing in mind there that on the Russia CIS side, the ruble has a significant impact there. It is A ruble functional currency balance sheet that we work with in Russia. So of course, when We have this 36% depreciation. It does impact the assets that we have on the balance sheet. Mentioned the strong cash flows in Russia. So working capital actually coming down to 3%. This is low and again an important driver of the cash flows that we've seen. We started the year at 19% or rather ended last year at 19%. And again, slightly different direction in Germany with marginally Higher working capital from 7% to 9%. These cash flows produce the Change from a net debt position, we were at SEK 83,000,000 at the end of Q3. We were at SEK 593,000,000 at the end of last year and found ourselves with a net cash position of SEK 20,000,000 at the end of 2020. And with that, we move to the next slide and look at what is our current or past maybe The financial targets, where we stand on that. And when we close then Q4 and look at where we stand, then we see that we are 2.2 times the 20 In revenue, our target there was set to triple our Russia CIS revenue by 2021. If we look at operating margin after going into Germany, Before Germany, we had a range or an objective of all the 7% to 9% going into Germany And saying that we expected Germany to be around 30% of the total revenue, we lowered by 1 percentage point to 6% to 8% and we found ourselves at the end of the year in the middle or slightly above the middle of that range. And then again with regards to debt, we set ourselves in to be as an object between 0 and 2 times and again now find ourselves slightly negative net debt. And with that, I'd like to hand back the word to Lars. We have revised our financial objectives, And we think it's essential that the financial objectives support and reflect The strategic objectives of the business. And that's the place we should start. Yes. Thank you, Erik. And if we look at our strategic objectives that we have actually had for many years now, We have one of them is leadership within market for Construction Equipment and Trucks. We have expansion into related business areas. We have aftermarket absorption rate of at least onetime or 100%. We have geographic expansion, and we have further development of Contracting Services. And obviously, for those of you who have followed us during the years, we have maybe not illustrated to the industry leading digital service and sales platforms, but that has been at the core of our development for the last 5, 6 years. So if we look a little upon how we delivered on those strategic objectives as of today, And I think we have delivered well. We were founded in 2010. And as a result of executing on these strategic objectives, we are now a more mature and diversified business. We today operate across 3 markets, and we represent several leading brands next to Volvo. We have also developed vertically by investing in a component and machine rebuild center. We have grown our rental business and used business. And we have, as you know, significantly expanded our Contracting Services business. And we are continuing to deliver on these objectives. We have developed a digital sales platform that supports our service organization and our customers, And that has been a significant driver of our developments in the aftermarket mainly. We have potential to continue to grow with significant contributions from Contracting Services and Germany. And as Contracting Services and Rental Operations, they Tie up more capital in machinery and as network infrastructure in Germany is either owned or leased for long periods, our business model becomes more asset and capital intensive than before. So in line with continuing to pursue our strategic objectives, we have then updated the financial objectives to reflect the current position and strategic direction in 2020 to 2025. I hand over to Erik to say what's the new outlook for Charlie. Thank you, Lars. Then we move to Slide 19 Over the deck. And there you can see our new financial objectives. As Lars mentioned, we have grown horizontally and vertically and we have Developed different business areas, many of which where we see further growth potential. We have looked on this call and previously at the market opportunities that we have Both in Russia CIS, but also in Germany, where we see upside from the equipment business. But we are quite excited about the opportunities in contracting services as well and the strategic direction All that kind of value that we can deliver to our customers and also the potential, Of course, all of our franchise in Germany. So we do see opportunities to grow and that's What we try to capture in this ambitious growth target that we set ourselves From 2020 to 2025 to double our revenue in our current markets. To define what that means, it is then the market where we're currently operating Germany, but and Russia CIS. CIS though including The all the CIS markets and the potential there. Looking at operating margin, we have Since 2017, performed above 7%. And we have indeed been above our 7% to 9% even target. We believe that this is a good measure for us where we should As a group, stay over and we don't want to limit the upside there, But we mean that this is a good target for us to stay above. When it comes to net debt EBITDA, Lars mentioned that some of these growth areas and potential that we see Does change our balance sheet to some extent. Contracting services ties up fixed assets that we carry on our balance sheet through machines. In Germany, whether we acquire or lease assets with IFRS 16, they come onto our balance sheet. So more infrastructure intense and capital intense business. And with that comes a different balance sheet that we should be able to use As we support the growth of these very interesting areas going forward, it also gives us More flexibility to act on opportunities that we see. So that's on these targets that we present to you today. We have also revised our dividend policy. So it used to be that the ambition was to pay at least 25%. We now want to be a bit more transparent with our investors, with the market and say that the ambition is to pay at least 50% if Net debt to EBITDA is less than one time and at least 25% if net debt to EBITDA is more than one time. And these are at least so that it doesn't per se mean that there is a limit to this, but these are the targets that we set and the policy that we've put. As before, The Board will, of course, take into consideration several factors when they look at what the dividend to consider and to recommend. With that, we can turn to the next slide, which really just summarizes and visualizes where we have been and where these targets put us. So what you can see on your top left there is The growth trajectory that we have that we've had up to 2020 and the potential that we see going forward and what we're aiming for. You can see to your lower left The operating margin performance that we've had all the way back from 2013 and indeed as I mentioned since 2017, we have been above The floor that we now set ourselves to be above going forward. And when it comes to net debt to EBITDA, you can see that we have been lower than within as our business to some extent With the opportunities we see changes the nature of our balance sheet, we want to give ourselves more room there and more flexibility. And the lower right graph there illustrates this point that on our path when we have Has taken on more assets in Contracting Services. And of course, if you look 2019 on the lower right graph, It also captures assets that we acquired in Germany. So that reflects part of the reason that We have 4 setting the objectives that we've presented to you here today. So with that, I would give back The word to Lars to wrap. Yes. I mean, the Slide 21 is a repeat of the first slide. And I think in the Interest of time, we move over to the outlook, which is Clearly uncertain still. There is uncertainty both on the supply side, as you might know. Obviously, there might be uncertainty on the demand side as well. However, we currently expect the markets in Russia CIS and in Germany to recover in 2021. In Russian CIS, obviously, our optimism is supported by the stronger commodity Prices have increased activity on the so called national project, however, checked by certain risk of potential changes in taxation. In a longer perspective, we believe that the underlying fundamentals and business opportunities in our markets are strong. So fairly cautiously optimistic about our markets in 2021. Thank you. And I think we can hand over to questions. Thank We have a question from Victor Hansen From Nordea. Please go ahead. Hello, Lars and Erik. Victor from Nordea here. Thank you for taking my questions. So according to AEB, the scrappy fees are up 2 to 4 times due to government interventions, and you also touched upon this in the report. How do you expect the increased sales in Russia to impact your new unit and aftermarket sales in 2021? And have you seen this little to an increase in your price per unit? Yes. Hi, Victor. There is indeed a Proposal for an increase of the so called utilization fee or the scrapping fee, which is called for certain of the models, Not all. And it is not yet decided. The levels are not yet known. It is under Heavy discussion, I can tell you. And the timing for this is not known. So that's part of the uncertainty of it all. But you're right, for certain models, we're talking about an increase of a manyfold increase in this fee or tax, which would mean that we would need to push that out to the end customers And eventually back to the government who is paying for it all, but that's parenthesis with quite some percentages. And if that happens, there is one thing, however, we need to mention here and that is that it's a flat fee. So it is a different fee for each product model, and it's a flat fee. So if we take Something positive out of it from our side is that it relatively affects us the least since we are price leaders in the market. But it's if it's being implemented, it will have an impact on a negative impact, obviously, on the market. But at this stage, I think it's too early to say whether the positive impacts that we see from increased In the economy in general, pent up demand and the national project, sorry, how that will play out. So we still believe in an increase, as we say, in the total market. That increase would have been bigger if this would not be in place, which we still don't know if it will come in place. So it's an uncertainty that we live with, which is not unusual, but that's the way things are. Okay. That's interesting. And on Contracting Services, to what extent are you currently using sub suppliers Carryout work in the specifically in the CMC mine in Ryalsk that you mentioned. And how should we expect this mix to change as the operations there mature? And could you please quantify how the ramp up costs that you mentioned has affected your results? I don't think we can quantify that, Victor. But at the moment and during Q4, we have had a High degree of subcontractors in Norilsk project. That level will go down over time. So we will have more own machines there going forward than we have in Q4. Okay. And a follow-up on that. Could you provide some guidance to the targeted level of stub supplier mix in general for your Contracting Services going forward? No, we don't give that number really, Victor. I would add to that, Victor. It's not only about not giving guidance, but it depends also on the opportunities that come up for which projects Our competencies would be better served by doing it ourselves and where we could benefit from taking in External partners as well. So it depends a bit also on the opportunities that come up. Okay. And are there any sales in Russia from projects related to national projects in the Q4 numbers? Or is still With this opportunity still completely untapped? I would say that very Limited sales in Q4. Okay. So it has started? It has started on a small scale. Wonderful. And how much of your cost savings in Russia at CIS would you say are temporary? I wouldn't give you a percentage, Victor. But as we mentioned before, I think there are, I would say structural changes that we've done to organization. And I mean, if you would look at our cost structure, then People is being part of the G and A, of course. And there, there are some of the savings that will last from the level that we see at the moment now. But then there are temporary ones that I mean, for example, traveling and marketing where we have to put the brakes completely. And still, if you look at Q4, we're very low on those posts and that's not sustainable over time. We need And when I say stable, again, one needs to think also in terms of percent of revenue. Of course, When we grow our projects in contracting services, when we grow our market presence, It comes with some cost as well. But when we grow, we do expect to see scale economies. So I do think that we can hold on So again, efficiencies that we have found this year. Okay. And the final question for me. On your new revenue growth target, is this including acquisitions in the parts of Germany where you are currently present? Yes, that it does. So it's how do we say non organic in the sense that does not include new markets if you would go into new markets. But in terms of the current business area, and again, We say that CIS is a business area. That's included in this revenue target. Okay. So if you would expand to a larger part of Germany, is that included also in this revenue target? Or Is that additional? Well, I mean, the markets that we currently are in, That's included in the revenue target and that would then include further acquisitions in Germany. Okay. Thank you very much. We have a question from Kenneth Tull from Carnegie. Please go ahead. Yes. So let me start with the last The question rounded off. In your target, you're focusing more on the areas where you are today. Does that mean that you will concentrate more on growing sales there rather than Taking over distribution in another country. So Kennen, we still keep our strategic objective of geographical Equal expansion, which we have started in I mean, we started in Russia and went into Kazakhstan and then Germany. And that is By no means not an objective anymore. And we are In constant discussions and we're looking for opportunities to expand geographically, but such a growth is not included in this target. Okay, great. Then I was a little bit curious about the low working capital in Russia. On the truck side, there are shortages of the semiconductors That hurt the output of trucks. And I know that in your business, You often have low inventory towards the end of the year. And then during Q1, you build up inventory again and start selling. But You needed quite a lot of machinery in Q1 and Q2 in order to be able to serve your customers. So are you afraid that you will not get the machines from Volvo and other Suppliers that you would like and that you were able to sell in your markets? Well, I mean, it's not a secret that there are a lack of semiconductors. At the same time, I mean, we have our production program, which with the suppliers. And we also state, okay, there is a risk of disruptions somewhat in those programs. But As it stands now, we should be able to get the machines that we need to capture the market. Whether we could sell more or more is a hypothetical question depending on the demand that we see going forward. But yes, there is a stress on the whole system, I would say. But as it looks now, we are okay in terms of capturing the share of the market we want to take. Okay. Great. And if there is a stress on the market totally, that could be good for pricing as well maybe? Well, yes, that's the overall demand and supply, I suppose. Yes. Great. Works even here. And then on the contracting services, you were ramping up this really large project now in Q4. Is there seasonality in Q1 now when you have the most severe winter conditions So that activity slows in that big project and in other contracting services businesses? Or should we expect sort of at continuing the growth in Q1. Well, I mean, we are We are used to working in these conditions. I can tell you in some of our places now it's minus 55 And we continue to work. So we shouldn't see seasonality in that respect Hindering too much, you might reduce production slightly and the machines will need a bit more care. But that's kind of our claim to fame in Contracting Services that we do work in these conditions. Okay, great. And then a final one. I know that you have said before that if the ruble I appreciate or appreciate you correct your prices and you are not very much affected. The swings we have seen lately are very dramatic. So have the FX movement affected your business? Yes, I mean, the swings we've seen in the last year, I mean, we're talking about 35% depreciation of the ruble. And clearly, that affects the business. And you need to work harder. You need to make sure that the customer understands the benefits of paying 35% more than it is 1 year ago. And that's part of the reason why you've seen that the Aftermarket has not grown as much as the machine sales. There is a bit of lag on the machine sales. So it takes A bit longer time to work that through in the aftermarket than in machine sales. So it's and I would say that, that is an effect of the currency depreciation that was particularly in the second half of the year very, very strong. Over time, that usually we work that into the system, so to speak. Okay, great. Thank you. Thank you. We had a question from Ophelia Oostema from ABG. Please go ahead. Thank you. I have a couple of questions. Maybe we can start with the one regarding this quarter. And it seems like Most of the deviation in this quarter came from the gross profit. And you have talked about lower ticket as a driver of this. But I wonder if you could Say something, which if we should see this as something temporary? Or do you expect this to continue during 2021 or even further? Well, as you know, Phil, we're quite cautious on giving guidance. But I think if we look at some of the mechanisms or Mechanics behind it. Partly the, as we call it, ramp up costs getting That's in the Norelisk for the big project bearing contracting services. Things that Should not be capitalized, but our costs over and I'm just setting up that to the expense. Some of that would decrease gradually as we move into next year and again as we are ramped up in Oryleston. So Likely some decline of those kind of costs. When it comes to that project itself, it is worth noting that when we're relying more On subcontractors, there is a permanent feature of lower margin contribution from such a project As is there though a lower requirement for us to invest capital in such a project because the subcontractors Would bring their equipment. So there is a trade off in terms of CapEx you could argue. And again, in this project, we will have a permanent You're all subcontracting, so there will be a lower margin for benefit. Thirdly, I would point to then the other side, so to say, to Germany, Where we have said and we stick to that our objective is to put Germany at a Breakeven run rate at the end of this year, as we said in our initial press release. And the restructuring costs that we've taken this year, will there be more restructuring costs? Probably some as we continue to build and take the organization, introduce our systems. But this should also be over this year a feature that decreases as we get more into the place we want to be in Germany. We are, As you've seen also from press releases also expanding and improving our network, as we say. That's part of the strategy to capture a bigger share of the aftermarket. And that acquisition activity or expansion activity, rather I should call it, also comes with certain costs, which are not permanent in nature, but one we are engaged in that, but there is some costs involved in that. So I think that's what I can say in terms of the margin we saw this. And then I think there are other factors like currency, which Has complex effect, I think, on our business in different ways. But that's it's harder to give A straight direction on where we will see that take us in the next quarter, let alone next year, given that the volatility that we can have in the currency. Okay. Thank you. And then I have a follow-up Questions on the new project. I wonder if you can say something of about when you expect most of the revenue to inflow from this project? Sorry, you mean when it will peak, so to say? Yes, exactly. Yes. I mean, it will be ramped, I would say, continue probably 1st quarter and to some extent into Q3. And that's a point where we should see stabilization. So that's what I would say. And then for the duration, it should be more or less stable until we get to The closing of the project, see if there are extension opportunities. That's also now how that business works that there are other opportunities, but That's probably the expectation we have. Okay. Thank you. That was all for me. Thank you. There will now be a brief pause while questions are registered. There are no further questions at this time. Please go ahead, speakers. I have had a question coming in via e mail. I'm not sure If the person asking the question was to be anonymous or not, so I'm not going to mention the name. Questions regards to if we can discuss the new margin objective of 7% in light of historical margin performance. I think, again, we have touched on this, how we have performed historically and that we do think that this is A good target for us to guide by as we look forward. We see growth opportunities Across our activities, Germany and Contracting Services are 2 areas where we said we see making significant Contributions here. And as the audience will know from when we went into Germany, that is an area where we see lower margins, Also lower cost of capital and typically lower volatility in such market as well. Contracting services would tend to carry higher margins depending on how much you rely on That's subcontracting, which in turn ties into the capital side of it. So we think that this 7% that we set ourselves is a good Met is for us to make that trade off and balance the choices that we have going forward when we consider how to grow and develop going forward. 2nd question, when we expect Germany to breakeven, that was something I think I just answered to the question before. We've said end of 2021. That is, however, on an EBIT level as we communicated in the Initial press release, and that's something we stick to. And for the Question on German EBIT level and there we have not given specific Guidance on where we expect that to be. What I think we did provide when we entered into Germany was An estimate of what share of our business we expected that to be and again, a Decrease in our margin target as a result of that. So the fact that we do expect our margins in Germany, that's Something that we are open about. And Well, I guess there's a question on M and A in general. And I think Lars touched on the one hand that we continue to follow our strategic objectives. The fact that we're Updating, which I think is really the right word for the financial objectives, updating them is By no means a change of the strategic objectives rather the other way around. The strategic objectives have taken us from somewhere to where we are today, which is a more diversified business, more resilient in a lot of ways With a lot of new opportunities to grow and could maybe a part of an expansion, It could, but we look at opportunities separately when it comes to geographical expansion Entering new markets. And we also need to pace ourselves. And the last question was on taxation risk in Russia. And I think we touched on that as well with regards to Victor's question. Okay. So thank you very much, everybody, for joining in on this call, And have a good day.