Earnings Call: Q1 2021

Apr 22, 2021

Welcome to Grainger's Conference Call for the Q1 of 2021. Here in Stockholm, it's me, Johan Menkel, CEO and beside me, I have our CFO, Oskar Hellstrom. As usual, we will start this presentation with an update of Grainger's performance during the last quarter and highlight some important events. After that, Oskar will take you through the financial results and then we will conclude the presentation with an outlook and a Q and A session. When summarizing the Q1 of 2021, it is clear that this is the best quarter so far for Grahenges. We experienced strong market across all regions and end customer markets during the quarter. This contributed to an all time high sales volume and operating profit. In total, sales volume reached 127,000 tonnes, which represent a 41% growth quarter on last year. Excluding the acquired sales volume from Graingerskornin, the Q1 sales volume was up 14% compared with the same period last year and 16% compared to the sales volume in the Q4 of 2020. The adjusted operating profit increased by 63% to a new record level of SEK 342,000,000, largely driven by the highest sales volume supported by continued good Cost Performance. During the quarter, we have also continued to execute on our growth strategy. We have now finalized the upgrade of our new port facility in North America. And we are taking a decision to expand our casting capacity in Huntington. This to keep up with increasing customer demand. I'm also happy to see that the integration of Graingerskornin progresses according to plan, despite the challenges imposed by COVID-nineteen. I will come back and talk more about this shortly. As I've mentioned several times before, sustainability is a strong driver and enabler of our long term competitiveness and Value Creation. In 2019, we launched a set of sustainability targets and since then, good progress has achieved towards many of these. To reflect the stronger than anticipated development in the sustainability performance as well as the increased interest and expectations from customers and other stakeholders, we are now upgrading selected sustainability target. Graeme's successful growth initiatives have resulted in a larger production footprint and a more diversified product portfolio. And we now see an opportunity to further increase efficiency and transparency by grouping the different business based on their respective characteristics. As a consequence of this, we have established 2 business areas. From now on, we will be presented separately in the external financial reporting, Grainger's EuroAsia and Grainger's Americas. Oskar will come back and describe this in more detail shortly. In addition to the new business areas, we will also as of quarter 1 this year refine the reporting of our performance in our core end customer markets. Automotive representing 44% of our sales volume in quarter 1, HVAC with 21%, Specialty Packaging with 15% and Other Niches with 21% our sales volume in quarter 1. Short term sales to the automotive industry is primarily driven by the number of vehicle produced. Longer term, the increasing share of hybrid electrical vehicles will have a further positive impact on demand for Grainger's products. Sales to the HVAC industry is short term driven by consumer confidence and the general activity within building and construction, whereas increased requirements on energy efficiency of HVAC units is expected to have a further positive impact under demand for grainless products in the longer term. The demand for materials for specialty packaging is relatively stable in its nature Enrijewski, some of the cyclicality and seasonality in the product portfolio. Sales to other niche applications are largely driven by the general economy activity. That said, in this product category, there are also several very interesting applications with very high growth potential that may be new core markets for Graingers in the future. Good examples of these are, for instance, our products for renewable energy, electrical vehicle batteries and green transformers. As I mentioned earlier, all our key markets developed very positively in the Q1. If we start by looking at the geographical dimension, we can see that the demand for Granger's products increased the most in Asia. This is driven by that Asia and in particular, China was the 1st to face COVID-nineteen already in January last year and is consequently the 1st region to also recover. Year over year, the demand for our products increased by 39% in the Asian market. Also, the European and the North a South American market show clear signs of recovery, growing by 12% 8%, respectively, in the quarter. Demand for our automotive products increased by 22% globally compared with last year. This was driven by increased light vehicle production continued restocking activities at customer level. For comparison, IHS estimate that the global light vehicle production increased by 14% in the Q1. The semiconductor shortage currently experienced in the automotive industry did not have a material impact on our sales in the Q1, but we expect it to impact the Q2 to a larger extent. Demand for HVAC product increased by 11% in the 1st quarter, driven by continued increase in HVAC unit production and an increased market share for Grange. Demand for specialty packaging material remains stable on the same level as in previous years, whereas demand for materials to add a niche increased by 60% in the Q1. Those of you who listened to our year end presentation may recall that we, despite COVID-nineteen, did a record year in Americas in 2020 and that quarter 3 was our best quarter so far for our American business. That record is now broken. In quarter 1, we achieved an all time high sales volume of 63,000 tonnes, a record operating profit of SEK 191,000,000 and the highest margin ever with an operating profit of SEK 3,000 per tonne. We established ourselves with own production in North American market in 2016 through the acquisition of Noranda. On the chart to the right, you can see how we have managed to grow and improve the business since. Our Americas team has so far managed to grow the sales volume by 25% and double the margin since the time of the acquisition. This is quite an achievement, and we are highly determined to continue on this road. At the end of March, the upgrade of the 3rd and final rolling mill in Newport was completed and the first coil was successfully rolled on April 20. Commissioning of the mill will take place during the Q2 and commercial volumes of thin gauge foil are expected to start ramp up as of the Q3. This means that both the investments undertaken to increase the ruling capacity in the Newport and Huntington have now been successfully completed. To meet the continuously increasing demand from North American customers, we have, during the Q1, taking a decision to invest USD 33,000,000 to expand our aluminum costing operations in Huntington. When completed within 2 years, this investment will enable us to increase the capacity utilization in our rolling and slitting operations even further. At the end of April, Grahengerskornin will have been part of Grahengerskrupp for 6 months. During these months, we have worked closely with our new Graingers colleagues in Poland to integrate Kornen into Graingers. The integration work progresses according to plan despite the challenges and travel restrictions due to COVID-nineteen. And I'm very pleased with the development I've seen so far. From a financial perspective, Graingerskonen delivers as expected in the Q1 order sales volume of 24,000 tonnes and then adjusted operating profit of SEK 49,000,000. As you know, we are currently investing in a further expansion of the production capacity in Graingerskornin. The expansion project will further strengthen our capabilities and increased annual capacity by 40% to 140,000 tonnes. The investment will enable growth within current niche market such as automotive, hex, but also electrical vehicle application as well as Specialty Packaging. But it will also add new capabilities for rolling and finishing of hard aluminum alloys used, for instance, in automotive structured products. The investment project is expected to be completed by the end of 2022. And we expect a gradual ramp up of production capacity going into 2023. Aluminum has an important role to play in the transition towards the circular and sustainable economy. We work to leverage the unique properties of aluminum to develop sustainable products and solutions, which aim to improve customers' an End Users Sustainability Performance. Our materials are, for example, used in lightweight vehicles, energy efficient buildings and resource efficient packaging, which are all vital applications for the future. Grainger's strategic priority is to offer customers sustainable product and solution, which have 3 important characteristics. One. Our offering should have a long should have a low climate impact and help to reduce climate impacts along the aluminum value chain, for example, in customer's manufacturing process or in the use of the end product. 2, our offering should be designed to maximize the use of recycled material as well as eliminate waste in our own operations. Anfird. Our offerings should also be purchased, manufactured and used in an ethical, responsible and safe way. To enable the development of sustainable products and solutions, we work through a structured sustainability framework to integrate sustainability into our business and value chain. In the beginning of 2019, we launched sustainability targets to 2025. Since then, good progress have been achieved towards many of these. To reflect the strong performance and to meet the increased requirements from our stakeholders, we have now made upgrades to a few of these targets. We have raised the target for having 3rd party verified sustainability information available for our products from 80% to 100%. We have quantified the target for renewable energy from a directional target to a target of 20%. We have increased the target for sourced recycled aluminum from 20% to 30%. This confirms our focus on circularity Resource Efficiency. We have also quantified the reduction target for carbon emission intensity from sourced metal inputs, Scope 3 versus baseline in 2017, so minus 30%. This target complements our existing climate target for own operations and purchased energy scope 1 +2, which is a minus 25% target. Lastly, we have added a target to have all our sites certified in accordance with ASI's sustainability standards. I'm very proud that we have achieved good progress on our sustainability priorities and that we have now further raised our ambition level. With that, I hand over to Oskar for the financials. Thank you, Johan. As Johan mentioned earlier, we have, from the Q1 this year, introduced 2 new business areas, grenges Americas and grenges Eurasia. And the reason for doing this is that we have grown a lot in recent years, and we have now a much larger production footprint and a more diversified product portfolio. In order to improve transparency and increase the efficiency, we see that there is an opportunity to group our different businesses based on the production technology and end customer markets. If we start with Grainings Eurasia, it consists of the 3 rolling mills we have with direct chill casting and hot rolling technology in Finspong, Cornyn and Shanghai. In addition to this, it also includes the newly established Grainger's Powder Metallurgy business in Saint Tawold, France. The largest end customer market for growing in Eurasia is heat exchanger material for the automotive industry, which represents 70 1 percent of the business area sales volume in the Q1 of this year. Continuing with Grayness Americas, It includes 3 U. S. Rolling mills in Huntington, Salisbury and Newport with continuous casting technology. The largest end customer markets for Gray Angus Americas is heat exchanger material for the HVAC industry that represents 42% specialty packaging material, which represents 23% of the sales volume in the Q1 of 2021. Graingers Americas also serves as a distributor of heat exchange material for the automotive industry from Graingers Eurasia on the North and South American market to the Grainger's international business unit. Starting with the Q1 this year, we will provide breakdowns showing the financial performance of these two business areas. And this replaces the earlier used and less precise split of Graenis Group into Automotive and HVAC and other businesses. That said, to a large extent, Graenis Eurasia matches the previous automotive business, whereas growing as Americas is fairly similar to what we referred to as HVAC and other. Worth to point out though is that There is automotive business in Grainger's Americas and non automotive business in Grainger's Eurasia. Since we have internal sales between the business areas, we have to make eliminations when consolidating the group. These are represented together with some unallocated group costs on the row called Other and Eliminations in our financial statements. If we look at the sales volume and margin development, we can see a clear improvement on a year over year as well as on a quarter over quarter basis in the Q1. In terms of the margin, the group's adjusted operating profit per ton increased from SEK2.3000 in Q1 2020 the SEK2,700,000 in Q1 this year. If we look at the two business areas, the Eurasia margin, excluding Gregor's Corner, increased from 1.9% in 2020 to 2.9% in 2021. And the corresponding development for Americas is 2.6% to 3.0%. An important driver behind this improved margins is the improved capacity utilization that is approaching 90% for the group in the quarter. And this is true for both the Americas and the Eurasia businesses. In addition to the higher capacity utilization, the most important drivers behind the positive development our slightly higher average conversion price, improved metal management and continued good cost performance. And this is, of course, a good development in itself. But I would still like to highlight 2 important items that have a significant negative impact when comparing the year over year margin development. First, as you can see on this slide, GrahengisKornen has a below average operating profit per ton of SEK2 1,000 in Q1. This is a good representation of the performance that can currently be expected from Kornin operating in a Grahenges context. As you may recall, we have previously guided for a full year operating profit per ton of SEK 1,900,000 for GrahengisKornen. If we exclude GrahengisKornen, the adjusted operating profit per ton was SEK 2,900,000 for the group in Q1. 2nd, As we also mentioned in our guidance for the Q1, we have a large negative impact on operating profit from unfavorable currency Ben, if we compare with Q1 last year. In total, net impact on changes in foreign exchange rates was negative SEK62 1,000,000 in the quarter, SEK0.6 1,000 per tonne on the margin. If we exclude the impact of corn and of currency to get a better understanding of the underlying performance of the business, the adjusted operating profit per ton would have been SEK 3,500,000 in Q1. And that's an improvement by more than 50% from the situation a year ago, and I think that's quite an achievement by the Graingers team. If we look at the Q1 in more detail, we can see that the sales volume increased by 41% to 100 and 26,700,000 tonnes and the net sales increased by 32% to SEK4 1,000,000,000. As Johan mentioned earlier, this is a new record level for Graenies. Excluding acquisitions, the sales volume increased by 14% and the net sales by 10%. The main reason for the net sales increased less than the sales volume is FX translation. The net impact of changes in foreign exchange rates was negative SEK449 1,000,000 on the net sales compared with the Q1 last year. Looking at the earnings. The adjusted operating profit increased to SEK 342 1,000,000 in Q1, an increase of SEK 132 1,000,000 or 63 percent on prior year. Of this, the acquired Koning business contributes with an operating profit of SEK 49,000,000. Drivers of this positive development are the increased sales volume and capacity utilization, higher slightly higher average conversion price, improved metal management and continued good cost performance. Depreciation increased within total SEK 22,000,000 primarily related to Kornin. As I mentioned earlier, net changes in foreign exchange rates was negative SEK2 1,000,000 in the quarter. Items affecting comparability amounted to, in total, SEK16 1,000,000 in the quarter. This is fully related to the realization of the fair value step up of the remaining part of the inventory that was acquired as a part of the Corning transaction. Including the items affecting comparability, the reported operating profit for the Q1 increased to SEK 326 1,000,000. The profit for the period increased to SEK 239,000,000 and corresponds to earnings per share of SEK2.24 in the first quarter. During the Q1, the net debt increased a close to SEK 400,000,000 to SEK 3,700,000,000. In terms of net debt to adjusted EBITDA, this corresponds to an increase of 2.4 21x to 2.4x. Starting from the left, we can see that the cash flow before financing activities adjusted for the expansion investments and acquisitions was negative SEK 55,000,000 in the first quarter, and this is primarily driven by the increase in working capital of SEK471,000,000. Of this, about SEK 300,000,000 is a consequence of the sequentially increased business activity that we experienced in the Q1. The remaining SEK 170,000,000 is driven by the higher aluminum price that increases the value of our working capital. That said, we're continuing to focus on working capital management, and we ended the quarter with 9 days less working capital than what we carried a year ago. We've also continued to invest in total SEK 195,000,000 in the expansion of the greying business. This SEK64 1,000,000 refers to the final payment of the purchase price for the Getek and the SPAAL acquisitions made in 2020. SEK 14,000,000 is related to the final purchase price adjustment for Kornin and SEK 117,000,000 refers to the ongoing expansion programs in Kornin, Finnsporng and Nieuport. Before leaving this page, I would just briefly like to touch upon how we currently view the capital expenditure for 2021. Those of you who listened at our year end presentation may recall that we at that time guided for a full year CapEx of around SEK800 1,000,000. With the recent decision and to invest US33 $1,000,000 over 2 years in expanding the costing capacity in Huntington, We have to add about SEK 100,000,000 to the 2021 figure. And the new CapEx guidance for full year 2021 is consequently about SEK 900,000,000 at the current FX rates. If we look at the Grayings Americas business area, Johan has already given us some of the most important highlights for the quarter. What we can add here is some more detailed comments on the earnings development. First, the comment I made earlier on the net impact on FX being negative for the group is true for the Americas business as well. SEK 31,000,000 or half of the total FX impact is related to Gray's Americas. With the same FX rates as last year, the Americas operating profit would have been SEK 222,000,000 or SEK 3,500,000 per ton. Worth to mention here also that the favorable market conditions in especially the U. S. Continues to have a positive impact on the pricing side, and we see a slightly higher average conversion price in the Q1. In Eurasia, We saw the largest organic sales increase, 27% year over year in the Q1, and this is driven by 2 things. First, this is the part of our business with the largest sales to automotive applications. And the automotive industry was one of the industries that was most impacted by COVID-nineteen in 2020. And second, China was impacted earlier than most other markets by COVID-nineteen. Tien and this is also where we've seen the most rapid recovery in the Q1. When we add the 24 1,000 tons delivered by Kvaenen. We get a total growth for growing ratio of 89% over prior year. Similar to Americas, we have the same negative SEK 31,000,000 FX impact in Eurasia. And with the same FX rates as last year. The Eurasia adjusted operating profit would have been SEK 224,000,000 or SEK 3,100,000 per ton. So a very strong underlying improvement in the Eurasia business as well in the Q1. With that, I hand over to Johan that will provide an outlook for the Q2 and the summary of the Q1. Thank you, Oskar. Although the COVID-nineteen pandemic continues, some of the uncertainty has cleared and the market demand is currently expected to remain on a healthy level in the coming quarter. For the Q2 of 2021, we currently expect a similar sales volume for Grainger's products as in the Q1. And this goes for all businesses. Graingerskornin is expected to contribute with the sales volume of about 24,000 tonnes in the Q2. As I mentioned earlier, we did not experience any material negative impact on our automotive sales in quarter 1 from the current semiconductor shortage. We do, however, expect this to a large extent in the Q2 and this has been considered in this guidance. That said, a potentially larger impact from the semiconductor shortage poses a downside risk to this outlook. Moreover, the development of foreign exchange rate is expected to have a negative net impact on profitability when comparing the 2nd quarter to the Q1 this year. Looking further ahead, I strongly believe that we will be able to capitalize on the strong platform we have established for Graingers with a strong commitment to sustainability, innovation, digitalization and continuous improvement, Graingers is well positioned to deliver sustainable a profitable growth for the coming years. To conclude the 2021 Q1 report, the Q1 was a record quarter for Graingers with a strong market and the all time high sales volume and operating profit. In total, we delivered a total year over year growth of 44%, of which 14% was organic. During the quarter, we have also continued to execute on our growth strategy. We have finalized the upgrade of our new port facility in America, and we are taking a decision to expand our casting capacity in Huntingdon. The integration of Graingerskornen progresses according to plan. Sustainability is a strong driver and an enabler of our long term competitiveness and value creation. And we have now upgraded several of our sustainability targets and raised our ambition levels further. Following the recent year's successful growth initiatives that have resulted in a larger production footprint and a more diversified product portfolio. We have now divided Graingers into 2 business areas that we will follow separately going forward. Finally looking into the Q2 this year. We expect healthy market conditions and currently anticipate that the sales volume in the Q2, will be similar to the one in the Q1. Thank you. And now we open up for questions. Thank you. And our first question comes from the line of Gustaf Schwerin from Handelsbanken. Please go ahead. Your line is open. Yes. Hello, Johan and Oskar. Congratulations on a strong quarter. I have two questions. I'll take them 1 by 1. First, on your guidance for Q2 and the potential downside risk you're mentioning on the I mean, right now, what is your feeling regarding how big that risk actually is? We're hearing from some other suppliers that the auto industry is not really cutting back too much on purchasing as there are already so much disruptions in the value chain and that they want to be fully ready when these sort of issues are solved. So your visibility right now and when you say that you expect this to more of a significant negative impact in Q2. How much is that actually taking down sort of your volume guidance sequentially? That's my first question. Thanks. Gustaf, it's Oskar here. But I think if we sort of break down our guidance a little bit there For the Q2, what we're saying is I mean, the current market sentiment is really that Q2 is going to look very similar to Q1. Then of course, things can change, but that's at least how it feels right now. If you sort of differentiate a little bit between the different market segments, the market segment with a slightly softer outlook then is really the automotive part. And that's completely true and sort of connected to the semiconductor shortage here. But that said, I think we do see exactly as you say here that Many of our customers have not really cut back orders at this point in time due to this. So it looks quite healthy. But a little bit of softer spot on the automotive part, I would say. But it's very difficult quantified this at this point. I would say a couple of 1,000 tons maybe is the quarter to quarter impact on automotive from this. Okay. But basically, I mean, just to be very clear, when you say that you expect similar volumes sequentially, we should still expect to see a slight decrease on the auto side, which is then offset by the rest of the volumes. I think that's a fair view at this point, yes. Okay. Yes, fair enough. And secondly, on the It is a tonne development, which, of course, is very strong both year on year and sequentially. We know some of the reasons why it's improving. But can you give us a a bit of a feeling for the size of these different in a bridge, like how much is volumes helping, how much is better mix, how much is lower problem for metal management, etcetera. Either if you want to hear that year on year or sequentially. I mean, I can give you an indication of what sort of the most important parts are without sort of giving any exact numbers. But if we look year over year, of course, the absolutely most important thing for us here is really the increased volume that helps the capacity utilization of our plants, of course. So I would say that's the single most important factor. The second most important factor is our continued good sort of cost performance also sort of taking into account the higher volume and leading to a larger fixed cost absorption. Also our variable production cost, that's an area where we perform very well year over year. And after that, I would say the price component and after that, the metal management component. There you have the ranking of the top four ones. And of course, the largest a negative driver, if you look year over year, is really the currency part where we say that, that's negative SEK 62,000,000 then year over year. But volume is most important here. Yes, okay. Great. That's helpful. And then just a last question, sort of now. On the SEK 33,000,000 investment in the U. S, do you want to say anything on sort of profitability I assume it should be at least in the upper range of your return on capital employed target. Yes. I mean, obviously, everything we do is has to fulfill our at least 15% On return on capital employed, of course. This investment is I mean, it's 2 things to this. It's really about sort of cutting down the cost for our value chain. So it's a cost improvement. And the second part is, of course, that even though that we do not have When we now completed the new port expansion, we don't have any sort of capacity investments in rolling mill capacity planned for But we do expect to increase capacity by process improvements and sort of running our mills more efficiently. And in order to sort of match that with casting capacity, we have to invest in casting capacity. That's one of the 2 drivers. And I would say it's fair to assume that the return on this investment is going to be fairly good. Perfect. Thank you very much. Thank you. Our next Question comes from the line of Oskar Lindstrom from Danske Bank. Please go ahead. Your line is now open. Hi, Johan and Oskar. It's Oscar here from Danske Bank. Two questions on my side. You mentioned that the In Americas, the pricing momentum was positive during Q1. Have you seen that momentum Continue into Q2 as well. And what's the magnitude of this momentum? That's my first question. Yes. It's Oskar here. I mean, we have a quite favorable market situation in general in the U. S. And I think we've said it before, and I think it still stands true that for 2021, we expect sort of a price increase in the Americas region by low single digit percentage. And That's what we saw in the Q1. That's what we expect to see in the coming quarters as well. All right. Super. And then on Asia, you mentioned inventory restocking among clients. How large was this impact? And I mean, how long will it last? What was sort of Q1 the peak of restocking in the automotive sector and then it's going to go down Q2, Q3, Q4? What's the profile here. Yes. I mean it's really difficult to say exactly how large the restocking effect, Waspa. I mean, one thing to sort of try to get a little bit of a grip on this is to say that You can always compare, of course, our sales to the light vehicle production. And sort of the discrepancy there is what happens in between Grain and Sandd and the automaker, and that's typically then the destocking or restocking effects. And I think the latest IHS number for Asia is 33% growth in Q1 for auto production. And we grew by 38% in automotive in Asia in the quarter. And of course, that means that there is a 5% or so percentage points of the growth is restocking and 33% is underlying auto production. I mean that's probably ballpark at least what it's sort of about. But given your guidance, we should assume that to continue sort of stay at that level also in Q2. I would say that we probably expect a little bit less of restocking in Asia going into the Q2 because we have had quite some effects of that already. But Sam is likely to continue in the Q2, yes. All right. Thank you. Those were the two questions I had. Thank you. Our next question comes from the line of Max Liss from Kepler Cheuvreux. Please go ahead. Your line is open. Yeah. Hi. Thank you and congratulations from me as well Very solid numbers. I just wanted to come back to the profit per ton there. I guess you indicate volumes will be Similar in the Q2 and then again, automotive volumes may be a bit softer, I mean, meaning a softer mix as well. But do you still expect the profit per tonne to be sort of sustainable into the second quarter as well? I think it's a good question, Vermaaten. And I think if you look at sort of the outlook here. We say, okay, a little bit softer automotive. And we know that automotive then is quite a large part of the business in the Eurasia region. And if we look at the margins then that we have in Q1, Eurasia, excluding Kornin and Grain is Americas, which is then less of automotive, is fairly similar. So it's not given sort of that you will have necessarily a large negative mix effect on that. But what we can say, however, on the profit per ton and what Johan also mentioned in the outlook here is that Even though currencies are relatively stable, I would say, at this point in time compared to what we've seen before, we do still expect negative quarter to quarter FX effects here. And that's due to that we, in the Q1, had the benefit of realized hedges that was at sort of more favorable taken at more favorable currency levels than the hedges that we will realize in the Q2. And of course, everything else the same. This will have a slight negative impact on the profit per ton in the Q2 compared to the Q1. Okay. But it sounds quite stable anyway. Then again, I guess, in automotive as well, you see this Changeover to where I'll just changeover anyway to more electrified vehicles. Do you see any sort of impact on that already? Or is it more from low levels. Johan here, good question. No, but we have been extremely active and there is more activities from the our customers and also from the OEM when it comes to validating suppliers for the new platforms, the MEB or PPE or Daimler's MMA. So and we are already in we have been awarded some business, but I think it's also important to say that most of the start up production for the majority of the volumes will the in 2022 or later actually. So we will see that impact coming later. But I think we have a very good position here to actually to take part of this growth and not at least what I also mentioned before when it comes to the sustainability targets here. We have as we presented this morning here upgrade our targets. And I would say that Graingers is quite of a leader here when it comes to in our industry to basically have very high ambition and also high transparency, which is of course a great value because if you see like BMW, we are requiring now indirectly that the supplier and the supplier's suppliers needs to report footprint and the same goes for Audi Enda Eimler. So you really you see this kind of a request now coming from the OEMs and there Grengis has worked quite a long time to establish a good framework to respond to these questions and requests. And this is mainly in the battery production phase. You will supply the battery producer, which also supply BMW, Toksara. This goes for the new platform. I mean, if you see a car, I mean, the 2nd largest CO2 footprint from a production footprint is actually aluminum after steel. So I mean this goes not only to the battery, it goes to the whole car, of course. I mean it will be important across all parts of the yes, of the product that we are producing for even for combustion engines, of course. Because I mean in the Corning operation, we can now also started to deliver structural parts for cars. Sure. Yes. And well, could you give some sort of outlook to look in 5 years' time, will it be sort of well, how much more volumes do you expect to see in these segments? Yeah. I mean, just looking into our 2 main markets then or segments for the automotive industry, one is the heat exchanger material for the yeah, combustion engines and also the EVs. We see that there will be an increase. And today, the market is around 800 1,000 tons and it's expected to be around 1,100,000 tons going forward. And if you look into the battery producers in addition to this, it's also expected to in a 5 years time be a similar sized market around 1,000,000 ton actually. And that consists of 4 main product groups, battery foil, casing, cooling plates. And I mean these are all product group that we see of course a potential future for Grainger. So we in a way we have a a very large, I know, upcoming new market segment for Grainger to work on. I think just I find that the early part of Johan's comments then that we say that the potential for the heat exchanger material to the automotive industry is around 1,000,000 tons. That's also The 2025 perspective that you mentioned there, yes. And it's almost doubling on the market size. Yes. If you include the battery producers and the potential for us to be part of that as well. That's correct. Okay. And finally, I mean, aluminum prices have come up quite a bit. And do you see any sort of impact on demand there that Customers tend to be a bit more cautious at these levels or try to use other materials or something like that. I don't we don't see that. And I mean the price increase is the same for other materials as well and even higher for some other materials. And I mean a lot of this the advantages aluminum in terms of lightweight and will not I mean be yeah. And we don't see an actual risk for substitutes here into other materials. Okay. Thank you very much. Thank you. And we have a follow-up question from the line of Christophe Thoreen. Please go ahead. Your line is now open. Thank you. Just a follow-up on the electric vehicles. I know you said previously that you expect to keep your market share for 8 Accentures following the increased penetration rates we will see. So far, when you say you're gaining some contracts on new platforms. How is that looking so far between OEMs? I mean, can you see that you are protecting your market share? Or is that very dependent on where we are in terms of model launches from the different OEMs. We it's quite early days to give an exact figure and if we're following the 20% market share. But we have reason to believe that we can, of course, be as has a large I mean, has the same kind of market chair for this vehicle type test we have for the combustion engine types. And as I said, we've been awarded some programs and we are in a discussion with others. So but of course, once again, just to say that we will see the volume effect, the main volume effect coming in 2022 and later. Okay. Thank you. Thank you. And as we have no more questions registered, I now hand back to our speakers for any closing comments. Okay, there's no more question then. I would like to conclude the session. Thank you everyone for participating on today's call. As usual, received good and interesting questions. And we look forward to our next call on 16th July when we'll present our Q2 report for 20 21. Thank you, and goodbye, everyone.