AB SKF (publ) (STO:SKF.B)

CMD 2018

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Nov 29, 2018

Thank you. Thank you. Thank you, everybody. I hope you had a good lunch. By sort of looking at your faces and looking at the discussions during the launch, it feels that we have quite a good atmosphere. And I sense that maybe you are also starting to feel the excitement of the rotating shaft and the excitement around the bearing and understanding that it's about the application. It's always about the machine where we are working and that the rotating shaft is the key. And that's why our vision is a world sorry, this is our world of reliable rotation to understand that that's what we're working for. And there's still so much to do. When I started SKF in 1987, I think actually the bearing was more of commodity than it is today. Basically, also now what's coming is the digitalization. And for you who thought about it, we were talking about models of how we can simulate applications in a more and more sophisticated way with digital twins. Victoria will come back and talk a little bit about that. How fantastic that enables us to have quicker and quicker development iterations with our customers and add more and more value around the bearing. I'm going to start by talking a little bit about our strategic priorities. As you know, they're the same. There's no change. And I hope that in this visit today, you've seen how we work with them. We create and capture value, start always at the customer. I think it was clear in the Vindquist test center, one of the ways we're actually doing this. World class manufacturing, we need to be the basis, of course, as a maker of something is that you're best in making the products, both from a cost quality and flexibility point of view and more. That we are innovative, Victoria will come back to that. If there's one thing that can inoculate us from irrelevance, it's innovation. And of course, a company like us, we have to innovate faster than outside of the company, and that is one of our main challenges. And of course, cost competitiveness. The cost competitiveness in what we do is the basis. The rest is sort of the icing on the cake. And with the goal internal goal, I know you as investors and analysts, you have other parameters. But if I'm to say 1, and this is why we chose this one, of course, it must be that we should be able to maximize the cash flow from our business over time. I'll talk a little bit what I think we've actually achieved since we last saw each other. We talked about the automotive turnaround. And if you remember, my then Head of Automotive, he had already printed in the date of 2018 when he was going to reach it, and I thought that was a little bit too cookie. So I asked to cover the page. Do you remember that? Well, now in retrospect, I shouldn't have because actually we have sort of helped by the market, of course, I'm not saying that, but actually we have made a fantastic turnaround in our automotive business. We talked about the balance sheet. We have strengthened our balance sheet. And now, as you know, we've been upgraded, and Christian will talk more about that. We have conquered new markets where previously we were sort of saying, well, we niche ourselves up in the higher up performance levels. Some of the more contested markets, we will sort of not take them on. We have taken them on, and we are doing it. We're growing. I argue that we are growing faster than the market. Some of you have said to me, yes, but you got help from the business climate. That's absolutely clear. But I think we are on a clear growth path, and we've had the best result quarter results in the last few quarters in the company's history. Pricing, there's been a lot of discussion whether the bearing manufacturer has the ability to sort of compensate for inflation, have a pricing power in the marketplace. And if you recall during the last quarter, our quarter results webcasts, this has been always a topic. I think now and I hear it from you, you're starting to understand. And maybe today also looking at the way we work, you understand more and more that this industry is a key component in all industries. And if you differentiate yourself, there's clearly a possibility to be profitable and drive pricing. I think you can see, if you look what we've done, we've focused on costs. Kent will come back to that. And we are doing the factory investments that we said we were going to do. And I like to try to say to you, we try to be a team that do what we say. So when we look forward, well, hopefully, we will be able to continue to do just that. So what is going to happen? Well, we are really focusing on the customer, and we will continue to focus on growing our business. We have strengthened our balance sheet. And of course, now when we have a stronger balance sheet, we can now turn the page on that and start looking forward. We have the money to invest in our factories. We also have money to venture into new interesting fields that are around the rotating shaft, and we also have money to make interesting acquisition when so possible. Christian will talk more about that. And we will continue to lower our cost. So everything that we have done, we have met the goal of all of the targets that we set ourselves in 2,005 except the net working capital. But with the flexibility, with the new logistic setups, with what integrated planning, and Kent will talk more about that, has installed for us in the future, I am sure that we will meet the target. And if you remember, when I came in, we actually made this target a little bit more difficult for ourselves from 'twenty seven to 'twenty five. And during the years to come, this is something that I'm sure we will also deliver on. Now I'm going to talk about, during my 20 minutes that I left here, a little bit more about what I think is one of the biggest changes going forward. And that's part of what digitalization will actually do to our business. We have been working with documented solutions with services as a part of our delivery to be able to differentiate around the rotating shaft for decades. Actually, when I joined SKF in 1987, we had something called trouble free operation, which was basically leveraging services and create a functioning function for the company for the customer. What we can do now with digitalization, of course, is to scale this in a way that we've never been able to do before. So we go from the products and services that have been very good, look at condition monitoring. We are one of the leaders in condition monitoring in the world. We've been selling condition monitoring equipment since the 80s. It's an innumerable amount of companies around the world that have been and are using our equipment to monitor their machines. But of course, in this environment, it was not possible to scale. It was not interconnected. There were islands of perfection around the world. We've been working since the beginning of the company with understanding the application. I think you saw that during today's visit, how this is absolutely crucial to everything we do. And what's going to happen now with the possibility to actually interconnect this with modern connected sensors, new kinds of models of foresight in the varying performance is that we can now start scaling this. And this is going to be a little bit what I will try to convince you that this is now what's going to happen. Sorry. SKF started as a performance company. Vinkqvist, when he started SKF, he went out and he said, I have this new product. It works much better for you. You will save energy. You won't have breakdowns anymore. We invented this self aligning ball bearing instead of the rigid stuff that you're using today. And he was met with a lot of skepticism in the beginning and they were saying, well, what if it doesn't work? Do you have guarantee? You're a start up, etcetera. And he came in and he said, you know what, what if I guarantee the performance by actually installing these and you pay me on the difference of the electricity bill? And suddenly, all the resistance to purchase was gone, and the SKF sort of business just exploded. And of course, so basically, this thing with performance contracts is not new to SKF. We actually started that way. In this particular, it's actually Vynkri is saying, if you use our bearings, your horse won't you won't get a tired horse and it will eat less hay. Now we lost that a little bit. We've always been working like that. We came back into a transactional model. Now, thanks to digitalization, we can now detect, analyze and fix. There's a lot of companies out there who will tell you, well, I can monitor your machines too. I can probably tell you the probability that it will fail within a certain time. We can not only do that, we can tell you with absolute certainty that it will not fail before a certain time as well. And when it does fail, we will give you the foresight. We will work with you to eliminate the problem. Very few companies can actually do this in the machine. And the fee based models that are now coming will actually help us capture value from this. It's going to be good for our customers and it's going to be good for us. It is good for our customer and it is good for us because we're doing it as I speak. And I firmly believe this. I think this is one of those things that are coming, as you know, whoever you talk to is talking the same thing as I do. And there's no contradiction in this. Our customers, our OEM customers are doing this, and we are happy to help them, to help them to integrate our condition monitoring and our knowledge into their machines. You've seen it today when we what we're doing in the Vinkwe center. But in the reality, there will be many business models that will be when I'm relying sort of on the OEM service packages. And there will be times when I cannot have and I don't want to have the OEM service package, and there's SKF. We have a global reach. We have the service offerings. We have partners all over the world. We can do it. And what's happening, if you see the things that we have been sort of the hardware and the software that we've been introducing during the last years, maybe you don't see what this is and understand. This is a connected grease gun. And why is that important? Because, of course, as I have a performance contract, I need to understand that all the points relevant points have been truly greased. And maybe it doesn't merit an online lubrication system. With this, I will know that the operator has actually greased all the points. It will be logged in the system. And if he forgets, I get an alarm. This is the IMX8. You can understand just a few years ago, it was a gigantic box if you wanted to connect a machine. Today, this is completely it's like this. The IMX-one, it's like a lipstick, a little bit bigger. I'll come back to that. Digital platform, when we integrate the understanding of what's happening in the machine with our own service offer through having a central where we can detect, understand and proactively help the customer. Yesterday, we inaugurated our sorry, our REP center here in Germany. Officially, it was already working, but they made me a favor. I could be the one cutting the ribbon. This is now coming all over the world and you say, yes, but everybody have these kind of control centers. Yes, but this is different. This is detecting, analyzing and fixing. This just a few years ago didn't exist. This is one of those fantastic opportunities that digitalization is doing for us. So if you take what we did, and I was part of it, I was happily part of it, and that's why I'm so absolutely convinced that this works. I was doing sorry, we were starting to do sort of the performance contract. The first we started to work in the end of the '80s, and the first contracts was starting to appear, the idea of the contracts in the '90s. And then basically in 2000s, we started to have these IMS contracts in Brazil and other markets. But at that time, it was, of course, very labor intensive, but this is basically what we've been doing since the '80s. We've also had the service levels models. And when we go in and do monitoring and services around it, but the business model is still a transactional business model. And I would argue, you ask me how big is your service offering, I say most of our businesses in industrial business, in some in the industrial aftermarket, in some way or the other is intertwined with services. Otherwise, we wouldn't have the position we have. And now it looks interesting, but now with the new tools, we can give a distributor one of those quick connects, a cell phone connected to our rep center, and they can start differentiating their offers tomorrow. And the future where the whole value chain is interconnected, of course, the health of the machine and the need to change a part or do an intervention is automatically put into the supply chain system. And we're coming to a completely different level, and this is the future. I am actually convinced that this is going to happen. It's happening in most businesses. It's happening with many of our customers are going this way. Many even in the car industry, many of us today, we lease our cars even as private people. And the only thing we do is we put the fuel and we drive them. Everything else is fee based. The only question now, of course, is the race is on. And I argue right now, as a bearing company, we have started the race. And as far as I know, at this point, we're the only one racing. Today, we have about 4 the amount of bearings that are monitored by SKF equipment, I don't know. You can imagine, it's 100 of 1,000,000 throughout the years of condition monitoring equipment that we've been selling. The ones that we are measuring is about 4,000,000 points today, which are interconnected in the way I said to you before, is about 1 SEK 1,500,000 and it's growing fast. And this is now how we're going to measure to ourselves how quickly we are changing the business model because this is what's going to enable us. And here you have some examples of Sweden, Germany, Australia, Germany, Brazil. We are doing this. I'm going to Latin America next week, and we have new centers in all of the major Latin American countries where we are doing this with, of course, an enormous interest by our customer base. I'll name 2 examples to try to illustrate a little bit what this is. This is one of the first contracts that we made. It's Fibria. I was part of that. Actually, I was in Brazil at that time in 2000s. And look how we have been able to develop this business. So if you think that by eliminating problems and helping the customer to get higher production 6 increased our business with Fibria 6x. 6 increased our business with Fibria 6x. And there's a direct link now with the possibility to take this now on a new level that we've been able to capture the last contracts. Is this scalable? Can you take it somewhere else? Yes, Big River Steel, Hot Mill in Arkansas. We have a 5 year contract that John just finalized some months ago where we're doing this. We're doing exactly the same thing. So we're going to help the customer to reduce his costs, increase his output, makes his equipment live longer and work more years at the same time as it's based on a fee arrangement. So we will also be able to get our fair share. And now can you understand, there's no conflict of interest between Big River Steel and SKF anymore. The better we can help Big River Steel reduce their need for repairs and the read for products, the better it will be also for us. And asking the CEO of Big River, basically, he said to John, I believe, why wouldn't we want this? So I argue, if you think that we are not able to capture value through digitalization, now maybe you believe me. And maybe when you've seen what we're doing, that you can understand also how we're going to do this. And there's no real contradiction with actually our customers, if there's compressor or gearboxes or whatever that they have their own systems. I was visiting a customer not long ago in China, and we're now looking on how together we can help them make these kind of contracts as well because sometimes the customer will want the end customer will want the OEM customer doing his or her service offering. Sometimes they will not. And we intend to be both helping our customers and when the opportunity is out there, capture the value. And sometimes in many businesses, after a while, yes, I'm doing it, but I need somebody to take the total control. I can't have they're not big enough as individuals to be in my plant. I'd rather have somebody like Eskeff take the lead, and there we are. So there's no conflict in this. I think these are very good things, and we will still be good partners to our OEMs in their efforts to go forward. We talked about insights, and now it's happening. And right now, this is our insight ready sensor. And we are have a cooperation with Siemens, where our system is actually logging into their overall monitoring system for the train. And right now, we're looking at with the customers that we have sort of signed up or in the verge of that who have shown interest at this point from going from the tests that we are doing today where we have about 1,000 plus sensors in the field, with the 14 customers we're working right now, we have a potential of 30,000 sensors. And when you go with the 30,000 sensors and a fee based sort of arrangement to go from maintenance per kilometer to maintenance when it's truly needed, you can understand that there is both uptime and cost to be had. And thanks to digitalization, this is now possible on a big scale, and we intend to be there. I don't believe that we will at all be the only ones. Don't get me wrong. I think this is going to be many, many players coming into this. And that's okay. I think that's we had one with one of you, I had a discussion and said, well, the market is big and there's a lot of things to do, and I agree with that. But if you want to remember one thing, don't believe that SKF cannot capture value through digitalization. Of course, we can. And we have an absolute clear strategy and implementation plan on how we're going to do it. But we're going to talk about the rest of SKF, and I will answer questions to you later in the question and answer session. So what we're going to focus now is on the financial performance, a little bit more about what we have done and what we can do on the financial side and what we're doing with our ITs. Product development, of course, with Victoria, looking at the nice cool stuff, some of it that's coming. We will talk about ICE Knoll, something that you're interested in, the automotive turnaround and what we're going to do there with Bernd coming up. And then, of course, we're in Zweinfot, the biggest beer bearing manufacturing town in the world. Kent will take us through sort of the ideas around how we're going to drive our manufacturing. And with those words, I leave the floor to you, Christian. Thank you. So let's see. It's on. Good afternoon, everyone. Kristian Johansson, CFO. I think most of you know me by now. When we were out in the factories there, I heard some of you impatiently asking for more numbers. So I hope that I will be able to provide at least some of the answers to your questions, even though I know that you are difficult to satisfy fully. So I would start with this picture. You see it now for the 2nd time. And the reason is simply that we are very proud on how we have worked the last couple of years in order to revitalize this 111 year old business. We have strengthened our regional management. We have strengthened our regional management. You've had John here, you have Martin, you have Erik in order to be a bit faster and more customer focused. M and A side has been very active. We have done some small, but no acquisitions, but mostly, as you know, we have worked on pruning our portfolio, and I'll come back to that. So 8 divestments in the last 3 years. The divestments combined with the overall improved performance and that we have closed our 2 largest defined benefit pension plans in U. S. And Germany has certainly strengthened our financial position significantly. Costs, very important. We have lowered our cost per unit the last years, which has supported then what you've seen 8 quarters in a row with good organic growth. And I would say the last three quarters, so the 3 quarters of 2018 are the 3 best ever quarters of SKF when it comes to the highest sales and the highest ever operating profit. So if we look at the performance versus our financial targets and if you take a 5 year perspective as I have in this, knowing then that 2018 is 9 months or a 12 months rolling value, And we know that the targets are the average to be reached over a business cycle. And if you take organic growth, in fact, if we look at that for the 5 year you have here, it's on average 5. If you take operating results on the 12 months rolling, we are now above SEK 10,000,000,000 for the first time ever in SKF history, and we are above the 12% target level. Cash flow, cash conversion cycle, I think you can confirm that has been good over the period here. Debt Equity Development, certainly positive over the period. Working capital, as Alrik said, I will come back to that also. This is the target we know that. We have improved somewhat slightly, but there is a gap to the target. And we are certainly determined, you can trust on that, that we want to show you gradual improvement on this, and I will touch a little bit on how we see it. Return on capital employed exceeded the 16% target for first time now in quarter 3 on a rolling basis, and that was felt very good, of course, and it was the last time we did that was 2012, so a few years ago. So we feel we are accelerating, and we do it. Someone asked about the pace, should we go faster or are we going too fast? We do it within what we see tight frames. And we do it based on our priorities. I mean, certainly, we have increased our efforts on R and D. We have a fully loaded IT agenda. I will come back to that. And we are we have discussed that a lot in the morning. We are increasing our capital expenditures. And we do that while we keep our fixed costs fixed over the period, we have reduced headcount and we have reduced our debt with more than SEK 11,000,000,000. So it's about accelerating and breaking at the same time. And we spend, I can assure you, regularly discussions in the management team on how we for the time we are in, should not just now, but on a regular basis, how we should handle this balance. So what I have said, we can see also in the numbers, fixed cost over time at fixed exchange rates. This one we have used in the quarterly calls also previously. We are just above where we were now in 2014, but almost flat. Headcount on the total level, we are 300, including agencies and temporaries now for the upturn. We are 300 persons less than we were in 2014. If you look on the low color there, which are the staff, we are more than 2,200 persons less than we were in 2014 by end of the Q3. CapEx from a level of SEK1.8 billion, SEK1.9 billion, we have stepped up. We have guided up now from SEK2.6 billion for this year. And on R and D, we will reach the level of around SEK 2,500,000,000 this year, which is also a step up. And obviously, we do this because we think these are the absolute right priorities for us in order to see to that we have a very strong competitive base for the future. Also added, someone in fact asked over lunch today, sales per employee in fixed currency rates not affected by the weak Swedish krona, also decent development over these years. So IT, IT competence, more than IT technology is certainly high on the agenda in SKF. I think you've got a flavor of that today as well. It's really core for us. And you've heard now from Alrik that our digital journey starts with creating customer value through REP, connecting to the SKF cloud for monitoring of customers' assets, assessing the health of the assets based on sensor information and based on SKF, algorithm, analytics and machine learning. This information can also be used then what we call supply chain 4.0 to predict and forecast the true demand of our products. The connected shop floor or Industry 4.0, you've seen, of course, example of that today by installing automated channels, but also what we do then to improve the productivity on the shop floor in general by installing you didn't see any today, the automated guided vehicles, by having smart manufacturing execution systems or by just providing the operators of devices that improve their productivity and their work. We do a lot of other things in IT as well, ERP. We've talked before quite a bit about our Unite program. So we have a need to replace our ERP for the group, and we do it on and based on SAP. And in order to get efficient and standardized ways of working. And this is continuing, obviously. We are rolling on our Unite program. But we are also integrating acquired units in our common systems, units like Peer, GBC and the bearing business of Kaydon. And one of the effects of that is that it enables us to see the full product offer also of these units across globally in the group. Productivity also in other ways, we are rolling out a new digital workplace for the SKF employees. We are also working with RPA or robotics process automation. For example, you can talk to John in customer service, order handling, repetitive tasks that are manually handled or replaced by a computer with some learning that can do these things in an automated way. E commerce, very important, of course, also, for example, in automotive aftermarket. So I would say this is a fully loaded IT agenda and some were asking why what happened in Q3, Q4 here on IT. You understand maybe a little bit more on what we do here. R and D. We Kent will talk about what we do on industrial footprint. We work with our footprint also on the R and D side. And one sizable undertaking that we are presently doing is to move our testing closer to our customers. So we've had and we do that, of course, to reduce the lead time in the development cycle. And we have had a sizable part of our testing done in Netherlands since many years. The customer base has moved. Other activities are moved. So we are moving now testing partially to China. We are moving it to 3 other European sites of SKF where we do the engineering, actually engineering work. So we come closer with the testing to improve lead times. I should also say that China, we also move and Victoria can talk about that. We're also moving product responsibility engineering wise. So it's not just the manufacturing or an end market base. We truly believe in the abilities there for the future also. So R and D, obviously give us new product offerings, which enables pricing, which enables market share growth. So some examples of newly launched products. It's been quite an intensive period. We have a new bearing for axle boxes for railway that lasts for 1,700,000 kilometers. We have a new range of hubs for agriculture industry. We have sealed spherical roller bearings for mining that has been launched. And we have the, for example, the blue line of bearing housings for food and beverage industry. We are also, as you heard, roll out the REP, and these are some examples of tailored offerings that are launched in Asia in order to solve specific industrial problems, for example, how to handle performance of a horizontal grinding mill in process industry. So moving then to net working capital and how to improve in this area. We are mainly targeting activities on the inventory side. We have activities and responsibilities set that should give us stock value reduction in the range of SEK 2,000,000,000 over time. And I come back to that on the next slide. The targets we have in terms of percentage to sales remain since we met last time. On inventory side, it's 90% to sales. On receivable side, I would say we have improved since we met last. We are at around 17. We would like to reach 16. It is also clear on the responsibilities and in order to reach that. And on payables side, we have a target of 10. We have improved. We are almost on target, but I would say we have still some areas to improve where we see potentials on the indirect material purchasing. So on the inventory side then, I mean, as you know, the stock levels are the results of a lot of activities that happens during over the value chain. And obviously, there is not one quick fix to get this done, at least not if you want to have sustainable results. But we have, and I would say, these areas of activities were presented to you also in a similar way 1.5 years ago. So there is consistency in this, but there is obviously some progress. So just to jump in to comment a few of them, integrated planning, so to have an end to end planning setup. Today, we have a planning our stock plannings that optimize individual stock locations. And we would like to have a planning that optimize globally for the product line across stocking points. And here, we have now worked we have done some IT work, and we have also a rollout plan that is ongoing with the first phase ending in mid-twenty 20. That should give us around SEK 300,000,000 in stock reduction. And then we will roll on with we'll continue with additional phases after that. Manufacturing supplier footprint, region for region, I think you've heard from us before that we aim for region for region supply chain. And obviously, by reducing cross regional shipping of material components, finished products, we will reduce stock. So by moving component manufacturing from Europe to China for Asian needs, reduce stock by supplying from having a supplier base in Eastern Europe instead of in Asia to European plants where it's economically viable, of course, reduce stock. So here we have activities that we expect to improve our inventory levels. Factory flexibility, I think you've seen a lot of what we do on this today. So obviously, lead times in the factory impacts our flexibility. And the less flexibility we have, the more safety stock we need in order to meet a certain service level. And also when it comes to manufacturing frequencies, that the lower flexibility we have sorry, the smaller batches we can run the lower stock levels we have. Debt Equity, you know these are our SEK 11,000,000,000 of debt reduction. It brought us from a peak in early 2015 of 144% to equity down to 60%. And excluding the pension side, we are now at 25. Debt structure, you heard it also from Alrik. We had a rating upgrade from Moody's here just recently, BAA1 based on how this show our stable performance of our improvement of our performance. We are on Fitch, PPP stable. Let's see what they say here going forward. We issued a new 7 year euro €300,000,000 bond in September, extending our maturity profile, as you see it here, at a record low coupon rate of 1.25%, so very pleasing. So capital allocation. We have a dividend policy guiding us to distribute 50% of net income. We are determined, I think you've heard that, assuming that, of course, the business environment allows it to continue to invest on a high level in CapEx and what we've done historically and also to continue to work on innovation. And obviously, also, we have an M and A agenda here. So if I move to that, divestments, I mean, as I said, we have mainly worked the last years very actively on our portfolio. We have concluded a number of divestments. I would say that a large part of these ones were previously part of what was called the specialty business area. I think you remember that. We had a business area called specialty, which in 2014 had SEK 9,000,000,000 of sales. So out of our divestments, SEK 4,000,000,000 were part of Specialty. The remaining 5 are that were standalone units are now determinedly integrated in our organization. So in the industrial or in the automotive business, And here, we talk about beer, again, General Bearing Corporation, the bearing business of the Kedron acquisition and so on. And I mean, with this, we do, as I said, also on IT, we get them fully and also to be able to have their offerings as part of the group's offering globally. So we can capture the remaining parts of the synergies of this. And also, competence wise, these units are adding a lot of good things for us when we really get into working together. And obviously, some cash proceeds also for SEK 2,200,000,000 after tax, and this excludes then the linear activation transaction that not yet disclosed. So looking forward then, I mean, we do have gunpowder to acquire to support our growth with acquisitions if we find the right ones. I mean, areas of interest, obviously, we can strengthen our industrial solutions, bearing seals, power transmission lubrication systems. We have industry segments of where the total solutions are maybe of special interest, wind, EV, railway machine tools. Also, we could increase the speed on REP when it comes to services and digitalized solutions on this side. And regionally, I would say, Asia is of special interest, India, China and Japan. On the automotive side, the biggest opportunities we see around new energy vehicles, so hybrid bearings, bearings and seals for high speed electrical motors as well as monitoring. And I would also say that when it comes to light vehicle combustion engines and transmissions related, we would say that, that will be phased out over time. So yes, I mean, business cycle, we have talked a lot about also during the morning here in the discussions and so on. I mean, we business cycle management is, of course, one of our agendas, and we have to be masters of managing the cycle. And we feel that we have done reasonably well in the upturn when it comes to timing of various actions. And obviously, now we are as we see it as at the peak. And what we are focusing is, as always, pricing. We're talking about inventory levels versus service levels, long versus short term commitments in both ends of the value chain, production flexibility with cost flex and obviously, the portfolio or the toolbox to work with when it comes to flexibility is different in different countries, different sites. Whatever you have there in terms of time lengths, short term weeks, different cost sharing arrangements that can be used when required. And as always, prioritization of cost is key for us. So yes, we have to, as a management team, give clear signals at the right time to the organization in order to work to manage the cycle, but also it's very important that this doesn't take over, that we continue to execute the strategic agenda because that's what's going to bring the profitability for the future. So in summary, I would say that we are at historically best ever performance if you look to the numbers. We are accelerating with the comments on the balance that we have. We are clearly determined to execute the activities that should bring us towards 25% net working capital to sales. We have a balance sheet in good shape. We do have gunpowder for acquisitions if we have the right type of targets for that, if you find them. And peak cycle management when it comes to the business cycle is where we are focusing right now. So with that, I leave the word to Victoria. Comes the lady with the stuff. You always have to bring goodies. It's great to have you here. I'm Victoria Van Camp, and it's my 23rd year in SKF, but it's never been as much fun as now. I'm going to start with showing you a little movie about why this performance thing is so important and what is actually new from the way people used to think about bearings. Anywhere where there is rotation. But you seldom notice bearings unless they fail, causing downtime, production loss and unnecessary costs and damage. Luckily, very few bearings fail because of overloading or fatigue. In fact, 90% of all bearings outlive the machine or equipment in which they're installed. 9.5% of the remaining 10% have to be replaced before the machine's life is over for a number of reasons. Of the remaining bearings, less than 0.2% failed due to what is known as subsurface fatigue, in layman's terms, being overloaded, which is measured in terms of load carrying capacity or seat value. It's very difficult to do anything about these 0.2% short of continuing to engineer even better bearings and focusing on more aspects of bearing performance and life than just the tree value. This is why we, together with our customers, are concentrating on the 9.5% that we can do something about. By focusing more of our competence and knowledge on these, we can get very close to our goal of 0 varying failures. And as impossible as it may sound, machines that in theory could rotate forever. And there are a number of ways we can save these 9.5% that actually translates into 1,000,000, if not 100 of 1,000,000 bearings every year. If the selection is done properly with application and working conditions taken into consideration and if equipment is monitored, we can avoid millions of unnecessary failures. Many industries and customers already do this, but not enough. To choose the right bearing or the right application, taking everything into account, you need in-depth knowledge. This is why we help our customers select bearings in a proper way that meet their design requirements, performance needs and application operating environment. We do this through advanced engineering design tools that are constantly updated. These can be used early in the design process and come with a dedicated expert support from our design and application engineers. SKF bearings are more than just carefully engineered machine parts. They include all of our knowledge, support and a promise, a promise that together, we can reduce the 9.5% of bearing failures that occur as a result of operating conditions. So you can see that there is also there are 90% of all bearings in operation that actually run very nicely, and that is good and great. But that means there is a lot of potential in machine design overall, saving cost, upgrading performance, getting even more output. So that is great news for many of our OEM customers and for us. So we can't stop developing. The topic of today is going to be reliable rotation and how we can provide that because, of course, you see my little devices up here, connectivity is very important, but it is not the only thing that matters. So how do we do this? And how do we do it in environments that look like this? These are real pictures from my colleague Daniel Ortega, who travels the world to he gets to see a lot of dust, I can tell you, and a very little Wi Fi connections as well. This is from South Africa, from So how do we do this reliable rotation? The primary thing is to detect what is happening. And preferably, you want to detect before it even happens. You want to have a crystal ball where you can say, these conditions are so bad that something will break. So that is actually not vibration monitoring. That is intelligence before vibration occurs. But sure, if you can't do that, then you need to be able to detect vibrations. Then you need to be able to solve or fix what is wrong because detecting that something is failing and then after 3 months, it fails again and again. That's not so much good for our customer. It might be good for the bearing supplier, but not for the customer, and that's what we care about. And once you figure out what is wrong, you also need to fix it, as Alrik said, rebuild or even remanufacture the parts, make them better, make the customer even better. And with the digital platform and the connectivity, we now have a possibility that we never had before. In Sven's old days, they had to do it with pen and paper. Today, we have a digital platform where we can learn from everything we do, from everything that is going on at the same time and make our customers even better. Almost in real time, get information, what works, what doesn't work. So this is really the key that we now have, connected devices. But again, that is not enough. We have to use that knowledge to improve further. So you have seen today a lot of bearings, but you haven't seen any really bearings with problems because they're all new. So I just wanted to show you how things happen. And when you run a machine, the curve is something that maintenance engineers work with a lot. It means potential failure or real functional failure, and they distinguish between that. So when you have a defect, it might look like this, like a little bit of frosting on the inner ring of the bearing. And that is hard to detect by vibration monitoring. It is possible to do it if you use the techniques that we are using. But again, what I said is you should actually be able to pick up bad things are on the horizon already before they start becoming like that. But okay, let's say that, that is what happens. If it keeps running, if you don't do anything, it grows. And it grows even further. And this can run, this can run, even this can run. It's starting to probably sound a little bit rattly. You don't need any fancy stuff to hear that. And then it looks like this when it fails. And this here, it fails so bad that the machine actually stops. But and you would think that, well, does this really happen? Yes, it does happen. It happens every day. That is this 9.5%. So when this happen? And you might have a maybe this is a specialty item that is not produced very often or you have to get it sent from Schweinfurt or Gothenburg out to Australia, that might take some time. So your machine is down. So detecting before something start and making sure that we don't even have this kind of situations. That's key. So we work on technology that enables these REP type of business models, rotating equipment performance because what you saw on the previous picture is not performance. The more we can detect, the better we will be at doing this. And the more we learn, the more opportunities we generate. So the number of points connected is very important. Arik mentioned 4,000,000 points and 100 of 1,000,000 probably being detected without even us knowing it, but using our equipment. The €4,000,000 that we monitor and €1,500,000 that are connected to our REP centers. And this is really key because if it's just monitored and not going into this the digital platform, then it's sort of lost. So it's very important for us and for our customers that we have this collection of data into the digital platform. But how do we get there then to this growth of points connected? Well, one thing is for sure, it needs to be easy. It cannot be difficult to connect a device. Some years ago, it could be. People were happy soldering wires and doing difficult stuff. They're not anymore. You're not anymore. You're using your cell phones. They're supposed to work like this. You click and it's, oh, it doesn't work. And so that app is no good if it crashes. So it needs to be really easy to use. And it needs to be part of your daily work process. If you're a maintenance engineer and your screen is not helping you in your work, you're going to leave the phone and you're going to use a piece of paper instead or something else. So it needs to also be seamless. Whatever you do, there should never be a gap where you have to shut something down, go into another system that looks different because you're not going to use it. Every such break is a reason to go and do something else and to not connect that data. And the user experience need to actually be enjoyable. You should not be annoyed because then you're not going to use it. And then of course, to connect both bearings and housings, our products from the very start, you could almost think of that as a Trojan horse, that if you have a big machine, a conveyor belt like I showed you before, what if every of those bearings already was connectable when they were installed? And then you, as a customer, you can actually choose, do I need do I want to connect them? Yes, I can. And then I bring up my very easy, seamless app, and I say, chaka, chaka, chaka, and I connect all my points in that. And it was supplied by SKF from a normal bearing factory. And this is not a dream. It's actually something we're working on. And then with massive amounts of data, we cannot have massive amounts of people sitting and looking at these graphs. We need to have artificial intelligence, both for detection and for doing the analysis and recommending the actions because otherwise, this is not scalable. We're going to have a lot of new colleagues. But we want artificial intelligence colleagues instead. So this is what we are really working on right now. So seamless connections. I think you have probably seen, we showed this, the Quick Collect sensor at the last Capital Market Day, what we are working and there it comes with an app, but it's a little bit clunky. It's still been a box office, it is office hit, but it can be definitely much better. It can be much easier to connect, and it can be seamless to other systems. And that is what we are right now piloting in one region in the world. But it will come because you pilot these things and you see how they work and then you roll them out. So this is 1. And by the way, API, if you don't know what that is, that means standardized or easy communication protocol for apps to talk to a digital platform. It's really what you have all in your phone why apps from different vendors can go into one Apple phone. They use the APIs, automated programming interface. We have devices that are a little bit more complicated. This is called the IMX 8. This is another Sosk, Weltare box office hit because here was a device that we didn't have 2 years ago. Now we have it, and it's really increased the number of connected points. So this, you can connect 8 points. What we are have now developed that will come out before the end of the year is the same box, the same architecture of hardware, but with 16 channels. And then we can have twice as many in 1 in the same box. You can also connect this thing with over 4 gs or WiFi. And if you don't have WiFi, you can store. So this has a memory. It has a simple anomaly detection and filtration in here. So in environments where you have poor connections like railway or those kinds of mines, this is key. And then Next Generation Systems, which is actually the work name of the project. They're not Next Generation anymore because I have one here. That's a lipstick, a little bit bigger than a lipstick. This is the prototype. It's called the IMX-one. And when you saw it last time, it was a picture on one of these product charts. Now it's real because besides being here and I really had to fight to get one. Besides being here, it's also out in the field in Brazil in its first field trial. The IMX-one is a sensor, but it's also an edge computer. So this thing measures vibrations, temperatures, all kinds of interesting things for bearings. But it also does filtration. It does anomaly detection, and it can store a small amount of data and it can send. So now we have the functionality of this plus the sensor functionality is now in one device, and it's at a reasonable cost. Low cost, yes, but we are striving for even better. So with this device, we can now connect machines that are critical. The Quick Collect that you saw before is more for machines that are not critical. If you have really critical machinery, this is the device to use. And it can be put out all over. With all these connected devices, and these are a few of them to increase the number of points, we also need smart gateways because otherwise, customers are going to go crazy with little devices that are supposed to talk to their Wi Fi or their intranet or whatever. That's not possible. So we have built a smart gateway, and this was actually something that didn't exist in the real in the world. You would not believe that. So we could patent this technology. We have filed a patent for the technology. So this one can take all our devices and other people's devices and function as one connection point to the customer's network, if we call it like that. So this is also quite a feat. Let's see. Next. So artificial intelligence, what are we doing there? Well, you saw today, this is actually a picture of a bearing raceway. It's a cylindrical roller bearing of about this size, and we have been really bad to this bearing. We have created a damage in it. And we are running it in highly loaded test. And why are we doing that? Because we want to see how these falls, the problem, the pits form and how they grow because I showed you that graph before where things go and fail very quickly. Well, some damages do fail quickly, but some damages, it can take half a year before they actually And this is really important to understand that just because you have a vibration signal does not mean that you immediately need to stop. You can continue to run. Maybe you can even lower the load a little bit or the speed, and you can continue to run until the next planned maintenance stop. And that is very important. So we are generating our own controlled data. We are doing calculations, simulations at the same time and comparing this with each other. Then we use this data as a training set for detection algorithms. So how does such damage look like? How can you identify what kind of damage it is? And then how does it grow? And here is where the artificial intelligence comes in, where you can start recognizing defects, comparing them from different machines and make predictions about the future and even about conditions where such things will happen, so the crystal ball that I mentioned before. Okay. So that was about the detection part. The solving part, I won't cover today, but you heard about advanced engineering tools and application engineers, and that is really a key thing here. But then rebuild or remanufacture. So yes, bearings do need protection. So you identify some damage, and you could put it the same thing back in again, but don't do that. This is from a cement press in Thailand where dirt has come in, and they run until it looks like this. Fortunately, there are solutions. The sealed spherical roller bearing. And this is the biggest sealed spherical roller bearing in the world. Daniel Okega is standing next to it because he's quite happy with this particular device here. This is also patented, the seal design, the way we have done it. This bearing, it says here that 1 equals 4. And what do we mean by that? Well, this is a picture from a mine in Latin America where they used to have open bearings, so no seals. This is during 12 months. You have a failure, you have a failure, you have a failure and you have another failure, 4 failures during 1 year because dirt comes in. Then SKF replaces this with a sealed spherical roller bearing. So there was a failure because this bearing was open. We replaced it with a sealed. And surprise, surprise, nothing happens. It just keeps running. This is really good. This is rotating equipment performance. So how can we get paid for that? Because you could think, well, this is really bad for your aftermarket. You can sell 4 instead of 1. That's no good. No, well, it could be that way. It's not good for the customer. Fee based models, that is really the trick. The spherical roller bearings, we can provide you with a sealed spherical roller bearing, and we charge you a monthly fee as long as this machine is running. And in this fee, we're also upgrading your spherical roller bearing because the next generation seal, when we need to replace this bearing, we will replace it with something better. So here is really where the monthly fee and the technology improvements that we do hang together. There are really bad we talked about application driven innovation. So the sealed spherical roller bearings are really great, but there are worse environments. This comes from a copper mine in Australia. So this is what goes into those bearings. And even with sealed bearings, normal sealed bearings are not enough. So we have something called the 3 barrier solution for those really bad environments where there is a sealed bearing in the middle and then there is a big chamber for grease and then there is a third seal. That one looks like this, and it's us providing the housing and the bearing. And of course, it's possible to put monitoring also in this. This will be a solution that goes into a conveyor belt, for example. This is ideal for fee based models because this thing works actually up to 6x better. We have got results with that one. Another example from steel and aluminum production in China. The working conditions for these bearings, this is now now we talk about a 4 row CRB. So it's this wide and about this high, that bearing. So a lot of rollers and a lot of steel. But these bearings go into something where you have flooded housing with oil. You have about sometimes even 30% of water in the oil. Water is not good for bearings. It's not good for anything. You get rust and you get something called fretting corrosion that locks the bearing in the housing its housing, and this is really bad. So typically, these bearings, they run for 300 hours, maybe 2,000 if you're lucky, when they should be running 12,000. And this is the normal working environment. So here, what we did here, not using the big test rigs over here, here we took a little bit different approach. We took 50% of the cost of the base bearing out. We actually told you about this one in the last Capital Market Day. So here, we worked on the design and on the roller supply, took 50% of the cost out, but that was it would still be failing all the time. We had to do something else. So we used a very simple test method that SKF developed, where we tested different coatings in this nasty environment. We did our simulations, as you have also heard about, in the test center, and then we put a prototype bearing out into the field. And this means that we can be so fast in product development than we never could do before because testing this in one of those big test rigs, you'd have to do this for 12000 hours or something. And now we can put it out in the field with sensors to make sure that it works, but it does work, so there is no problem. So we put this in, in August 2017, and it's still running. So we are actually at 7,000 something hours now. My colleagues were there last week. Competition, there is one that manages 5,000. But also here is the perfect situation for a fee based model. And you know what else you can do? You can also put a lubrication system with a dewatering device on to take out this water, and we will definitely get to 12000 hours. So this situation is not abnormal. It happens all the time. Remanufacturing. If you can detect issues very early before you have got big, big chunks of steel falling out, like this, here is a bearing that comes out of a mining truck from the drive shafts. It has a little bit of dents. You can see it here and a bit of rust. So it's not in really good condition, but it's not destroyed. So these bearings, by monitoring them, taking them out when you see the very early signs of failure, you can remanufacture them. You provide you polish the raceways. You put in new rollers usually, but rollers are not a problem to keep on stock. You wash and you pack them up again, and they go back into the refurbished axle. This is really it's a cost saver. It's a time saver because remanufacturing can also be done locally or in the same region, and it's certainly an environment saver. Instead of shipping big bearings across the world, you remanufacture them locally. And you can reman a bearing up to 3 times. So use the same bearing several times if you have good monitoring. So extreme environments, there are other things than just dirt. Some environments have not really even oil. In large air conditioning units, that can be used in plants like what you maybe not on the conveyor belts, but inside the plants to cool the air or in big residential buildings. Usually, because of new environmental regulations, these bearings in such a compressor are nowadays lubricated with the actual refrigerant. And that is not so good for bearings. And why is that? So if you take a ball bearing of about this size and you take one of the balls and you kind of enlarge it to the size of the earth. So it's just as a thought exercise. The oil film thickness, if you size that up, would be equivalent to the Shanghai tower. So that's quite thin still, but for bearings, that's what they work in. But if you don't have oil, you instead have lubricant, then you have 20 nanometers of separation between the surfaces, and that would be equivalent to the height of a tree. So we are now in the regions where we have a couple of layers of molecules actually separating the surfaces. And then you can no longer use normal steel bearings because they will weld surfaces will go together. So instead, we use hybrid bearings and hybrid bearings with a special steel in the outer ring. So hybrid bearings means that you use silicon nitride ceramic rolling elements and you use a special polymer cage as well. And then you can run these bearings without oil. And this is something that right now, it's used in compressors. But with environmental regulations in other areas, we will be running machinery on very environmentally friendly lubricants that are not the same as we are using today. And these types of bearings will be able to handle that. So you can run at higher speed. You can run-in tough conditions. They actually weigh a lot less because these weigh less than steel. And Bernd will mention electric vehicles in general. These bearings are also because of the ceramic, they insulate from electric currents passing. So they are ideal to use in electric vehicles. One challenge with these bearings was that there was no design models. You could not for engineers designing those compressors, there were no models for calculating what you could expect if you put in these kinds of bearings. So you would use the ISO life, the standardized life calculation for steel bearings. And then you get a certain result, and it's no difference. The calculation will tell you that a steel bearing and a hybrid bearing are the same, even though in reality, this is not true. But if I'm a design engineer and I have to justify, I have to show it. So we developed a new life model for this combination of materials. And now we can show that we can get 2x the life at least, and my engineers are very they take no risks. So I think in real life, you're actually going to get it more. But we can be safe and say at least twice the life under those conditions. And this is really something to be able to do that calculation. So remember the simulation tools. This is already in our simulation tools. So we learn from the field, and we can use the digital platform to share and reuse this knowledge. And what else can we use it for? We can use it for taking cost out. It wasn't us inventing this heading, everything you need, nothing you don't. It's some other companies use it. But I really like it because that is optimization as it should be done. You design for what's really needed, and you take away what is not needed. Sounds easy, but you really need to know what you're doing. If you put in a too cheap bad steel in a bearing that's highly loaded, it's not going to work. It doesn't cost anything, but it's not going to work. So you have to know what brings value and where can you take cost out. And with data from the field and the data from our application engineers, we can do this. So a couple of examples where we have done this. Here, you see this is really the classical DeepCo ball bearing, where there is a company in Malaysia called Kusan Gloves. They make gloves for medical. And they had major issues with the competitor bearing. And that was definitely probably a low cost competitor. So of course, they wanted us to come with something that was more cost efficient. So we analyzed this application, and we figured out what could be taken out from this bearing. So we came down in costs so that we were lower cost than the low cost competitor, and you can see the difference in performance after 12 months. They have no issues with bearing that cost less. And that you have to be really good to be able to do. The other device I want to show you, this is actually going to be launched in January. It's called the Blue Line. It's a food series of products for food and beverage. This is from a herring production factory in Gothenburg outside Gothenburg, so that's really nasty, salt and all kinds of stuff. Here, we have also done design for what matters and save costs on the rest because here, the seal matters and the cover of the thing matters and the ability to clean the device with high pressure spraying overnight because otherwise, there is mold and allergens and whatever. And you also cannot let your washing detergent come into the bearing because then it rusts. So we have designed a new seal. This is we have I think it is 6 patents we have on this device here, a new seal that has low friction and keeps the detergent out. So it's possible to design when takeout cost, if you think, before you start doing it. So more things you can do with these insights that you gain and well, you can rebuild and remanufacture, but actually, you can also control your process. And what do I mean with that? Well, if we could measure load on the bearing, this would be a process control instrument. And I'll give you one example. When you drill underground in underground mining like up in Elko Abe in Kiruna, Sweden, The drilling machine, yes, they can measure load, but they measure it very far away from the drill point. And when you drill, you don't know what kind of rock exactly will be there. So very often, the load on the drill is much higher than what they thought, and they have to drill slower to be able to detect this. If we could measure the load on the bearings out in the drill head, then we could have something to control the actual machine and the drilling speed. And that's just one example. You can use it to control compressors and compress the refrigerant in a different way. So now we're not talking about sensing for the sake of the bearing only. We are talking about using sensing of load to do other things, to control the process. And load measurement is like the Holy Grail. You can do it with strain gauges, but that's messy and they fall off and it's not easy. SKF have a new technology where we have been partnering or we are partnering with a telecom company. It's a Swedish company called Proximium, part of Hexatronic Group, where they do optical fibers. And optical fibers, there is a technology where you can do grating, so you make little scratches on the fiber. You wrap the fiber around the bearing. And when there is a load on the bearing, the fiber becomes some nanometer longer and the refraction index changes. So you actually can measure the load with this fiber. And it's also a technology that you actually could put in, in a normal bearing factory because what you need to do is a groove on the outside of the bearing and you need to glue this fiber. But there is no electronics in this. And I think when you walked around here today, you might realize that you cannot really work with fine electronics in this environment because to do that, you have to have EMD proof environment. So you cannot have flashes when you touch or people will destroy the electronics. With this one, we can actually do it in normal bearing factories. So this is a development project that we are working on. We have prototypes out in the field right now with Howden and Flowserve. And it's going to be a big thing. So we will come back to you on that. Summarizing then. So our product development aims at providing reliable rotation, of course, at the lowest so that we can create value but also capture the value as it is created as long as it is created and use the insights we gain from every touch point to make us and the customer better all the time. That is really why it's so much fun to work for SKF even after 23 years. Thank you. And I keep these. You can touch them if you want to, but I will hold them. So also welcome from my side here to Schweinfurt. After you heard a lot about Industrial Applications and what we are doing, I'm talking here today to you about Automotive and Aerospace. You see here there are some equipments which combine these two things. There's flying cars and there's a lot of new ideas how to change mobility. This is all visions, but let's see what will happen in the near future. To go a bit into what is Automotive and Aerospace, you see here, if you look a bit from the region side, we are very strong in West Europe. A small part is East Europe. Then in Americas, we have also quite big business, including South America. And then the rest is Asia. So we have a quite good distribution globally where we are in our business. If you see the product portfolio, the biggest part of it is automotive special bearings. That means it's all bearings designed for that application. It's nothing which you can find in the catalog. The same is in the aero bearings. Also, these bearings are special designed bearings for the application. Seals the same. We have also a part you can see here about 25%, where we are using the standard bearings or variants of standard bearings. And these bearings, we are buying from our colleagues from the bearing operations, which Kent will report. So that means the biggest part of Automotive and Aero is all special designed things for the customer application. If you see our market, I think we are here in the number of our competitors in number 4 position for the automotive bearing market. But we are number 1 in the wheel bearing business globally, and we are number 4 in the automotive and number 6 in the automotive steel business. If you see the aero market, then we are by far the number 1 in the aero business, aero bearing business, And that is also, at the moment, a very high growing area, I come to that. So if you see the automotive revenue in is about SEK27 billion, and we are roughly around 10,000 employees worldwide. If you see our footprint globally, you see that it's well distributed, all locations globally in all the areas where the business is active. You see in total, these locations, 11 locations Americas, 15 in Europe and 6 locations in Asia. And that is all only automotive without the industrial factories. And you see 12 of them are from the aerospace side, 9 factories plus 6 vehicle part centers in automotive and 10 factories globally on the Sealed side. The customer base is all the top brands, you can say, on the automotive side, it's the OEM customers plus the Tier 1 customers mainly. And also the same you find on the aero side, also the airplane producers, but also the engine producers here. So if we see what we have done from 2015, we launched a turnaround plan for our Automotive Bearing Business Unit. It started in 2015, ended in 2017. And this is what we have done here. So that means we have worked on a plan, 2 years to get productivity. It was also a heavy headcount reduction involved in that. We changed our manufacturing footprint. We closed some sites and moved things. We developed also new application specific materials for cost reduction and also for aftermarket special products, that is also sometimes needed, but you don't need an OE product in an aftermarket or, let's say, 10 year old vehicle, and you don't want to run not another 300,000 kilometer, maybe 100,000 is also good enough then. So that is also a little bit what we changed the application specific performance. We made a supplier optimization and gained also from the purchasing side here benefits. And we also changed manufacturing technologies for cost reduction in our factories. So it has long term a very positive effect. Let's say, here, you see 'sixteen, 'seventeen, 'eighteen on our operating profit. We have a much more robust and also much higher profit leverage. It was really an excellent development in most of the markets. You know also that we have the U. S. Tariffs coming in with duties, and we were also able to compensate ourselves with that, and we were able to move this negative effect also to the customers. Very clear focus is here the new energy vehicles. I come to that. That is clearly seen that a lot of new vehicles with an electric powertrain or hybrid powertrain are coming into the market. So looking into the future, I think we are focusing here mainly on these 5 key points. We are working with the customer, and that is new product offering especially for the new energy vehicles. So we started at the beginning with Tesla in the U. S. To work with them on their drivetrain, and that was at that time a small thing. Today, we have all the business there, you can say. But there's a lot of new players coming into the market, and the main business is popping up in Asia and there in China. So we are getting a lot of new customer orders, especially for these drivetrains in Asia. The market in Europe, you know, and for sure in Americas is still quite small, But Asia is really giving full speed behind this technology. And we are there, and we are working with all these customers. We also see in the aftermarket that new business models are coming in. So we are working with different business models, including what Christian said before, the e commerce is coming more and more. And we are also prepared to sell our products via e commerce platforms. If you go to the profitability management, we have managed in the last years very much our product portfolio and also worked with the customers on that to manage also on the pricing side, that we get a better profitability situation overall, pricing, cost and mix of the portfolio. So from the innovation side, we are working very strong with the market to understand the new technologies trends and introduce new products. Victoria mentioned for hybrid bearing, for example, that is for sure something which we need for the electric vehicles and is a very powerful new product, which gives us a nice share in that business. Still, I think as long as we have CO2 emissions in the market and targets for that, Our customers are working on how to achieve CO2 targets, how to reach the emission of fuel consumptions. And therefore, our leadership here in friction reduction and also low weight is still very key. We are always trying to be more energy efficient and getting lower weight. The same is today also in the aero market. The new aero engines are much more fuel efficient, and also weight reduction is key for the aero business. On the cost side, Automotive is always under cost pressure. So therefore, this is a permanent process we are driving. And it is also what Victoria mentioned, very important for automotive, design to cost. We are selling a certain function for the vehicle. And what best function what we are delivering should be reliable for the lifetime, which is expected and should have the optimum cost. So that we have really the benefit for the customer. So therefore, we are working here very close also with the customers how to take cost out and getting the benefits. What we do for sure all the time, and that is in Automotive since years for us in our DNA, is improving the competitiveness to continued value added optimization. And we have talked and you have seen here today the Industry 4.0 technology that is also happening in all our automotive channels. So we have to improve our manufacturing in a permanent way, getting higher automation, going even up to autonomous production. And for sure, the same we are doing with our purchasing partners or suppliers, you can say, how do we get cost out of our components we are buying. Also, the efficiency in the organization is a key point. So we have worked on that, organizational efficiency and effectiveness. We have brought the business unit concepts in. I will show that. And we are working on the manufacturing side with the same way, Industry 4.0. And what we also do is we get the whole business process digital. That means we will have no papers anymore. We are working in a digital way end to end, and that makes it also much easier to be leaner and more efficient. And the target is, for sure, we're having this robust operating margin over the full business cycle. That has worked out so far quite well. Coming to this organizational efficiency, we have separated in this year the automotive OEM business from the aftermarket to get a better focus in each area. This is for sure the biggest area we have in Automotive and Aerospace, and here we are focused fully on OEM customers and how we work with them. But this is much different from the aftermarket business, where we are having complete different customers in most cases and also different performance requirements. So therefore, we have this global new business unit now in place and focusing dedicated to the aftermarket. On the Sealing Solutions side and also on the Aerospace side, we have strengthened our focus and also our leadership there. Also in these two areas, we are pushing for a turnaround or profitability improvement plan. So if you see the strategic positioning, we want to be the leading expert in the market, and we want to be the cost competitive supplier to our customers. Also, we're delivering increased value to the customers with a focused leadership. And at the end, we want to see also further productivity profitability improvement in the plans we have. So if you see that now 2018 and beyond, what is the focus? I said it on the automotive side, the new energy vehicles for bearings and seals. We will also launch additional product lines and widen the assortment in the aftermarket. We have quite a good footprint, what I showed before, with our factories, but what we don't have is, in all these locations, the right supply base. And therefore, we are working on a project where localization of our supply base so that we don't need to travel parts around the world, but we have local suppliers or even our existing suppliers locally available to deliver to us. And for sure, further footprint optimization, we have in Seals, U. S. A. And Mexico. And also we have that in Aerospace in North America. But what we see in Aerospace is a bit different at the moment from the automotive world. We have a very strong growth in 2018. We are really on the capacity limits producing, and that will also go on with the ramp up of the new engines, aero engines. And we have installed 4 new Industry 4.0 channels, 2 in Europe, 2 in U. S, and we are just in the ramp up phase of it. Here also, we are focusing on profitability improvements, and I'll come to that. And also, what I said, these 4 channels, which we have installed, are all full automatic Industrial 4.0 standard. So that is, let's say, a bit different from the automotive side here. So innovation drivers, we spoke a bit about that. One is the emissions and CO2 targets for the conventional powertrain with internal combustion engine powertrain, which is ongoing. Minimum for the next 10 years, we see where that keeps going and where weight reduction with new design and materials are key, reducing the weight of the car. Also, the mechanical system efficiency is very important, and that means friction reduction in the first place for us to see how do we make the vehicle more efficient and with lower weight. If we see the new energy vehicles, which are now really coming up, we see the electrification that we need application specific products and solution. We have if you see today, an internal combustion engine, there's a lot of plain bearings in it, and that is for sure not our area where we are focused on. So therefore, our content also in an in this internal combustion engine is quite low. We are more in the gearbox, but not in the engine side. But in an electric vehicle, that looks different, where you can see all the bearings in the electric powertrain are roller bearings, ball and roller bearings. That means we are gaining here in this field quite a lot with our technology. And it could be easily up to 17 bearings in an electric powertrain, if you talk about a 4 wheel drive. So it is good for us. So the hybrid bearing, Victoria mentioned that, is one key technology for us because it is not only that we can do the high speed without problems, you can run really extremely high speed on the electric motor. Today, we are at 18000 to 20000 RPM. It will go further up. Power density is an important thing. So therefore, everybody is developing to downsize the powerful engines, yes? And for us, it was very important to have that, and that is also, let's say, in the vehicles today. But we have made this acquisition of the ceramic powder manufacturing Vesta, which is very key for us to have this base material available. And we are also investing here into ceramic ball and ceramic roller production. So what we want to have is a complete ceramic bearing, rolling element production in house. High speed, low noise of the bearings is key. If you drive an electric vehicle, there is no engine noise, you can say. So therefore, the noise level is very important. At the same time, when you have these high speeds, not so easy. Sensor technology is coming also into our automotive bearings more and more. Why is that? I think you know ABS sensors and these things which we have on wheel ends for managing the brake system. But if you take an autonomous driven car in the future, there is no driver understanding if there is ice on the road, snow on the road, rain or whatever. So we have to measure the friction of the wheel against the street. And that is the best position is the wheel bearing to do that. So therefore, we are also equipping our bearings with sensor technology to manage in the future this part, which today the driver is doing, yes, and then to automize that. So and then there's also a lot of new electric driven accessories coming like electric air conditioning, electric heating, electric cooling pumps for the battery pack and so on. So there's a lot of new products, which also needs bearings and where we are also working on how we support our customers in this area. So for the energy efficiency, it's also a point which we see in the aero engines. There's also CO2 reduction programs. So therefore, we are working also here for complete new bearing technology. And for sure, at the same time, weight is for an airplane key. So therefore, we are trying to make the airframe lighter. So it means we have new bearing technology. We also, what I said, have new manufacturing technology, and we go with new materials into the lightweight in the airframe. There's one problem which we are facing at the moment. I think most of you have for sure heard about it, that is this new worldwide harmonized light vehicle test procedure, WLTP. The old cycle was from the '80s, NEDC. And now since September 2018, all new vehicles, which will be sold to a customer, have to be certified under this test. So that has created some problems. So the test was mandatory to have the certification from 1st September 2018, and it's based on a lot of data, real driving data. So and it's really global. 3 continents, 12 countries have measured and have created these tests as one standard. And it should matching much better the on road conditions to measure real fuel consumption and CO2 data. So what was the effect in Q3 of 2018? I think a lot of vehicles were not certified, mainly in the Volkswagen Group. You can find that here on the Internet page. We were in trouble because you have to measure vehicles, all engine types with all transmission types with different chassis systems and which tire combination you have on the vehicle. So it is not that you certify 1 vehicle and when you have done it, no, you have to certify all variants what you can have. And that is if you see the vehicle configurators were partly stopped, but you could configure that vehicle because there was no certification. So the problem was for the industry that in September, we had here from Volkswagen 42% drop in sales, and also October is still impacted. So we hope that, that is phasing out soon. But it was, for sure, a heavy impact in Q3 and maybe also in Q4. So we will see. If we go on, focus areas. I think on the automotive OEM side, we are focusing clearly on bearings, seals and modules of it. So we are focusing on new energy vehicles, but what we are not doing is we don't move into system supply. We will be not a producer of a traction motor or a drivetrain. We want not to compete with our customers and not with our Tier 1 OEM or Tier 1 customers. And that we see now works quite well because we got a lot of RFQs, especially from these guys for the new drivetrain. This goes up to 1, let's say, new order per month in Asia. That's enormous speed. For sure, not all of them will survive, I believe, but I think it is a huge activity there. In the automotive aftermarket, we are focusing on new product lines and also the broader assortment. We have this global business unit. We want to have the right portfolio of products in each area. We are not all the same. You have different vehicles in different areas. You need different assortments. And we focus also on more chassis parts and less engine parts. And we have also with e commerce, the business directly with the customer possible. In the Aerospace area, what we are seeing there is extremely high sales growth at the moment, very high, full load. We need also here footprint optimization and managing the ramp up with the new Industry 4.0 channels. And what is clearly driving us permanent cost down, pricing management and also with the innovative products to go to the customer. So if we see on the OE side, what do we see? In the next 10 years, I believe we see a heavy change in the drivetrain, and that is not only for cars. It will be also for trucks and buses. So there's a big phase of hybrid or electrification happening and where we can play a major role. The business opportunities for SKF Automotive to gain rolling bearings and seals business by offering ride technology. I said in this vehicle, it's much more SKF than today in a combustion engine vehicle. Strategic direction is to remain in the component and module business and avoiding, let's say, the competition with our OEMs and Tier 1s. What you see here for the growth, we see in the chassis a growth for sure with the volume in the wheel end also, but the biggest growth for us is in powertrain. And that means that is exactly the bearings and ceilings I'm talking about. So if you see the aftermarket, we want to have the best offer and the right assortment for the customers. We are adding new product lines to our portfolio, and we want to grow faster than the market. We want to have an increased focus also on efficiency and cost down, and that is, on one hand, also have a way of working, how we do it, how we manage the logistics, what cost we have to do the business and also where and how we purchase certain components. So that will improve our profitability further here. And what you see very clearly coming is the digitalization of this business, e commerce as one is a key point, but also electronic catalogs, ordering system and so on. So we need to be ready for this big change. And that is also changing in different areas with different speed. It's clear. So on the Aerospace, we have a clear focus on Airframe, reducing the weight of the aircraft, also on the maintenance repair business and also more on helicopters. So the profitability management is connected with that. So the new market offer is the airframe and composite materials. So we will see much more composite parts in the new aircrafts than we have today. There's a project Wing of the Future to make lightweight wings of the aircraft. And for sure, we will focus more also on the MRO market. On the manufacturing side, heavy cost reduction. You see also there with 1 piece flow to manage an Industrial 4.0 production, So the channel is able to produce one bearing and makes his resetting more or less himself. So that is what you have seen here for aero. So cost reduction on the OEM business and also our footprint, we will make some tuning there. And finally, also on the cash side, we want to have a better inventory management. The supply chain has to be changed, and also the material flow needs to be much more simplified. It will give us all financial benefits. So finally, you know Elon Musk. He has dismounted a gearbox here, and he was tweeting that. So and say, okay, after 1,000,000 miles, he's speaking is that the gears look like after testing. So the gearbox is like new. And you know the responsible part in the gearbox that the gears are meshing well is the bearing. And these things are our bearings here. So therefore, we are quite happy to reach 1,000,000 miles with that car without any problem. Thank you, Alan, for that. So key point, SKF Automotive Aerospace is delivering high performance and high quality products and solutions that help customers to gear up for the future. And that is clearly, we want to be the future partner of our customers with bearings and seals and modules. That is our strategy. Okay. Thank you. Let's over my side. Fantastic. Whatever it takes. What a better introduction than that to talk about world class. And I will never say that we are world class in what we do. But the only thing I can start saying is that we will always strive to be world class in SKF bearing operations. And I hope that what you saw today in the factory with what we are doing on world class manufacturing, on our CRBs, on our TRBs, a bit the flashes that we got from the film here. I hope it makes you just excited about bearing manufacturing as I am. I think it's a fantastic area to work in with so much different opportunities and not as dull as I know some people believe. It's one recipe to do something very standardized. And in reality, what I talk about is that bearing manufacturing, it's a wide variety of customer needs and a wide variety on technologies that you have to be able to cope with. And I will talk about that. Alrik, and I think you've seen it as a dream throughout the day already that world class manufacturing and the strive for world class manufacturing is, of course, one of our key strategic priorities. And it's clearly to have world class manufacturing is a prerequisite for SKF to be able to supply our customers with the best products at the right time, at the right quality, at the place where they need it in a very competitive way. This is what the strive for world class manufacturing is all about. And we talk about that in 4 different dimensions. We have to be able to drive a production system. That's the way we work. I'm going to talk a little bit about that. I would also talk a little bit about input cost reduction, but I'll actually spend most of the time today talking about technology step up and about the footprint. The time doesn't allow us to cover all all the topics in detail. Before going into these areas, however, I just try to set the standard here. When someone asks what is the world class technology for cylindrical roller bearings manufacturing? The first answer from my side will always be, it depends. It depends on what the customers need. It depends on if the customer needs 1 piece, if he needs 10 pieces, if he needs 1,000,000 pieces. So we need to adapt our manufacturing recipe to the different customer needs, and I'll come back to that as well. But to make sure that we actually adapt our technology development, our strategy development in these 4 different areas, we always try to start from the customer side. Now we make sure that we have a good customer understanding coming into the plants and to the operations in SKF, and we do it basically mainly through 2 different dimensions. 1 is on this side, where we have very clear road maps from our for all our different product lines, what are the needs of our customers of tomorrow? What are the gaps that our customers see that we might have in our current operation, our current operational performance? What are the opportunities for us to find, as Victoria showed, less costly solutions? Can we compromise on something? Can we take away certain feature for customers that need it? And be more competitive, where are the areas where the customers actually need more performance from You saw examples, and Bernd talked a bit about it, and Victoria talked about it as well. So our recipe on the manufacturing side needs to be building on a very good understanding of customer needs. We get that from these roadmaps, but we also, of course, get it when we work directly with some of our leading customers. And this, we should never forget. It's easy actually for engineering people in a manufacturing environment to think about their vision of world class and forgetting that it always needs to match your customer need. Before I talk about these four areas, I just want to give you a brief flavor of what bearing operations is all about. What you see here is the number of locations that bearing operations cover. And you can clearly see that we cover the world in a very good way. Wherever the customer need is, we have a possibility to a large extent to meet the customer on his local home base or a global home base. We make bearings from a size of 4 millimeters bore diameter to bearings 3, 4 times the height of this room, depending on the application that you're running. And you saw in the test rig, I think you've got some flavor of the different requirements you have in certain application on the bearings than on the others. And we cover really the responsibility for making sure the customer gets the right products. We cover everything from product management back to the purchasing, reduce stakes, manufacturing. And of course, this variation that I talked about with bearings from 4 millimeter board to 10 meters diameter, it's easy to understand that you need a variation on that side. But I also just take a very standard example. This is a 6,205 bearing. And you will say it's a very standardized component. And of course, it's to a large extent the standardized component. This is the bearing that SKF sells directly to the biggest amount of different customers in the world every year, close to 10,000 customers every year buy directly from SKF 6,205. But these close to 10,000 customers, they don't have one demand. They don't buy 1 standard iPhone or 5 different iPhone versions. Just give you a moment to think about how many different variants of 6,205 do we sell in SKF today in a year. Not as many, yes? But we sell more than 300 different variants of 6,205. And of course, for a cost reason, we always try to manage assortment variation because adding assortment adds cost, but we cannot do it at the expense of the customer not getting a functioning bearing solution, the best bearing solution on their side. And when you look at the variation that we have in batch sizes and demand here, we sell everything from 1 to 10 pieces of the 6,205s to other customers buying per order 100,000 or even more. And the reason why I'm talking about this is, of course, the manufacturing recipe and the supply chain recipe that we need to have to meet these different customer demands needs to be different. Similarities, but also differences. And that needs to come back to all the 4 boxes that I mentioned before. And the variation is, of course, not only if it's high volume or low volume, it's also the other prerequisites that we put on the product at the same time, where we need to vary the process to get the product to the customer. The production system, as I mentioned, that is actually the way we make sure that we have a very stable and continuously improving production process inside SKF. And I'm not going to go through the details of this one, but I think the logic around it is very much what Victoria talked about in how we improve for our customers. The production system is the way we improve. Finding the problems or the opportunities to get better, fixing them and then prevent the problems from ever coming back. So we continuously actually face the performance standard on manufacturing, and that's what you basically see here. And to drive that forward, we actually have the production system as a base. We have a best in class setup. Our current known standard to make CRBs in the best way, DDBs in the best way. And of course, we try to lift all our manufacturing plants to that level. And then we have the disruptive. And partly on what you're seeing today, it's actually setting a new standard for manufacturing in our plants. And once that's validated, we will roll it out to all the plants. I also made this red, so I didn't forget it. It was good I saw it. Of course, one very important area that we focus on right now, and also connecting back to what Christian was talking about, is on flow and simplicity. There's a big opportunity in SKF to actually even more work on throughput times, flexibility in manufacturing and get a better supply chain. That's going to help us actually to improve balance sheet performance of net working capital as well. Input cost reduction, I think, Bernd mentioned that already. It's actually working together, cross functionally, even involving our suppliers, even involving our customers to find smarter ways to deliver the performance that the customer needs and help us to take cost out. And here we are running many, many projects every year, but I'm not going to spend too much time on that today. I'll spend a bit more time on manufacturing footprint. And what manufacturing footprint is about, it's again making sure that we have the best supply chain for our customers, delivering the right products in the right place and the right process at the right time. And to do that and to optimize our manufacturing footprint, we have 2 different starting dimensions. 1 is, of course, the product line strategy, where do we see the market needs from tomorrow, what do we see as the market expectation or customer expectations on us. At the same time, we have to combine this with capabilities. Most of the products, we will make local. Sometimes, we have to use economies of scale, and we have to consolidate some manufacturing volumes. And we also, of course, have to look at the overall efficiency that we have in the system. If we have redundancies, if we have duplicate sites and so on, we, of course, have to address that going forward. And you saw the map I showed before on bearing operations and us having more than 50 sites today. Of course, that picture, if we would have built our manufacturing today, would look somewhat different. There are 2 main differences in that footprint is we are today having more capacity in Europe than we would have built for the market. So we are actually continuously and this is happening as we're speaking. We are shifting production volumes from Europe to other regions. The other side is we are having more sites than we would have put in place if we would have built a manufacturing footprint today, And we are also looking at that. And that's what you see down here basically. I cannot share the details with this plan with you, but actually we are mapping all our manufacturing sites, and we have classified them based on these inputs, which factories are the factories that we need to keep and develop, maybe to some extent transform for the future, which are the factories and sites where we see a need actually to close them down. And then we have a number of sites where there is a question mark, But the big chunk of sites are actually either A or C. And then we try to drive our activities to make sure that we get to that stage, following market dynamics, following load situations, so we can do all these transitions on our footprint without damaging any customers. We have talked about that before. I'm just quickly showing you some of the projects running. In Americas, I would say the biggest project that we announced already some time ago was the consolidation of our bearing manufacturing in Hanover, in Flowery Branch and in Baltimore. But out of 3 sites, we are actually making 2 sites. And we can exit the Baltimore site that we acquired together with Kaydon, which is not in a very good shape. We are consolidating the industrial manufacturing, our DGBs, our angular contacts and our spherical roll bearings into Flowere branch, And we're moving the aerospace production into Hanover, giving us a more efficient footprint for the future and, of course, helping us to save cost. In Europe, we have a number of activities going on as well. Recently, we also informed that we're going to consolidate some lubrication footprint, where we have the acquisitions of Vogel and Lincoln, 2 sites quite close to each other, and we have expanded the footprint in Waldorf as well. Here, we are driving down and getting economies of scale in this operation as well. And what's going on all the time, which is not on this list, is that we all like to shift in production volumes from Gothenburg, from France, from Italy, from Germany to our Asia manufacturing to be closer to the customers. In Asia, some people might believe that in Asia, we're just adding capacity or adding sites. Actually, in Asia, we are adding capacity. I can ensure that we are adding a lot of capacity continuously in Asia. But even doing that, we are also consolidating. And one example here that we also communicated some time ago already is what we're doing in Changshan. It's a plant that we acquired with a peer company already 10 years ago. And there, we are now expanding our presence in Changshan. We are moving into a new site, but we are moving the old Changshan site, plus we are moving the Shanghai and the Ningbo sites in China into that same facility, which means that we are creating a big center for spherical or for small TRBs in China. And we are getting a footprint that we think this is the right footprint for us to continue to expand for the future. But as I mentioned, we also add capacity in other areas, and we actually grow our presence in China to make sure that we compete clearly with whoever else is in China here. And also India, of course, India is also a strongly growing market for now. So we are adding capacity into India as well. So to wrap up on the footprint side, we basically follow a plan that looks like this, and it contains the factory names. The footprint activity goes beyond manufacturing. It's as Bernd said before, it was about supplier footprint, it's about engineering capability, it's about customer footprint, and we try to make this whole chain work efficiently. We expand and we adapt the customer base. We continue to consolidate, and we have a strong alignment also what we're doing on technology step up. Of course, these big technology step up activities that we take, they also have an impact on the resources that we need in the different regions. So that actually takes me also into the technology step up discussion here. And when we talk about the world class again, I just want to share a little bit on this picture because I think it's important to understand. When we talk about world class manufacturing needs overall and the world class manufacturing opportunity, Basically everything we do has some commonalities. All production equipments that we have, we need to automate the logistics. We need to make sure that we have a truly robust technology. I actually think that some quite advanced companies, they don't realize that if you want to automize and digitize your factory and make it autonomous, the base technology needs to be extremely robust. You cannot have any disturbances. You don't have anyone to go and fix more topics that you might have in production area, which is quite common. We have decision support improving. We have data collection. You have machine learning coming in. We have IT security as we digitalize. We have the network capacity. And with all that increased traffic that you're going to have in your manufacturing sites, you need to have very stable, fast networks to handle all the data that is actually going to transmit in that manufacturing environment. You need to connect to ERP systems, to product management system. There's a lot of commonalities on the need that every factory has. But then up here, we I just stick to this simplified model of differentiating our manufacturing volume and in weight. High volume, low volume. High weight, low weight. And I'm just going to cover 2 boxes. Some of the additional requirements that you have up here on a low volume, high weight manufacturer is that we need 0 resetting. Resetting is a big loss factor if you don't make it fast, if you don't make sure that you can drive it in a good way. We need automation. We need high flexibility. We need to decouple the processes, as you and Ben talk about on the 1 piece flow. And as you saw also out here in the both the CRB and the TRB manufacturing that it's not connected with any flex link or conveyor system. It's autonomous how you actually take the products to the manufacturing side. We need to make products RAP ready. I would say all the products appear over time needs to be ready for REP. And we need to have traceability down on item level. If I take the other corner of the box, high volume, low weight, manufacturing that actually spits out Baren continuously, 2, 2, 2, that's the base. Here we have need very fast and robust processes. We need automation, but here we also need high speed automation. We need an automation that's capable to keep up with the machining speed. Autonomous production, run complete shifts without anyone being in the production plan. High cost efficiency, here we can start using advanced statistical methods to understand and control our process even better. It's a bit difficult when you run 1 piece at a time to have that advanced statistical method to help you to improve. And we have to drive a continuous flow. So I think this is in our setup how we define the wall clause manufacturing by need, regularly taken it from a customer perspective. And this variation shows the variation on volume and weight. And just to give you a flavor of some of the activities that we are running here. Shop floor mobility, really making sure that we have decision support with the for the operators that he can use online, giving information when there's something happening in the process, when he needs to do something, he can have the instruction, he gets the alarms, he can sign off that these activities have been done, really taking a much, much better control of helping the operators, but also making sure that work gets done according to what we have defined. TDBBs and ACBBs. If you watch the video, you would see that now we have developed a technology for resetting the assembly area for these products down to 1 minute automatic resetting, which is, of course, extremely useful for low volume production. We are working on traceability. And in this case, from our super precision bearing traceability, it's not just tracking process data, it's actually also sharing process data with our customers because when you select a superposition bearing, the bearing designation doesn't tell you everything you need to know to get the right assembly and the right bearing for use in your superposition or in your machine tool equipment. We are talking about DGBP China. And when we talk about what we're doing here on DGBB China, we have moved the whole value chain footprint to China. It's not just bearing manufacturing, it's also the product development, the product engineering, a strong product management locally in China, and they are driving a lot of the development together with Chinese customers on what are the needs that we need to get into and be better here. The World Trust SRB, I think many of you visited Gothenburg last year and saw what we are doing in that field. And I can tell you this has been a learning journey. Now this production is very stable, and we have very good improvement base on getting the output from the Gathenburg. And now we start to have technologies from Gathenburg that we roll out in other areas, and some of them you have seen here already. We also work on machine upgrades. I've told some of you already, some of you saw the signs of LNP or lead chirping machines out in our manufacturing area. That used to be the SKF machine tool manufacturing when we made our own machines. I would still say that for bearings up to a certain dimension, these are still the best machines from a mechanical property point of view, extremely good machines. What we are doing now, we keep those foundations and we upgrade these machines to become smart machines, which means that we can actually move into Industry 4.0 at a much lower cost than if we would buy new machines. So a number of different things here that we put together. And then we are following this road map as well on how are we rolling this out and across all our manufacturing sites and what we measure this in a number of different dimensions. As you see here, world class factory. Here, what we are working on is to launch a project to get one factory that is fully world class, not taking 1 channel, but taking full factory concept, including the surroundings of the channels. But then we also run a number of world class channel projects. We do the legacy channels and legacy machines upgrades. This is the smartifying of the machines that I talked about, and we are digitalizing our equipment continuously. And some of the latest news you manage to see today on the CRB side and on the LSP side. What is not mentioned here, but I think you will get much, much more storytelling about what we are actually doing uniquely in these areas when you were in the factory tours. But we have actually also for Schweinfurt started a new roller project, where we are doing world class product on roller production. And I think some of you might have read the news today that we are also having a world class finished order project going to France, where we actually also for our DDB manufacturing will be able to, in Saint Cyr, handle the flexible part of the assortment in a much more efficient way. And here, we are combining high volume manufacturing for the high volume needs, and the low volume needs will actually leave the flow and get into a separate matching operation. It will help us to be much, much faster responding to customers. Will take cost out in meeting customer needs, and it will help us take inventories up. So if I wrap this up, now I have still have this one as well, because I think this is also extremely important. Of course, the Industry 4.0 and the world class operations. What I've talked about so far actually is what happens within the factory walls. But the true Industry 4.0 will go beyond the factory walls. And you've seen some examples of that already. Christian and Alrik and also Victoria, they have showed the examples how we connect our systems to customer systems. We can connect them to condition monitoring in our customers' operations, getting an indication that now this large size bearing XY is starting to show failure properties in the application. It's time to prepare and make ready that we can supply another new bearing or even a remanufactured bearing to help the customer to and not have any stoppage time. We are integrating, of course, also with our OEM customers. We are integrating with our distributors going forward. But here, we are more piloting those areas. What we are actually already now what we have piloted is actually to take this whole chunk of SKF planning properties. This is what Tristan mentioned before, integrated planning. We don't have someone planning here, someone planning here, someone planning here, someone planning here. With the system transparency that we have today, we have one person sitting and planning all these stocking points and optimizing these stocking points for SKF out to one location. This we do for all production out of our Steyr factory, we do it in France, and we do it in Italy. And as Christian mentioned, we will roll this out to basically all plants, all the standard bearing plants where this makes sense until the mid-twenty 20. And that's going to give us a good working capital improvement at the same time as it's going to give us better customer performance. So then I'll cut to the wrap up from my point of view. Bering operations, I think it's we have very clear business priorities and improvement maps on what is that we need to do in better going forward. And when we design our processes and we design our supply chains, we work from the customer and backwards. We don't push inside out too much. We work on these four priorities: production system, input cost reduction, footprint and technology step up. We have shared plans, and we continue actually to work and drive these plans. And I should always start with this, but this time, I decide I'll end with this. Of course, the key success factor for any of the activities that we have talked about today is to make sure we always have the right people and the right leadership in place. And we spend a lot of time actually making sure that we have the right people here. And it's even more important, I would say, in a business like SKF that is looks very standardized on the surface, but there are very many different customer needs that you need to respond to. And we need to have true entrepreneurial leadership in all levels in our operations. So that was all I had for now. And by that, I think it's time to hand over to Alrik to do the wrap up. Thank you, Kent. Have you ever seen a guy so passionate about manufacturing? This is he is I think, I have absolutely one of the best aids in the world and this is a fantastic team. Well, I hope, before we start Q and A, that you have a feeling now that when we talk about our 4 strategic focus areas that you have understand what is our vision, what we want to achieve, that you have seen that the focus areas we have are relevant and that you have seen that we do not only have the capability and the knowledge to do it, but also the passionate leadership to see through it that we continue to deliver on what we say. And I also hope that you have maybe during this day understood that the rotating shaft or the rotating machine, the bearing in the center is one of the most interesting businesses you can be in. And I hope that you're all sitting and said, why didn't I try to get into SKF when I was young and starting my career? I tell you, I grew up in SKF, and it was a fantastic journey. I was outside. It was very good, but I'm so happy that I am back to be able to be part of this fantastic journey that we are doing, and I know that we will be successful. Thank you very much for listening in. We still have a Q and A section. So please, everybody, come with me or all the presenters come with me up on stage. We do the Q and A. And then for you who are traveling back with us in the bus, we can continue to discuss. We can talk tomorrow. We can talk the next week. Thank you for listening to us. Thank you. Chris, I'll let you know, senior. Klas at Citi. I have two questions on cost inflation. First on the tariff impact, if we see another 25% hit, we're currently looking at 10%. Your analysis within the group, if we start there, how do you see this across end markets next year? When you look at the industrial side of the business compared to automotive, thinking about the pricing power you have in the different segments, will the 25% potential extra hit be more geared to industrial versus automotive? I'll start with that one. So as we communicated in the last call is that we see that we enter 2019 that we are we have caught up in terms of getting price increases for what we have in terms of cost today. And the potential risk that there is that you get for the portion that is still 10,000,000 that you get 25,000,000 when we have looked into that, if you see where that will impact us, it is towards industrial more, it's towards distribution. So we are fairly confident, and we've started to prepare what will be required if that would happen. So we are fairly confident that we will cover that. And it's a small number. It's a small number. And they're meeting today, tomorrow, right? Exactly. They'll fix it. They'll fix it. Okay, all right. I'll quote you. The second one on cost is on R and D, IT, the production disturbances that you had because you were running production very hard. And thinking about next year, obviously, if the demand is slowing, the disturbances should go away. But R and D and IT as a percentage of sales, if you, Christian, could comment a little bit whether this will be an incremental drag in 'nineteen over 'eighteen? First, I would like to answer that we're not sure that demand would slow next year. We said that the next quarter, you've seen our guidance, we stick with that guidance. What we're saying is that instead of just saying, hey, everything will continue forever, we're starting to prepare ourselves for all eventualities. So I mean just to be clear about that. Yes, sure. And the cost side. But then I think what you have seen and heard today and the discussions we have had, I think you see that we are a little bit lean forward here, and we are really pushing some actions we truly believe in. And obviously, you have to chip in something. And we do that in the areas that you mentioned, IT, R and D and obviously, footprints. Kent mentioned this consolidation in China, for example, 3 factories to 1. I think there are some 400 machines that has to be transported and moved and installed in a new place. And obviously, that has take some cost. And these were the type of things that we discussed in the last call. But then when that is done, the cost is also gone. So of course, this comes with activities. So we are confident that we are in control of this. So obviously, if the market is doesn't support it any longer, we will take the actions required. My final one is on pricemix and fee based pricing. You're now being able to sell more total solutions contracts as digitalization is spreading across platforms. Should firm up pricing longer term in an industry that is typically seen as being more cost led? Can you walk through a bit more how the pricing structure works? Is this tied into you being able to offer performance guarantees, longer warranties? Just to understand how much pricing power can change over time. Yes. Well, it's about sharing in the benefits in a more equal way that's happening. I mean, we are now aligning what's good for the customer was also good for SKF. So this is more about it's more about sharing in the actual benefit that we're doing than pure the pricing as such. There's a component of actually lowering the customers' costs and sharing in that lowering in a better way. And of course, you can understand, as this develops and becomes a bigger, bigger part of the industry, it makes our industry much more sort of stable in its revenue streams and also market share becomes more sort of stable. On the other hand, there is another component normally in this, which is a performance sort of bonus, if you understand. 1 is the sort of the fee base on the operations and then there's a bonus. On the bonus, if the factories are loaded and our customers are producing a lot, that is a good extra income that you will get. As of course, if the factories are not loaded, well, it's more it's more difficult to argue that if you're not producing, that you should share with me that extra uptime. So it's sort of you're in a way becoming more of a partner also in the gain and the pain. But that's, of course, the minor part of the positive in this. The positive is we know how to reduce the cost, we know how to give that benefit to our customers, and we also know how we're going to share in this. And this is what you will see going forward. So I argue that this is a good way of becoming more stable in earnings over a cycle. Everyone, thanks for your presentations. And I understand the idea behind the fee based model. I can see how it could work very well. But in terms of your KPIs, what KPIs will you have in the business to try and monitor how it's going? And is there any way you can help us scale it today? I know that's difficult. And what the sort of time frame might be? Is this something that is a slow burn over 20 years? Or is it something that could credibly be a material shift in 3, 4, 5 years? I think in a way, we've already started to give you that. We have now told you how many assets or how many assets we're now and bearings we're now monitoring. And we will start showing how this is growing. And this is a good parameter for you to understand because, of course, it's related to not the amount exact amount of sensors, but as this becomes really a mass thing, it will also show how this is growing in the marketplace. To go in and tell you exactly because already today, I argue that we are doing in a way this. We've been doing this since I joined in 1987, then we called it trouble free operation. It was services, helping the customer improve his performance, but the business model was still completely transactional. So in a way, I think we're already doing this. Now we're transforming the business that we have and the businesses that we don't have for these new models. And I argue you will see this being real. I can't give you more than this at this moment, James. I'm sorry. I'll just follow-up with 1. When you talk about the number of connected bearings, I don't know what the total population is or some sort of is it The total population of bearings. That is Your bearings of new sales or of installed base will be 2 very different numbers. That is people say that there is somewhere between €100,000,000,000,000 bearings installed in the world. It is a very difficult number to look at. But because of your annual delivery of bearings, but your auction is connected today. Yes. This is you will understand there are many, many bearing applications where this is still not as you saw in the movie, but this is not going to be sort of the relevant the percentage of how many. I mean, if you have something in electrical motor, I believe it's going to take a while before we're monitoring all the small electrical motors that sometimes have a good mean time between failure without even looking at them. You have to understand, we're talking about the end users in all kinds of industries, but it's small and big, we're talking. We've been talking about paper mills, steel mills, cement plants. But if you have in a municipality a water sort of treatment plant for a distributor to go out and start measuring the pumps with a quick collect, that's already starting to be able to work with a fee based model with municipality water treatment plant. So you will see this big and small. But of course, as you see the numbers of Connected Bearings increase, you can understand that it's really happening. And as I said, the race is on. It's Andre from Credit Suisse. Thanks for all the disclosure and all the access. I'll try with a couple of questions as well, please. Firstly, on your point of the industry being able to price up, can we just hypothetically think about 2019 as maybe a low growth environment? Are you confident that you'll be able to price up in that? I mean, I think this is interesting, the story. I think we have proven already that there is a possibility to differentiate your offer and that there is a possibility to work with a margin improvement during the last 4 years. And I see nothing in the marketplace during 2019 at this point that will as I see it today, that will change this. Okay. And can I just on manufacturing side, looking at Kent, if we take all those initiatives by geographies where you say this is done, this is being done, this is planned? And you put the numbers behind them that you don't have to tell us, but just kind of trying to aggregate this into what this has yielded as a savings or is yielding a savings in 2018 versus what that can be in 2019 if you implement everything you're doing as planned. Is there any way for us to gauge, a, if it's different and what level is? Maybe I'll start and then if you're not talking about year after year, year by year, but if you take it and as we take the investments decisions for world class or whatever investment and what we have said, we have 4 to 5 years payback on these investments. They are good ones for us, which means, and you heard us that also, how long time it takes to come up to speed and so on. And we say that we are in a learning curve. This is new technology. It takes 1.5, 2 years until we are up to speed, which means that we should get pure cost savings in 3 years, we should get the money back with the time lag that you get. So that's the magnitude we are at. So it should be safe to model it with the cost taken with that 3 to 4 year payback that kind of gradually becomes 3 years rather than 4 years and then next The 5 years, you mean if we get better on quicker on installing it and shorten the lead time to get it, of course, we will go in that direction. But still reality is so that it will take certain time until you get up to speeding at the volumes and get it tuned in. I mean, that's reality. Thank you. And just last on on rep, on connected devices. On that example where you could have sold 4 bearings to replace the failed one or repeated failing one and you switch it to fee based. Is there a do you know what your revenue would be as fee based over that period versus selling forbearings and more importantly, what the profit would be? I know it's very specific, but Yes. I mean, all contracts are different. All negotiations are different. But yes, I mean, it's not so that we go in and make an agreement and a commitment without knowing what we're doing. So yes? So we can you can confirm that the profit from selling it is fee based over those, I can't remember the time scale, 5 years. No, 12 months that was actually. My apologies. Yes, 12 months, then you would generate more profit on that fee based contract than you would have done than selling forbearings. Yes. But it's obvious. It's obvious. We will, of course, share benefits with our customers. There's no this is a little bit like we said in this it's about aligning our interests. When we have a fee based contract, we will do everything to improve our customers' costs and because it's good for us and it's good for the customer. And as these contracts evolve, like you saw the Fibre case, it will be more obvious how the customer also shares in this work over time. So it's also a way of actually sustaining the possibility to improve your customers' costs at the same time as you're having a fair share of that. It's Peter Reilly from Jefferies. Can I ask about ceramic bearings? I mean, you weren't talking about it 5 years ago. Is it a niche business is going to stay niche? Or does it become much bigger? If it becomes much bigger, does it have a really big impact on your manufacturing footprint? Because I imagine almost all your factories today are essentially built for steel bearings. Yes and no. I mean, first answer is, of course, it is. I mean, the reason there are so many benefits that you heard a little bit through Victoria when she was talking about the ceramics bearings, how it prolongs life. You can work with contamination in the bearing without it failing as quick. You can work with minimum lubrication and still having the bearing work. And even contamination in the bearing has a less effect. And if all rolling elements are ceramic, you have an isolation that's complete. No electric current through the bearing. So why have we gone in and we have now a powder? We're gearing up for actually having the full value chain, which we already have, but increasing the full value chain of making rolling elements in SKF is because as we can drive the cost down of this, basically, theoretically, most bearings could benefit from this. So today, when you're looking at this compressor that Victoria talked about, it's a relatively high end and it's a no brainer. But can you imagine if we could drive down the cost of this, how this could be a really common and a fantastic performance improver in most bearings? That's why it's so important. 2nd question, no, why? Because it's a drop in. If when you're loading and assembling the bearing, if you do that with a ceramic or a steel bearing, there's no reengineering of any No, you could even the factories you saw today, it's very difficult to make ceramic rollers in that size, but you could you don't need to put steel rollers in. You could put a ceramic roller in as well. So that is the fact Yes. It's the rolling elements that are ceramics. The rings are still steel rings. And could you hazard a guess about what share of your business could be ceramic in €5,000,000 or €10,000,000 or is it so early that no one's got an idea? Yes. You could say the following. It depends. It's like we said before, you have today, it's a relative we've already reduced the cost of our ceramic bearings during the last 4 years. So we have actually taken a lot of and expanded our business in ceramic bearings. But you can understand, it's on the high end, it's already needed. And the more we can, with engineering, reduce the cost, we can be more competitive in a much, much larger portion of it, and it can basically theoretically be in almost all applications. If we could once in the future reach steel and ceramic rolling elements at the same cost, well, it could benefit all bearings. I don't think I will see that, though, if I I mean, if I'll be absolutely honest with you, but that we will be able to reduce the cost much further from where we are today, we're absolutely convinced. Which brings the sort of final question, what is the cost difference today? It's all over the place. We have some very large rollers. They're really expensive to make, and I would say it's very big difference. So there, you have the real high end. And the more you go down, the differences go, but there's still a significant difference. That's why we are betting on the whole value chain to be able to it's not really the raw materials, it's the process. Thank you. Gael Dubreuil from Deutsche Bank. Two questions, I guess. The first one is on your M and A priorities, the chart you showed with some of the priorities you had by segment, by geographies and so on. So I was a bit curious to understand why in particular you would be interested in getting bigger in power transmission, firstly, and then in Japan too. That's some of the two things I've noted. You know, When it comes to in Japan, SKF has a relatively we have no really we have one manufacturing base for machine spindles. Actually, that's what we're doing. We're doing also lubrication systems. So in today's SKF, we are an importing country to Japan. And of course, as we leverage on our new technologies, there's no reason why we shouldn't be more have a bigger presence in Japan. And depending on what we can find and how it is, I think this is still an opportunity. Japan is still going to be a large market for anybody in rotating shaft for the foreseeable future. When you say power transmission, you mean electric Rail? Yes. Powertrain. Powertrain. So powertrain, of course. I mean, the powertrain, if you look at there's still going to be gearboxes in electrical vehicles probably. There's going to be a sort of a mixed view on it. And when you're looking at certain technologies around that, I mean, it's still interesting for us to be looking at technology to be leading within the electrical powertrains, for instance, going forward. Okay. Can I have a second question completely unrelated, I guess? Given how important it seems to be to get access to more and more data from your customers, So what can you do in reality to accelerate the process so that you can get more access well, stronger access and easier access to some of the data from connected bearings or some of the connected machines of your customers? What I showed you there were some example. Then of course, we can't wait until there is an SKF sensor on every equipment. There are other sensors as well. They may not pick up the same things, but you have enough of them plus process data. You can draw conclusions out of that, too. So from already installed sensor base with some machine learning and artificial intelligence and our knowledge, we can make sense out of data that otherwise would not have been possible to make sense of. So that's one connected little grease container. Those are also information points, even if they don't measure container, those are also information points. Even if they don't measure vibration, they tell you something about the machine that together, again, with process data, will be very valuable. So connected is not always the same as vibration. That's also important to know. And third, we collaborate as we already said last Capital Market Day, we collaborate with process control system companies. Honeywell, but also with Siemens, you heard on Rail, and we collaborate with ABB in some process control systems as well. And that is a way for us to get process data. And what do we give to them? We give data around the rotating shafts, data and analytics that they don't have. So this is another way of connecting more points. And then keep working on these sensors connection points, the handheld devices and make them easy and accessible for people. And then we also have data already. We have been monitoring bearings for a long time when it comes to since 'eighty seven basically. We have data that we can with this new insight, we can still reuse for certain applications to actually teach our algorithms as well. What's the average difference between a non connected bearing and a bearing with connectivity features? In what sense? Well, in terms of the cost for the customer? Well, the good thing is that there is a possibility, as we have shown you today, there are 2, in certain applications, to put the load sensing, for instance, in the roller for large size bearings, etcetera. But if you look at the devices that Victoria has shown you, they're not even on the bearing, right? They're on the housing. So you can measure the vibrations in the rotating shafts without actually having to have a sensorized bearing. And this is the beauty of it. We can retrofit it. You saw the Insight for Rail, for instance. I mean, that's a device that we're already putting on existing trains and then just go. So this is the beauty of it. There's no need to sort of reengineer the application to be able to work in this new way. Hi, it's Andy Wilson from JPMorgan. It's probably just a quick one, but it might be quite a broad answer. In terms of what you see your competitors doing on this similar sort of direction, because this feels like obviously an extension of a theme, but potentially quite an exciting one. How much you've seen? Yes, exactly. Definitely, definitely an exciting one. Come on, man. Yes, what are your competitors doing? And I guess if they're not kind of following you down this path, do you have any sort of insight into why? I think that this is difficult. As you see, many of these devices that we show the IMX-eight, for instance, it's just a development that we've done during the last 4 years. We have the IMX-one coming now, etcetera. I think this is like many talk about digitalization, but we're all starting. I think that we will see everybody jump on this bandwagon very soon, and I think that this is the way forward for everybody. So I have no illusion that we will be alone in this market at all. I'm just saying it's my personal target to be the one who runs the fastest now in this race. Tom Swift from Credit Suisse. I just have a couple of questions. Ben, I think this is for you firstly. In light of kind of the softer picture we've just recently got from Detroit and what we're hearing from some of the German suppliers, how are you thinking about the automotive industry in 2019? And maybe some bit of color on China. And then Christian, if you can just give me some guidance for what you're thinking about net leverage, not as with respect to equity, but net leverage through the cycle, including kind of cyclical peaks in M and A, that will be great. Thank you. Yes. I mean, on M and A and what we say that and what we showed us where we see the opportunities, I think hopefully, we've been clear on today that the agenda we have and the growth that we have as targets, we are going to deliver with the portfolio that we have today. We are and that's what we have presented to you. So I mean M and A is not replacing anything. It's simply hard work on what we have in the portfolio. Then we have some areas where we have an interest. And obviously, if things comes up there, some of the companies that we work on technology together with, for example, we will acquire. That's also for sure. It will not be anything. I would say, you have seen our cash flows, you know it. The free cash flow we generate, we expect to continue to do that. So it's out of the free cash flow. That's what I see when it comes to M and A. So you from the banking side, you can sleep well. So and then maybe before Bernd, on the automotive, we have guided for the Q4 on that, and we don't guide for full year of 'nineteen. You know that. So just as an introduction to it. So please, Ben. Not much to add here. I think we are on the high side. In the automotive business, we see, let's say, maybe a flattening out or maybe even a slightly decline could happen now. And for sure, the automotive companies worldwide are preparing themselves also for the future. You see news every day there what we do. And the competition there also gets tougher. There's new players coming up, especially in the new energy vehicles. And the, let's say, old players have also to prepare themselves for that. So therefore, it is a big change happening. But I don't see that so much for 2019. Yes, Matsper from Exane. I had two questions as well. So the first one was, I know you've said you don't want to speculate on whether there is a downturn coming or not, but let's say we had a modest downturn in Automotive and General Industrial in 2019. So let's say a few, let's say, low single digit top line declines. Where would you be upset if margins in the 2 divisions fell below? So what sort of you talked about flexible cost base. And just trying to come at a different angle for where your downside protection kind of lies. And then the second question was just on you flagged a step up in investment generally. I just wondered whether you could give some color around whether these are sort of investments you see genuine paybacks in a few years' time. It sounds like that with the footprint stuff, but how much is just a sort of a legacy of underinvestment? No. There's no where do you I know you had a spot All of it is upgrading like I mean, there's an assorted crane somewhere that after 20 or 5 years, you need to replace because otherwise, you can't continue to operate for safety reasons and so. But I would say the absolute vast majority of our investments have good payback. So it's not those kind of legacy things that we're talking about. And I think that if you look at what we're trying to do and without answering because I'm not going to answer you, I mean, I'm I will always try to make anybody who's short in SKF to lose money. That's my one of my pre prime objectives. So we will always try to do that. And if you look at SKF, I think honestly, in downturns, we are quite good at reducing costs and sort of keeping our margins on a relatively good level. And we always have a very, very strong cash flow. If you look at SKF's Forte, it's relatively stable margins, relatively stable volumes and very, very strong cash flows. So from my point of view, from a cash flow point of view, we're not a cyclical company. We're actually a very, very stable cash generating company. But I will be always be upset with when anything drops, I will be upset, I'll assure you. Okay. Three questions, please. First, it's Andreas Koski from Nordea. The first one is on your presentation. You mentioned, Alrik, that you have gained market share recently. Could you please elaborate where you're gaining market shares? Yes. I mean, what I'm telling you is, so to speak, that I think we are defending our turf in the marketplace. There are some places where we have increased a lot and there are some places where we have maybe, for one another reason, lost a little bit. This is a very, very vast market with 100 of 1000 of different segments and customers and so forth. So what I want to say by that is to say, I think we're holding our turf well in the marketplace and we're well geared to growth. And with our innovation and the activity package here, I hope that we have convinced you that this is what's going to happen, that we're going to defend our turf and expand our turf. And second question is on your EBIT margin. You're close to 12% now. You have a 12% EBIT margin target over the cycle. So at the peak of the cycle, which we are at right now, you should probably be at 13% or 14%. So from here, we should see in the next upcycle, hopefully, we should see upside to margins either in the Industrial division or in the Automotive division. Where do you see the biggest potential when it comes to margin improvement from where we are this year? Yes. I think you're the growth and the margin equation because you know there's actually an equation there. You can take more competitive business. It gives you a little bit maybe a lower margin for a while, but you are getting very good cash flows and so forth. On the other hand, you differentiate yourself, you get a better capturing of value and you can create both growth in. So of course, in all areas, I see that there's potential, all areas. And it's always going to be around our ability to deliver on this this one. And I hope that we have convinced you by also showing you what we've done so far that we have both the will, the determination and the skills and the resources to actually do it. And the last question is on the cost development. A couple of years ago, you guided or talked about that the general cost inflation will be around SEK150 1,000,000 per quarter or SEK600 1,000,000, SEK 700 1,000,000 per year. Now in the last three quarters, and it like it will be the same in the Q4, we have been at SEK 250,000,000 to SEK 270,000,000 per quarter. So would you say that, that is a new level for the next coming quarters or years? Or do you think it will come down to the SEK150 1,000,000 that you guided for a couple of years ago? Yes. Firstly, I'm not going into mathematics, but the base is not fixed. Since the business is growing, numbers follow. So I'm not saying that we have a 40% increase of inflation. That I don't do. But you also I mean, you know that, that we have when you run on a high level in the cycle and you get extra cost, you get have logistics costs that are more expensive than on an average level. You have a lot of these things. And we guided for the energy price levels that has come up also after the summer and so on. So I cannot say forward where these things will come and depending on where the overall business climate comes. But it is what it is. We have compensated it. We are I think we managed this overall well in terms of taking out costs and compensating all the gains. You have seen look at what Kent has talked about, how digitalization will help us to move and make our operations more efficient all over. Of course, there's fantastic opportunities going forward to be more lean and agile, definitely. Yes. The reason why I'm asking is that going into next year, I expect a slowdown even if you maybe are not doing it. And in Q3, Q4, you will be able to offset the cost inflation through growth. But going into Q1, Q2, you might not grow as much, which will make it more difficult to offset the cost inflation. So that's why In your what's going to happen with the steel prices in your equation? Yes, they will definitely come down, but there is a lag, as I understand it, before it impacts your P and L. But I promise you, we will take the actions required. Thank you. Thanks. Okay. Thank you very much, ladies and gentlemen. Again, you've come all the way to Schweinfurt to be with us for this last night and today. And I tell you, we are extremely grateful and humbled by the fact that you have decided to do this. We hope that it's been worth your while. And we are, of course, through Patrick, where are you? Yes, through Patrick, we're continuously always ready to continue our dialogue about SKF and so forth. And we hope that you have had a good day. Thank you very much. Thank you.

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