Earnings Call: Q4 2020

Jan 28, 2021

Thank you very much. Welcome to today's earnings call. I have Lars Samson with me, as usual here, who will go through part of the detailed financials in a moment. But we can I will start with a quick overview of some of the key takeaways? So we can move over to Page number 2, please. So if we look at the key takeaways from a performance perspective, the year. On the top line, we continue to deliver sales growth and we've ended the year right in line with our guidance, 3.9% for the full year. It's particularly good to see that we have had strong performance in our 3 largest markets in the quarter. So that's the U. S, it's China and it's Germany. The only weak point that we see is that the order intake for Surgical Work was slightly lower than the Q4 of 2018, and this is mainly related to a weak start to the quarter in Americas spend in Asia Pacific. We did not see any underlying change in the market, so we expect this to be temporary. And the quarter also ended on a much stronger note than it started. So that's positive. If you look at the total order bookings, They were also better than at the end of 2018. So for 2020, we entered with a stronger order book and what we entered 2019 with. So we expect that our sales increase for 2020 will be in the range of 2% to 4% that previously guided and in line with what the market underlying market growth. If If you then look at the gross margin, the gross margin for the quarter was positively impacted by a favorable sales mix. We had good results and higher productivity in many parts of the company, and there was also a significant currency effect in the year quarter. So all in all, this has contributed to a strengthened operating margin year on year. We come out with an adjusted EBITA margin that is 1.4 percentage points higher than 1 year ago on an adjusted basis. So overall, a positive outcome from that perspective. I also want to mention the cash flow. Our underlying cash flow was very healthy for the quarter, and the balance sheet strength and test as a consequence. And I think this is particularly good since it really shows the work that we've been doing for almost 2 years now when it comes to, of course, accounts receivables, but also our inventory levels. And to me, it's a sign that Many of these underlying productivity measures that we've launched are actually gaining traction. So we're very happy about that. When it comes to the balance sheet as such, we're now at 2.5% in leverage, which is, again, another piece of evidence that we're continuously moving in the right direction. From a dividend perspective, the board that proposed a dividend of SEK 1.5 per share, which implies a 50% increase versus the previous year. We can then move over to Page 3, please. Period. I want to just start out by some of the main events in the quarter. So the key takeaway here is that one is structure on the cost side, where we thought to see positive effects from the restructuring efforts that we made in the first half of twenty nineteen. Some of these were also visible in the Q3 of 2019, as you may remember, and we expect not to have the full year effect, of course, in 2020. If you look at OpEx, however, some of these savings were eaten up by mainly by negative currency effect, but we also had remediation costs and the costs related to the European MDR preparations that that are in full swing at the moment here. There was also one expiring PSA from where we had some seasonally elevated personnel costs. So that gives kind of the whole picture from a cost perspective. It's also worth mentioning that we've strengthened our offering in the Life area with the acquisition of Aplicon Biotechnology, the leading company in the fast growing area of advanced bioreactor systems for biopharmaceutical research and production. Very happy we closed this acquisition on the 7th January. So they will be with us for the full year here. It's also worth mentioning, I think, in the quarter that we've decided and started to implement a number of important actions to improve the manufacturing footprint efficiency in Surgical Workflows. So one decision is moving the production of low temp sterilizers from the manufacturing unit in Ankara in Turkey to our factory in Fosna in Poland. This move is expected to be completed already by the end of 2020 with the manufacturing unit in Ankara, Ankara closing and retirement. In terms of footprint rationalization, we're also in discussions with the workers' council on a project to transfer our endoscope washer production from Toulouse in France to Vecler in Sweden. So this will enable the Toulouse factory to focus entirely on our growing Life Science business and Pacifica Workflows. It becomes a much cleaner setup that will enable us to increase both productivity, but also competence. We will establish a disinfection competence center in our back office. So these are some of the main events during the 4th quarter, and we can then move over to Page 4. So if we look at the top line a little bit more in detail then from an order intake perspective, our order intake rose 0.9 spend organically and 6.9% in actual numbers. We saw continued high order intake in Acute Care Therapies, mainly due to our cardiopulmonary business, which delivered double digit growth in the quarter. We also see that Life Sciences continue to grow primarily in sterilizers and in washers disinfectors. We had, as I mentioned, initially, a little bit weaker order intake in Surgical Workflows, shift initially, a little bit weaker order intake in Surgical Workflows, primarily due to a slow start of the quarter in Americas and Asia Pacific. It's also worth noting that if we adjust for the cancellation of 2 low margin orders in Acute Care Therapies and Surgical Workflows from back in 2017. The organic order growth amounted to 1.7%. So despite these cancellations, The order bookings are higher than a year ago. So if you want a proper comparison, Q4 of 2018 with the Q4 2019. You can adjust for this. We don't normally report any adjusted order intake, but things that's unusual with cancellations. We thought it would be worth mentioning this. If you then look at this from a sales perspective, We had 1.8% organic growth in the quarter, 7.7% in actual numbers. Acute Care Therapies had good performance in all regions, accounted for the largest share growth in absolute figures. We also see that Life Science has shown very robust growth in both Americas and also EMEA, While organic net sales for Surgical Workflows declined in all regions due in part to some deliveries that we made in the 3rd quarter that normally maybe would have ended up in the call. We can also see that from a consumables and capital goods perspective. Sales to consumer goods are now growing faster than capital goods, which is generally positive for GOSMOR. We can then move over to Page 5, please. So if we dissect the order intake picture a little bit and look at the contribution from the different business areas, our organic order intake was bit below market growth for the quarter, even with the adjustments that I mentioned earlier. We do expect this to be temporary given the feedback that we have numbers and what we see in our pipeline. And as I mentioned earlier, the cancellation of the 2 lower margin orders for 2017 amounts SEK 57,000,000, which takes away 0.8 percentage points from the growth figure for the quarter. So the adjusted figure then would be 1 point 7% if you want to compare quarter to quarter from 2018 and Acute Care Therapies then 2.9 percent organic growth in order intake, SEK 346,000,000 in actual numbers. This is in line with market growth. And as I mentioned earlier, very strong order growth in our Cardi Pulmonary business. Life Science also had good growth for the quarter, 2.3% organically, SEK 48,000,000 in actual numbers. Here, we see an organic growth with a strong trend in capital goods for Asia Pacific. China is a very strong market for us in Life Science. Also generally favorable growth for disinfectors and the pasteurilizers and a decline in Americas and EMEA, which we again expect to be temporary. The underlying growth dynamic in Life Life continues to be positive. If I look at Surgical Workflows, we had minus 2.4 percent organic order intake or order intake growth, plus SEK 71,000,000 in actual numbers. The weakness is attributable to infection control in Americas and in Asia Pacific, where, as Vasyl mentioned earlier, we had a slightly weak start. We it's also worth mentioning that our smallest partners, ready to Workflows, Integrated Workflows Solution, had organic growth of more than 20% in the quarter. So that's very positive. With that, we can move over to Page 6. On our net sales. Net sales for the quarter increased organically by 1.8% in actuals by 7.7% to in total SEK 8,498,000,000. In this, we had a positive currency impact of SEK 4.65 €5,000,000 And as I mentioned earlier, consumables grow faster than capital goods for the first time in a rather long while. From a business area perspective then, Acute Care Therapies had 5.9% organic growth or SEK 485,000,000 in actual numbers. This is outperforming the market a little bit with growth in all regions and most of our product categories, very strong cardiopulmonary as mentioned earlier. We also see continued robust performance in Critical Care. This is predominantly linked to high demand for our ventilators. And it's also encouraging to see that we have a good demand for our recently released product updates in Critical Care. Life Science had very favorable sales growth as well in the quarter, 13.9% organically and SEK 143,000,000 in actuals. This is particularly driven by strong growth in EMEA in Sterilizers, and we also had higher sales in Americas, mainly attributable to capital goods in the U. S. Results. Somewhat negative trend in Asia Pacific, but largely due to a challenging comp from the previous year where we had over 46% growth in the Q4 of 2018. In general as well, sales of capital goods increased in Life Sciences. Surgical Workflows, on the other hand, we had minus 5% 5.6 percent organic growth, the minus SEK 20,000,000 in actual numbers. The organic decline here was attributable to factors like care, large deliveries taking place already in the Q3, but also decline on products with lower margins, like for example, our modular ward systems and some of the loading equipment related to CSST Solutions. Organic sales in integration. So in Integrated Workflow Solutions were unchanged in the quarter. And from a capital goods and consumer perspective. We had a decline of capital goods with 8.9% organically, while consumer goods grew by 2.7%. With that, we can move over to Page number 7, please, and look a little bit at the gross margin development in Q4 2019. So our adjusted gross profit increased by SEK514,000,000 to SEK 4,304,000,000 in the quarter, driven mainly by the Acute Care Therapies and in general support from currency. The currency support here, was SEK 316,000,000. There was also an IFRS 16 effect of SEK 31,000,000 positive in the quarter, for him to know. If we compare with the preceding year's margin, the gross margin is 2.6 percentage points share higher, driven by improvements in all of our business areas, which is encouraging to see. This is supported, of course, by positive effects from currency, as I said, but also we can see a good mix between product and geography. We have some volume effects as well that are positive, and we have good absorption and in general also good productivity gains in our supply chain. So a lot of good things happening there. With that, we can move over to Page 9, and I leave over figures. Thank you, Matthias. As you can see, the adjusted EBITDA increased by SEK 261,000,000 and adjusted EBITDA margin improved 1.8 percentage points year on year. Current FX had an impact of SEK 200,000,000 on EBITDA and supported the EBITDA margin by 1.3 percentage points. Adjusted gross profit impact on the margin amounted then to 1.3 percentage points, thanks to the positive product and you got the mix and the other parts there, Matti has mentioned. Looking at adjusted OpEx increase year on year, primarily due to currency and investments in compliance, quality and remediation, including then all the preparations for the EU MDR. Sequentially, The costs were higher following the seasonal pattern with higher costs in Q4 and the higher OpEx had an EBITA margin impact of minus 0.8%. All in all, this resulted in an adjusted EBITDA of SEK 1,673,000,000 and adjusted EBITA margin of 19.7%. Over to Page 10, please. Let's take a look at the BA contribution to adjusted EBITDA, which was impacted positively by currency, tailwind of some SEK 200,000,000 in the quarter, Starting with Acute Care Therapies with a margin of 27.5%, which is an increase of 0.8 percentage points and SEK 165,000,000 impact shows. Here, the main the increase Over 0.8 percentage points was mainly due to increased sales volumes, higher gross margin and positive currency effects, which was partly offset by higher costs. In Life Science, adjusted EBITDA rose by SEK 30,000,000, results in a margin increase of 0.5 percentage points, mainly attributable to higher gross margin compared with the year earlier and also partly and by some offset by some higher OpEx. SW, Despite the lower sales, volumes in Surgical Workflows, adjusted EBITDA increased by SEK 61,000,000 corresponding to a marginal increase of 1.9 percentage points due to improved gross margin, policy and lower operating expenses here. Over to Page 11, please. We continue to see improvements in the underlying OpEx development, which is tracking according to plan. And today, we are 10,538 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Feet Feets. And we do see continuous underlying decline in the number of Feet using the natural turnover and order refill where it brings value to customers and the business. However, we have increased the number of fees in the quarter, mainly attributable to sales and also remediation and preparations with EMVOR and also some increases in the production, where we increased some of the production space in some of our facilities. This is generating value over time. At the same time, the number of STs within traditional back office areas are declining. Our work continues to bring OpEx in relation to net sales to a healthy level. And as you can see in the graph to the right, adjusted OpEx in relation to net sales on a rolling 12 month basis then has declined in fatigue levels in the first half of twenty eighteen. This is, to some extent, supported by positive currency effects on net sales as well. Over to Page 12, please. On cash flow, The 4 changes in working capital, it strengthened in relation to Q4 2018, primarily due to improved EBIT, lower taxes paid and also last year payments for the investigations done in Brazil last year. During 2018 2019, we've been working intensely with improving our working capital. And as you can see in the graph in the middle, we broke the trend in working capital days in the Q2 last year following by a decline each quarter since. And we are now at some 112 working capital days. Also, working capital is decreasing 6.8% year over year at the same time as our net sales is growing 1.8% organically. Our efforts to improve working capital will continue just as everything else we do in order to improve productivity and thus both underlying earnings and cash flow improvement. Of course, you should expect this steep decline in working capital to slow down a bit as we get into comparisons at our telco. And as an example, you should expect some build up in the safety stock inventories related to the transfer of production that is ongoing from Fairfield and Norway to Wayne in the U. S. During 2020. Nevertheless, we still we do still have many things to improve in this area. Net investments in the quarter amounted to SEK 261,000,000 compared to SEK 363,000,000 previous year. And free cash flow then in total amounted to SEK 1,400,000,000 for the quarter. Let's move to Page 13, please. Let's take a look at our net debt situation, which has improved in the quarter following the strong cash flow. Interest bearing liabilities declined by SEK 1,800,000,000 during the quarter and net debt was reduced to SEK 12,300,000,000 Our net debt, besides normal interest bearing loans, as you find it in our financial report, include pension liabilities and impact on leasing liabilities under the new IFRS exchange. When we exclude the IFRS 16 lease related leases on the balance sheet and pension liabilities and focus on the interest bearing loans, we can conclude that they have been reduced by SEK 1,500,000,000 in the quarter. The reduction in net debt in combination with increasing operating profit has contributed to a significant reduction of leverage. Net debt, including pensions and IFRS 16 is now at 1.7x adjusted EBITDA. And if we add financials and IFRS 16 effect to the net debt we are at 2.5x adjusted EBITA, which can be compared to 3.2 1 year ago. Let's turn to Page 15 and back to you, Madel. All right. Thank you, Lars. So just a few words on the outlook then. So we continue to guide for 2% to 4% organic net sales growth for 2020. Nothing has really changed fundamentally on an overall level from our perspective. From when we look at things from a customer perspective. We expect the overall positive demand pattern to continue. This goes for both capital goods and consumables. We also get positive signals from customers on our newly launched products, which I think is very encouraging. And we expect the same with the ones that we have in the pipeline 2020. So that gives a bit of encouragement for the year in front of us. We also entered this year with a stronger order book in total compared to when we started 2019. However, we have been facing a decline in orders in Surgical Workflows for 2 quarters in a row now, mainly related to Americas. So this is something that we are very aware of and addressing also internally with reinforcing the organization here. And We keep monitoring the our activities closely and really working hard to reverse the trend last 2 quarters. But all in all, if you weigh everything together, we expect an organic growth in net sales of 2% to 4% for of 2020. There, we can move over to Page 17, and I'll just summarize briefly before we move to the Q and A part of the call. So if you look at the key takeaways when we summarize Q4 of 2019. We continue to improve our business and deliver growth. So 2% to 4% expected for next year, in line with our predictions at the Capital Markets Day in 2018. We see a positive margin development in all our business areas. The adjusted EBITDA for tool in 2019. It's 1.4 percentage points higher than the same the comparison in 2018. Some of this improvement maybe came a little bit faster in 2019 than we expected. We expected the main expansion to be in 2020, twenty in year 1, which was communicated at the Capital Markets Day. But I think it's good that things are really strong in this sense. We continue as well to see positive development in underlying cash flows. And as I said, the thing to me and indicates that things are starting to work debt from a productivity perspective is really all the activities that are getting traction and momentum when it relates to working capital because it's very sound quarter for the company. As a consequence as well, the cash flows generated, our leverage has declined differently, which again is another example, given evidence that we continue to move in the right direction. The Board has also decided to propose survey at the end that we will increase the dividend by 50% to SEK 1.5 per share. Those are really the main takeaway. And so finally, overall, I'll just continue we will just continue with our efforts to continue to work closely with our customers and really help them create value in their business and continue to strengthen our way of working in the coming quarters. So With that, Valerie, I open up for questions. Thank you. Thank you. The first question is from Annette Dubre from Handelsbanken. Please go ahead. Your line is now open. Thank you so much. First of all, could you provide a little bit of Color on 2 order cancellations you had within acute care therapy. Where these and also, I mean, regional maybe product area as well and also why this was canceled? Then you positively say that the FDA limitation program are on sheet. And you have unutilized provisions of around EUR 234,000,000 and you used about EUR 150 For 2019, so would it be fair to say that you have Unutilized amounts corresponding something like 18 months. And is this in a timeline. You also see as a finalization for the remediation program? Or are we at risk that you will, during 20 20 mega further FDA provisions as you on top of the already EUR 2,000,000,000 negative since 2014. Then I have some questions on the FX afterwards. Okay. Well, FX, when it comes to the cancellation, these are our 2 contracts that we've had since 2017, which are lower margin orders in the EMEA part of EMEA spend where we've concluded that it doesn't make sense to continue to have it in our order book and financial supply this quarter. So it's SEK 57,000,000 in total. It's related to both SEK 7,000,000 in total. It's related to both SEK 7,000,000 and acute care, but that's the only color we do. Review of it. Welcome to the FDA remediation. We do feel that the provision that we have, if not otherwise, we would have changed the course. And we do expect our program is running at full speed in all the relevant list. We expect this to continue in 2020 as we guided for, and we do expect that the remaining provision is enough for that work. Okay. Then on the margin, and I know you're not so happy to talk about margin guidance. But If we look at the and we strip out the FX of EUR 200,000,000 for the Q4 or EUR 400,000,000 for the full year 2019, score. I think it's fair to say that your EBITDA adjusted EBITDA, like in the history about currency, is basically flat. And although you highlighted that you are gaining traction here, What should we expect for 2020 in this respect? As you also highlighted on your call, The effects you've seen have materialized already in 2019. Yes. Well, you're absolutely right. We're not going to change review, and we will not provide detailed margin guidance. What you need to keep in mind and what you didn't mention in your summary there is We've also had the headwinds from expiring TSAs during the year. We've had remediation investments in addition to what we had the year before and we have the preparations for improvement, it means offsetting these effects as well. So if you're clear for that because these are things that we will get review during 2020. There is a better underlying margin expansion. Okay. Thank you. Next question is from Carolina Elwin from Danske Bank. Please go ahead. Your line is open. Hi, good morning. So just a few questions on the FX effects again. And It was EUR 200,000,000 on Investo in Q4 and EUR 400,000,000 for the full year. Could you describe if you've had any hedging profits or losses during the year? And also what is the value of the current cash flow hedges on the balance sheet and how that potentially will impact profit going forward? Yes. When you look at the currency impact that we have in the 4th quarter for SEK 200,000,000. You should also remember that the Q4 for us is the biggest quarter when it comes to profit, sales and profit. So we get a proportionally higher share in the Q4. So that is more normal in that sense. And when it comes to forward looking on our hedge stripping, we are yes, we have some hedges coming into next year, which are slightly negative, but there is not a big material impact because we also have, of course, Okay. Thank you. And also And next question is from Christophe Riddeberg from Carnegie. Please go ahead. Your line is thing. Yes. Thank you. Three quick questions, if that's okay. The first one is for Surgical Workflows. How soon do you expect the sales and order momentum to pick up again and whether you see the weakness here in the last 2 quarters as temporary. 2nd quarter about the margin. You have previously said that you expect impact of course helped the margin more than expected, I believe, in 2019. So how do you view that previous comments evolving here. And the third question about the tax rate, 34% in the quarter, seems to be higher tax in the U. S. So how should we think about the group tax going forward? Thank you. All right. Thank you. When it comes to the software starting for workflows, then we do the reason we believe it's temporary is still that we see good activity levels from our customers. In the areas where we have high market share, so outside the U. S. Primarily, We don't see a big underlying weakness, especially not in our most important markets. The main concern is in Americas and U. S. Specifically. And we've worked both during the 3rd and the 4th quarter with reinforcing our organization to move this in the right directions. So we do expect this to get some traction during 2020. So that's the reason for our view in that regard. When it comes to the margin expansion, we do expect still our underlying productivity improvements to continue in good steps in 2020, but you're absolutely right that we've had a bit more currency tailwind than we expected. So it's Difficult to predict where we will end up. So the probability of a much bigger set has, of course, gone down a little bit, given that we made a bigger improvement in 2019. I can't really give any more detailed guidance on that. And when it comes to the question on the tax rate as well, I I didn't actually hear that, but Lars picked that up. Yes. Now you asked about the higher tax rate. And yes, we have an impact on from the geographical mix. We are making more money growing in the U. S. And some other geographies with higher tax rates that impact the tax rate for this year. And also, U. S. Tax reform is impacting us from GILP and D, and that is also contributing to the high tax rate. And given this will bring also continue when we go into next year, so we will have a higher tax rate that we have had historically. Okay. Okay. Do you think you would be able to compensate anything on the tax rate versus the 34% you had in 2019. That is the work ongoing continuously, and we are working on that. I cannot give you more guidance on that today. But of course, we are not happy with that level. So we will work on that for sure. Okay. But the current is what you think is the best guess because having consensus is forecasted at 25% margin. It's a big difference if you have EUR 24,000,000 versus EUR 25,000,000. So I guess it would be I think you have to give some sort of guidance. So if this is higher level than in the past. So as I said, in the tax rate we have now is in line with the result we have and that is impacting us going forward. So that you should not CapEx going back to that levels. We are at 34 now and going on to next year. We will work, try to bring it down from the 34, but not I will not give you a clear guidance more than that. Okay. And if you're very successful bringing it down. What are we talking about then, 30% or is that a good assumption? I will not give you any guidance on that story, Chris. Okay. I see. Thank you. Next question is from Greg McDowell from JPMorgan. Please go ahead. Your line is now open. Thank you. Good morning, everyone. Just two questions for me, please. Firstly, please can you give us an update on the progress of the mesh litigation? You Previously said that trials would start early 2020. Have you had any further visibility on this on where and when trials will start? And could you give an update on the case numbers? And linked to that, please, could you give an indication of the cash out that you expect on the mesh provision in 2020. Thank you. All right. Thank you. But unfortunately, there are only short answers on this front. We have no news when it comes to mesh. Share. Nothing has changed there. As soon as we have any change that is material, we will, of course, disclose this, but there's nothing at the moment. And consequently, we can't give any guidance on the cash outflow because of this. So we need to see what ends up here with the process milestones, and then we can maybe give a bit more guidance. Okay. Just a second follow-up. The various sort of measures you're taking on adjusting the manufacturing footprint, can you give any indication on what restructuring charges you expect through 2020? Well, there's not many restructuring charges in 2020 for the ones we've announced now. They were taken in 2019. What we have said, when it comes to restructuring, over time, we have said a level of around SEK 200,000,000 last year. Now in 2019, we are more towards SEK 300,000,000. And we should be moving, so to say, May back to more normal maybe levels. But We don't give guidance for single years. But on the longer term, we say that around SEK 200,000,000 has been. Great. Thank you. Next question is from Scott Bardo from Berenberg. Please go ahead. Your line is now open. Yes. Thanks very much for taking my questions. First one, just relates to you Describing 2019 as an implementation year previously with further underlying strides to from 2020 beyond. You made some comments here already, but can you please give us an update as to where you are with the SKU reduction and transfer Of production warning letter appeasement in the U. S. Just some sense of time scale and whether there's likely to be any Quarterly disruption or near term impact from any of those endeavors. Also, obviously, cash generation is coming relatively strongly and your leverage position is better than I think most would have expected. Can you please just requalify your expectation for the Ampekron acquisition now? Once you've Absorbed acquisition on a full year basis, where would you expect leverage ratios to be for the group for fiscal 2020? Thanks. Thank you, Koth. Yes, it's true. 2019 was a year of a lot of things being implemented, and we're starting to see the results from this. When it comes to the SKU reduction program, that's going according to plan. There's really no news with that. It's a healthy exercise that we're going through and has not been disruptive at all. It's been positive for the business. When it comes to the warning letters in Marowyr and Fairfield, we are in full swing when it comes to remediation. And financials to reiterate what I've said earlier that 2020, we will spend on remediation these two factors as well and simultaneously going through the move of the production from these 2 facilities to our Wayne activities, and those projects are going according to plan as well. On your question on leverage, share then. The applicant acquisition will add just about 0.2 to the leverage, and we expect to be able to work that down again during 2020. Okay. Thank you. And a couple of minors, please. I think Historically, the company in previous viral outbreaks like SARS or H1N1 have benefited Strong demand in ventilators. I just wonder whether you could comment at all whether you're seeing any increasing activity surrounding The coronavirus outbreak, please. And also perhaps, Matthias, you could give us some sense on the PMA for covered stents, which I think you've historically described as being one of the biggest swing factors to revenue growth in 2020. Where are we with this, please? When will we likely get some sort of answer here? Thanks. Thank you. So when it comes to the virus outbreak, we already see increased activity. So our team in China is working intensely with our factories, not only for ventilators, that I would point out, but also our hard line machine and the oxygenators required for this. So we do see a pickup in debottal. So we're really just trying to work as closely as we can with customers to help as many patients as we can. So it's in addition, I guess, to the normal influenza piece that we see this time of the year. On the PMA for Kapusten, nothing has really changed things we talked about this in 2019. Again, we're still in the process of in terms of the dialogue with FDA on moving this forward. No news at this stage. Okay. Thank you. And next question is from Stijn Gustavsson from Nordea. Please go ahead. Your line is now open. Yes. Good morning. Stijn Gustavsson from Nordea. A A few questions. First on could you give us a number of well, How much of the provision you booked related to the U. S. Mesh litigation have you utilized in 2019. That would be helpful. That's my first question. And secondly, When it comes to the FX, you said, if I heard it correctly, It would the hedging effect for 2020 would be negative. Is that correct? And if can you give us Some sort of guidance on what do you expect based on current currency situation and your sort of expected deliveries for 2020. That would be very helpful. Thank you. Efforts. Starting with the first provision regarding mesh. We as we have said before, we don't give any real information on that since we want to keep this not to the start of the process. But The full provision was made for portfolio outcomes and also the legal expenses. So It has only been used so far on connected to the legal expenses. So therefore, minor impacts and changes to that. And when it comes to FX, Oda, as I mentioned, there are minor impacts that are connected to FX hedging. But it looks depending where we stand right now. And of course, you know, partly moves. And when it comes to the explanation, the normal such as an impact. We don't see big impacts year over year given the rates that we have at the moment. So we don't expect figures from that, it looks. Well, does that mean then that the Sort of €400,000,000 uplift this year will be basically 0 Around 0 for 2020. Is that how we should read it? No, you should we We don't give guidance on the transaction part. We will come back and give you more information when we come into quarters going forward on currency development as we do every time. And but when it comes to pure translation, there is minor impact. And then translation, we cannot give you any guidance on this, depends on how it develops. All right. Okay. Thank you. And we have a follow-up question from the line of Enneiro Duggi from Handelsbanken. Please go ahead. Your line is open. Yes. It was just on the first of all, on restructuring costs and that you say that long term, they expect It should be around the SEK 200,000,000. Is it fair when you have such I mean, you have had restructuring costs for a very, very long period as long as I follow you. And now you also expect these not to be 0 in the longer term. Wouldn't it be more fair to see those as a part of the operation cost if they have this kind of repeat nature. Then on the MTR preparations, I might have To what you've said before, but it was my impression that once you have finalized these, you would allocate more resources into innovation from The cost you have within admin and the cost you have had within R and D to prepare for the MTR filing for May this year. Details. Starting with restructuring, I think the reason why we show it is that it can be significant amount in 1 quarter if you make a decision. So it will help you to see what kind of impact that has. And then if you want to decide to have it in or out, that is your decision. And when it comes to EU MBR, Yes, it's an intensive period working on that. And it, of course, takes some of the resources from the R and D organization, but also other parts organization. And when that phases out, some costs will disappear, what we can call external costs. And some costs can, of course, can be more move back to the core R and D, you can call it. There's been some general studies made that The NGL calculations could be something between 300 to 500 basis point of sales in Europe. Is that something you recognize or will you be able to share with us how much of the NGL Corporation's is it 100 basis points? Or How much of new margin has been allocated into this area? Yes. We don't disclose what the exact amount is, but it's significantly lower than the 500 basis points. We've heard the same benchmark figures as well, but we don't see the need for that. It comes from various consultants in the area. And we're doing a lot of this work ourselves, some helpful with external and that's the increase you can see really for us and what would disappear later. But for sure, not $500,000,000 Thank you. And another follow-up from Christoph Giedebert from Carnegie. Please go ahead. Your line is open. Yes. Two things. First, you talked about the currency effects for the full year. I'm sure I could calculate that myself. Set. But the SEK 400,000,000 mentioned, was that only the translation effect? No, it's both, translation and transaction together. Okay. And the transaction part, how much was that? The transaction part was SEK 132,000,000 and translation, SEK 68,000,000. Sorry, how much was translation? 68. And transaction, you said SEK 122,000,000,000? Yes. And total SEK 200,000,000. Okay. Then I mean for the full year, Wasn't it SEK 400,000,000 for the full year? But that, I don't have on top of my mind. That I need to come back to you all. Okay. That's fine. And then finally on the P and A for the covered stance, you said you are in a dialogue with FDA. Could you give some more clarity, because I think you filed that quite a while ago. So has is there any problems that has emerge? Or is the process going as good as you were hoping? And there are no particular problems that have emerged. It's just a very drawn out process. Okay. Thank you. And we have an additional follow-up from the line of Scott I just want to come back to Christophe's question on tax, Please. I think getting its underlying tax rate has been around the 27%, twenty 8 percent region for the last 13, 14 years. So what I'm trying to understand is what has actually changed for a structurally higher And tax rate. And do you expect that then to be coupled with higher cash out as it for So a bit more clarity there, please. That's, I think, needed. Thank you. Yes. Thank you, Scott. Yes, we are having a solid higher tax rate compared to historical very stable 27%. And from a cash out perspective, We still have tax loss carry forwards that we can utilize. So somewhat lower cash out is to be expected. And of course, that is depending on the possibility to utilize them and that can vary a bit over the years. But from a cash out perspective over time, yes, it should be lower. And the reason for the increased tax rate, is that because A lot of your business is coming from now higher tax jurisdictions? Or is it that you've now turned Profitable in the U. S. Market or something? Can you help explain what the structural difference is? Well, it is mainly related to profitability or profit generated in higher tax regimes. That is the very short simple answer. Thank you. Could you give some examples of those regions for us, please, Lars? Well, you have, as I mentioned in the beginning, U. S. Impacting and also some European markets and also that we are growing outside, So say the old European market is also impacting. So that is and the general trend is higher tax rate. If you look at the for the patients, what they are working towards, and that is impacting us as well. Okay. Thank you very much. And that was our final question for today. So I'll hand the call back to the speakers for any closing Please go ahead. Great. Thank you very much. I think I made the summary already before we started the Q and A. So I just I want to thank you for your attention and wish you a good rest of the day. Thank you very much.