Earnings Call: Q4 2019

Feb 12, 2020

Okay. Good day, and welcome, everyone, for today's financial year with Teleborg. I'd also like to welcome everyone participating via the webcast and telephone conference. Moderator today is Teper Svera. He will be back later and lead the Q and A session. But I now hand over to the CEO of Teleborg, Mr. Pietenizo. Please go ahead. Thank you. Welcome all of you to our year end report, more focused on Q4 for 2019. As usual, I'll review the presentation. I will kick off giving some overall flavor for the quarter And some comments on our new business areas and also then comment on the special unit that we created here Beginning of December, business is under development. And then I will be supported by Ulfaar, who is our CFO, who will guide you through the figures and then we Summing up with Q and A session and also facilitated by Douglas. So at the end of the point, starting off with the highlights, Business areas, financial, another summary and then some comments on the running quarter as well and then some Q and A. So starting with the highlights, it's stable despite continuous challenges. And actually, 2 of our three Business area is actually performing very well, and the challenge is really is mainly in one of the areas in wheel systems. I will comment on that a little bit more when I comment on that one. But Overall, quite satisfied with the results. I mean, sales is up by 8%, of course, supported by Structural growth was on 4%, the currency is on 4% and then flattish or either actually flat organic sales Compared to last year, but the mix behind that, we also will comment a little bit on. EBIT at Just north of the business with Swedish owners, actually the highest EBIT in Swedish owners that we ever had ever have had in the quarter 4 For us, but also here, of course, the quarter will be with the change rates. Margin down a little bit, 0.5 percentage points Compared to a year ago, but nevertheless, on healthy levels for us in quarter 4. So it's really in line with guidance and no surprises on that line for those of you who has been following us For some time. Cash flow, very good cash flow. It's actually the highest cash flow we have ever had, the highest operational We've been managing our capital very well and also CapEx is under control, all in all delivering a very good capital, which is then of course also supporting Our balance sheet in many ways. Cash conversion at 90%, which is standard as we're getting up to healthy levels again There's some focus on the cash throughout the year as businesses in general has becoming more challenging in some areas. And already, which I mentioned, we are, of course, launching a new organizational structure here on 1st January. And this report, as you have already seen, is kind of represented In the new format, talking about the sales, I mean, we see some differences here. As you we have in But no real drama on that one, to be honest. We know where it's coming from, and we understand The situation here, I mean, Western Europe heavily influenced, of course, by agro sales being down a lot. North America more in general declined, but Also minor extent also impacted by the wheel systems negative organic growth. As you know, wheel systems major exposure is We see it separating that a little bit to keep focus on that one, positive or 0. And then South America, very good, but that's a very small part So that is mainly related to oil and gas that is coming back, so we have some extra invoicing down there. And then, of course, it's kicking in 2 very, very high figures. Asia actually performing very well for us. I mean, surprisingly good, driven by a very good organic sales in the quarter, both in China and India, Which is a little bit surprised, I shouldn't say. But actually, behind this 2% is actually some very good sales in China And in India, while we are suffering on some project business as in Australia, which making the comparisons a little bit strange, Very well. Very good development overall. At least this quarter, I get back in comment on that of China and once again, for India as well, Performing well about 10% organic growth in individual countries. Business areas, starting with Asset Solutions, which is somewhat new. Last year, we shifted around a little bit here, and this is the new setup. And that is actually, if you look for the full year, Industrial Solutions, that is With the new organization, if you go back, if you look at the restated figures, it's actually the best year ever for Industrial Solutions in terms of margin In the new structure, then of course, we carved out some difficult areas. But nevertheless, what we now have in Industrial Solutions is the best year ever This new organization. Developing well in the quarter as the sales is up by 11%, Driven by slightly growth and slim positive organic sales, profit up even more and then also margin expansion coming Primarily actually from the strong bounce back in our Marine and Port Solutions. We say Marine is then what we call mainly related to oil and gas In these marine houses, which is delivering very well and also all the kind of marine equipment and marine infrastructure business Also delivering very good results. That is kind of the primary driver for this improvement, this improvement primarily in this Moving infrastructure activity. Lower sales, light lower sales in the industry and also automotive, actually quite stable here, Even though we have, let's say, exposed to a tougher environment in general in automotive, as you know, but in this business and the positions we have here, With the automotive, we are actually developing very well in relation to the market. And that is coming primarily from that we are kind of Extending our scope in certain areas, actually, we're selling more to each application, more than actually sure volume growth. Geographically, we say negative in Europe overall, while that is North America and rather positive in Asia. It's a mix. It's difficult really to draw some long term conclusions, but this is kind of some railway sales, some project related The project related in that way, but more so some individual sales, which is pushing this in various directions. But no drama here. It's a little bit Relatively stable overall, boiling down to 1% positive. Already touched EBITDA margin up, Primarily related to this higher Marine Infrastructure business, which is then performing substantially better than a year ago, While the other activities, actually, there's a mixed bag, which is all likely to be in Industrial Solutions. We've always been a mixed bag, but here, again, this mixed bag is moving in the right direction, and that Why we see an improvement on the overall performance. CE Solutions, very solid quarter. Regarding sales, 3%, which I have to say was slightly better than we anticipated here when We were looking at this on 6 months ago, but I mean, we saw the performance throughout the quarter. And on top of that, also structured growth coming from a few acquisitions In North America, one medical acquisition, which we did is Silpro beginning of the year, and then also we have another one is Tri Tech To be some pro form a, just to comment on that. General Industry, general, I mean, this is, as you know, very wide exposure in a lot of different, But in this quarter, actually, we're going to bounce back in China, which is coming from a fairly soft start of the year In China, so it's a bit strange also. You should be careful to draw too much conclusions out of this, but nevertheless, this is the kind of the fact for this quarter. Automotive, surprisingly good here, primarily driven, let's just say, off the market base. As you know, we have an off the market business here primarily related To break applications for cars, and that business has been performing a lot better than we actually do. We believe that it's part that we have new product launches and part of it also that we managed to, say, pay off the market a little bit better than before. So that is something also which we are Strong benefits from both in terms of sales, but also actually a positive margin impact coming from that development as well. Aerospace, Even though all of us aware this Boeing communication, all of that, it is slowly impacting us in a negative way, but overall, aerospace is still developing very well. And even though the growth rates in this quarter is slightly lower than at the beginning of the year, but we still talk about 10% plus again the growth in that segment. EBIT up primarily due to acquisitions and cost control, but also, as we said before, the acquisition is actually coming in with a lower margin than our raw margins. So even though they're benefiting in absolute EBITDA, we have seen a negative push in the margin from the acquisitions. That is also something that needs to be seen in Ist, but that is the way we want it to be and the way we Needed to be in Tritik Steel is very interesting. It's actually an acquisition doing a very hard plastic steel, if I say like that. So some PTFE Steel, Which is then a kind of growing steel segment that we're lacking capacity for that. That segment of this acquisition is both good in the terms that we get in And entering into some new application areas we can offer our complete solutions. But on top of that is also offering us some capacity in some Segments were actually lacking capacity at the moment, so this is a kind of double benefit from this acquisition. Very happy. Even though it's not the major version, though, we're not going to do any major acquisitions here. If I remember correctly, it's on €30,000,000 annual sales on this one, and that is kind of acquisitions that we need to do, but that is providing a few percentage points of structural growth in this area. And that is the way we would like to continue to add this kind of 5% to 10% structural growth here We still have the agenda to try to find supplemental acquisitions in this business. And by which business Agriculture here, you see on the air, when you see Aker, when you see Kees and Holland, I mean, they are the biggest factors that combines, as they usually say. I mean, they are I did the release report last week, and we have not analyzed any details, but they are talking about the downturn in that of some 15% to 20% Of global productions, of course, in that perspective, this has been quite good. So we are gaining market share even with this kind of very negative Again, we're actually gaining market share in the EV market. Now in these figures, we had a slight upturn We can handle construction, similar development actually driven by this global uncertainty and all of that, given by forklift, you know, investing in this And myself at the moment. And also on top of this, which is then hurting our margin quite a lot actually is that we've also been Doing kind of underproduction in order to adapt to this kind of extended cost Which is then providing more comfort as we go forward here because we don't go into the, let's say, this year with actually too high To high inventory, we can still cut some inventory. We're still going for improving the working capital somewhat, but of course, we're doing that in a more controlled way Going forward, business under development, I mean, that is also a major, percentage wise, major improvement. All of this improvement is basically coming from Osor kicking back, I mean, very strong organic growth in this area. And then we have Kind of good, relatively good drop through. It will get better, hopefully, but relatively good drop through as well, which is then improving the profit, which is kind of €6,000,000, €7,000,000 year on year. Rest of the business actually performed in line. But in this area, of course, we are Pushing through now some Positioning a lot of activity in this, and hopefully, we will be able in the next few months or next few quarters to give you some more news On all things happening in this area. Financials, Okay. Thank you. Good morning. So I will guide you To wrap it up for the group, this is the decisive concern overall, as Peter said, that was a flat organic growth. I'd also like to highlight and to recap slightly, this is a good growth of 3% and SIT also 1% and then, of course, Ndehrad Badu with Sure, with 11%, but then offset by Wiese minus 9%. And as we say, you see here the currency had an impact of Plus 4% and then we had a structural growth of 4%, which is basically coming from the 2 acquisitions or 3 acquisitions, the SIMPRO and Kaitrek In TCS and Signum in Industrial Solutions. The next one is then the rolling The growth, the organic growth or the total growth over the last quarters, you can see that we have had 15 quarters of positive sales development. And of course, most of that and later coming through acquisitions. We have done this year, we have in 2019, we did close 8 acquisitions. And then on the bottom line here, you can see that we had flattish growth, as I mentioned, in the previous quarter, minus 1. We will go to the next one that is then the only rolling 12 month basis, and then you see this is the highest Q4 space to date. We move on to EBIT. This is, as I said, it's the highest 4th quarter EBIT in Swiss money. And also then going through the business areas then, if the Industrial Solutions also the highest EBITDA and return on sales With a good performance on return on sales in the new setup, as I understand, we have done restated order numbers backwards. Sales in Solutions had a very strong quarter with 1.2% return on sales versus previous year 20.4%. Business under development and basically offshore then had a very positive bounce back coming back then with a rental of 68 minutes. And then, of course, then we had a negative one on this, where we systemed and impacted by market conditions and also then that we have And a little bit that we want to take down the stock. So we have an annual absorption in Porvenoroz. There's a small currency movement here in the quarter from translation point of view. We had SEK 46,000,000 and year to date, we have SEK 169,000,000 impact from translation. And then this is, Ben, on a per month basis. And then you can see that we have sites brought Telebor. When I summarize then the profit and loss, Then as Fried mentioned earlier, we have then the restructuring line with our guidance, both on restructuring costs but also the write down and Mainly then within all within business under development. The finance is slightly higher. That is due to the IFRS 16 and the pension, I will come back to later on inside, where we then IFRS 16 impact We moved the pension dip from working capital into near the Ept. That has an impact of SEK5 million in the quarter. If we take that away, we actually will be in the international interest. And tax is also been impacted by the write downs. And if I look at my underlying in the quarter, that is about 28%. And at the full year, we had underlying tax rate of 25%. Moving into cash flow, over the EPS, earnings per share and also then to the takeaway items Technic comparability, we have a slight downturn from NOK 255,000,000 not 245,000,000. This come from the restructuring. If I then move into the cash flow, as Peter mentioned, this is the highest cash flow we have ever had in the quarter. And I just want to point out this is the bridge from last year's performance into this year's performance. And the EBITDA is an impact by the IFRS 16 restatement, and that shouldn't be offset through the leasing of the 116. And also then what is then, Amay, we have a better EBITDA performance, but also then we have a lower CapEx overall In the quarter and also we have had, although it doesn't look as impressive here, the SEK 59,000,000, but in the quarter, we released SEK467 1,000,000,000 in working capital, out of which majority of that is inventory. So we have been much healthier balance sheet and then from a closing balance point of view. This is the cash conversion then. As coming back then, we had we would like them to be between 80%, 90%, but then we're up to 9%. And of course, that is impacted by then improvement in gross capital, but also then that we have in our CapEx. And just to take the 3rd and for you to understand, this is the most I know this is the most I will not show this slide in this year because We are on half and half in comparison, but we had an open balance in the SEK 10,000,000,000. We moved into the pension debts. And then we have the cash flow. We pay tax. We have the M and A activities. We have the dividend and then others, and then we end up with a net debt of EUR 5.7000000000. And then we're moving in the SEK 2,400,000 on leasing there. So the closing balance, that is SEK 50,000,000. The leverage is in 1.7 and coming from 1.7 and up to up to 2.5, 2.1. Still healthy, but it's, of course, an impact by the higher debt and slightly not EBITDA coming through. And of course, also has an impact because some of the acquisitions, we have not had full impact for the full year while we have it on the balance sheet. And then this is the development on then the gearing and leverage over years. And then moving into return on equity, we hope to see a small decline then from 11.7% down to 10.9%. And I will then Sam will finish my presentation by explaining the guidance for 2020. Then we have the CapEx, We said SEK 1,600,000,000 to SEK 1,800,000,000. We are then aiming to we would be more and more harsh on the CapEx in 2020. We still have On what we call strategic CapEx, so that we have taken a decision on that we will have an impact in 2020, but we are very reluctant to review strategic CapEx. And then restructuring costs, we guide in. We normally do €250,000,000, but we still have a turnover still over them from last year. So that's in line with that guidance. So that's where we guided EUR 300,000,000 in 2020. And I also had an underlying tax rate is to be about 25%. And then on the station and intangible, that is about SEK 400,000,000. So, Petr? Yes. So as a summary, sales up 8%, 4% currency, 4% structural growth, flat organic sales, EBIT was north of SEK 1,000,000,000 margin down by 0.5 percentage point compared to a year ago, Driven primarily by our only, if I may say, only from the downturn in the wheel systems, which is then More market driven really than performance driven for us, and we have kind of accelerated that downturn by focusing more Q4. Cash flow again, highest ever in the quarter with Teleport, 1,500,000,000. Cash conversion then, of course, high. And then, of course, we are running into Going in the right way. The priorities here really for us, of course, to get this going, what we call business under development, Continue, as I say, continued innovation of very structural alternatives. That's what's something ongoing. It's something we're working with hard. It's something Wilson and myself is At the moment, in order to get this going in the right direction, it also requires some organizational changes and some set ups in order to Create more independent businesses, I mean, that we've also developed for quite some time. So in certain areas, there is some Not the any major car business, but a lot of smaller operational issues that need to be settled and people need to Get going in the new organization. Then, of course, on top of that, managed market conditions. We have, as usual in Teleport, some Mixed areas, we still have, like I said, this what you call marine infrastructure and oil and gas, which is kind of heavy, heavy growth, continue to struggle to supply. What's the demand on the aerospace areas? We have some of that businesses. And of course, there are other businesses, especially related to the wheel season area where we still All kind of trying to find out exactly what we should believe. Of course, it's a downturn, but The CLC overall kind of macro environment in this business is still quite positive. But at the moment, they are really not at the pharmacy, really not buying And in fact, this even though that produced more than we've been doing before. So this is something we're mostly watching, Getting the inventories right level, but also be ready if it turns up or when it turns up. So that is something we're going to continue to see as doing cost value management. The majority of the Teleport. The majority of the portfolio managed organic that we do internally in the business, making sure that we continue to improve the business. And now of course, we've done on the group level. We've done this Change on organization, which, of course, a big portfolio management activity for us. We see the high activity there. We see something coming also when we continue to do acquisitions. And of course, we also need to make sure that these are Integrated in the correct way. Customer integration and smart use technology is still high in the agenda here. So you see the industry is changing and the way you interact with the customers is changing. That's also something. So this is kind of the agenda for me and Ulf and for the To our management to make sure that we really change this in a strategic, clever way. And looking at outlook for Q1, I mean, it's been, as you know, during the quarter, we have had this global as I say, starting like this instead. I mean, the overall business is actually quite good. I mean, we have a fairly solid order book. Quite good. I mean, we have a fairly solid order book actually compared year on year. And I mean, of course, always Samik's order book is actually on overall on a fairly good level. So what we hand put in here is a slightly lower Also on what our demand, I mean, is only related to this as to what you see happening in China. I mean, we are in the middle of it. It's really difficult to We get the update that I've sorted before the meeting here. And at the moment, of course, we have 8 factories in China. 4 is still closed and the 4 is open. And we don't know exactly, and the local Regulations is somewhat different. How they implement, for instance, the workers is not coming back in the regions to work. You need to You have really seen that they have health certificates and all of that, and that makes it quite difficult actually. So at the moment, you that is Very difficult to get, and it is basic support on the lorries and the freight and all of that is not really working. And the workers is also slowly getting back So this is really an uncertainty, which we don't know exactly. Of course, we still see the order book is quite okay, but this is something that definitely We'll have an impact. And how much negative? Honestly, it's difficult for us to judge at the moment. We see it's going to be negative, But we don't know how much. And this, of course, is different true now as we see also in other areas. So people, we see now some flights is canceled to Malaysia. They are canceled to Singapore, and we don't know really what the surroundings will be out of this. We, of course, we Assume and I think everybody assume that's going to be settled in a few weeks or a few months, but we don't know really know the impact. The only thing we know is that the order books are fine, but It's difficult to deliver and sell if you cannot have a lorry picking up the goods. So this is something which is Troublesome at the moment. It's something we're working hard on, but a little bit outside of our control. Well, it's said and done. Of course, we shouldn't make it a bigger issue than it is. So because, I mean, our overall was a flattish demand, but now we see this kind of in China. We still have, what is it, Our sales, I think, 8% of our sales is in China. So it is not really so we need to put that in a perspective. And I mean, this is but nevertheless, that is really the way you should read this, that overall demand is actually quite okay. The order book is quite okay. But now we have this, let's say, maybe we'll call it a hiccup because that we don't show any respect because it's really a difficult situation In China, and of course, we are fully supporting the local authorities in order to do the best I can to stop this kind of outbreak. But it will have an impact. And I mean, people, as once you all know, that Chinese New Year has just been and people are going back, and they are kind of reluctant to go back, of course, to have families at home So there's still a lot of uncertainty exactly how to get the factories up and running. So this is the way you should read this this statement. So with that, leave an open hang up then for Douglas to guide us through on the Q and A session. I guess that's my queue. Hello. I'm Douglas Lindahl, a Koreanist with Kepler Cheuvreux. I will moderate this Q and A session. We will start up with a few of my questions, Then we take some questions in the room and then telephone conference questions. So Peter, starting off, You already touched about this in your presentation, but I wanted to move back to your reorganization that you announced in December. What have you been doing internally? I know You sold an asset in France. But what really have we been doing to lift profitability and what can we expect going forward, more spinoffs and so on? Yes. And I mean, there will be some further spin offs, but we also need to get the businesses in the best shape. And I mean, we have said that this is not really an Immediate activity, this is great independent business, solely independent businesses, make sure that they have their solely their own agenda In order to maximize the performance and maximize in a way the value for these businesses, so that is happening at the moment. I mean, we've been up and running with that only for Yes, 2 months. So of course, we are still a little bit in the planning, a little bit starting on the execution of some changes that are being identified. So that is more, say, very operational mode at the moment in order to get that aligned. And of course, at the same time, we are Since we communicated this, of course, I'd say your colleagues at the other side of the Chinese wall, the investment bankers, of course, is running around and trying to Great business for us and for others and that's of course something also we are evaluating at the moment whether this is a better option To discuss with those guys and to focus on the operations. So that is a continuous activity. But I think internally, the focus at the moment is quite independent businesses and make sure that We have a game plan for how to improve those businesses as standalone businesses. And so far, is that going according to your plans, would you say? Yes. I mean, I say, of course, that there is some discussions. There is always some power of issues like IT and stuff like that. As you know, it takes longer time. But I mean, Overall, I think we have solid plans now, and we are kind of once again in execution mode, slightly different, of course. Then we have the offshore activity here with the Major struggle is actually to cope with increasing demand at the moment. So that is a little bit different to maybe the other businesses that we have here is more in Kind of carve out mode and while the offshore business is more to deliver on the growing order book at the moment. Okay. My second question is on the general demand situation. You're writing your report that Europe is down, But you also reported quite impressive 3% organic growth for Sealing. Do you see This 3% organic growth is a sustainable figure for that business more specifically. And is it mainly automotive that's driving this? I think the positive surprise here was Automotability bit, I should say, that we got more in special related aftermarket, which was substantially up. It's not a major part of sealing solutions. I mean, but this is, of course, is 10% or something. But I mean, it's really substantially up on that part, Partly due to easy comps, I should say, as well. So that is also part of the explanation. We don't know we don't think that that's going to Last, a little bit, this kind of automotive growth, but we still see a positive growth in aerospace. We still see a positive growth in our Kind of new segment, medical and health care is also growing at a solid growth rates. And honestly, on the industrial, it's more Challenging to get the full picture. But you see the order book is still solid. I mean, it's okay. But of course, it's not really booming. So that is more where we need to watch it and say 3% is probably a little bit on the positive side, but Who knows? I mean, we are a little bit also not a bit too complicated, But I mean, we were also looking into how short term orders versus long term orders, the short term orders have sometimes increased the last few months because as uncertainty grows, Then people are a little bit more careful giving orders, but that has impacted for us in Grover short term orders compared to the long term orders, which is then Making the reading of the forecast somewhat more challenging. So sorry to be a little bit more, let's say, but that is why, of course, what I want to say, we stay close to it and we don't see any kind of major obstacles outside of China Asia because China Asia, we don't know the impact from. So of course, this is something which is a little bit challenging. Once again for Asia, we have the orders, but will we be able to deliver? Will we be able to We'll actually do the call offs that I have, and that is something we will start. I mean, as you know, most of the factories in China actually started, let's say, Monday. So So of course, we are still very early in this kind of phase and we don't really know the to what extent this will hit us in terms of delivery. So excluding the coronavirus, would you have a different outlook, would you say? Yes, probably. So that will be more flattish overall for the group. Okay. Yes. Do we have any questions in the room? Agnieszka Villala, Nordea. Can you give us more color on the wheel development in the quarter? How much did you under Produced, so if your sales went down by 9%, how much your was your production down in the quarter? And also what do you expect More or less for Q1. A little bit difficult. And some of it, I didn't really want to respond to give you details. We had, of course, I mean, a few 100,000,000 more of cash flow than last year. And I mean, that is majority of that is coming from probably what I want to say, not really given any details about that one. Development during the quarter, we also need to be aware that Q4 It's kind of the lowest quarter, especially for agriculture, because there's some seasonality on that one. So I don't want to say, it didn't really change. I mean, I think we saw a downturn end of made a downturn end of Q3 actually, and that continued on a similar level So we didn't really see any development or changes throughout the quarter. I mean rather into Q1, do you think your inventories are more in balance? Oh, no, no, no. But okay, on that one, we will We have to take it, but we believe It's sufficient. So it's sufficient. Yes. So Yes. So I mean, if you say this negative, if you were aiming for this negative year on year margin development, we don't see that really in Q1, it's a little bit early in Q1 to say it, but I mean it shouldn't let's put it like that because Q1 is not going to be impacted by underproduction At all on the level that we saw in Q4. But you're still not expecting booming markets in Q1. Yes, I understand. But then if The demand doesn't change much. Should we expect the margins to return to kind of former levels? Yes. But what we said is there's no formal levels, But we have had higher returns in Q1, Q2, those are the highest quarter from a seasonality point of view. At the same time, I mean, as Peter said, the underlying market, if it really, really picks up, which we don't really see because it's moving in, and then we will have but we will not have The impact of this under absorption. Okay. Perfect. And then my last question is on the generally, can you Tell us if you had any kind of cost saves impact in the quarter given quite good leverage for Industrial Solutions and sealing? Of course, we have that. I mean, we have we accelerated this cost savings here midyear, and that is we see some impact on that, I say both in Sealing Solutions and in Industrial Solutions. So that is kind of partly explaining also the EBIT improvement, But that's the way it should be. So that is not really a surprise for us. And also honestly, if we wouldn't done this downsizing that we had done, major downsizing And of course, they would have been even worse. So of course, we see the impact from this, which is otherwise, Yes. We need to see that impact, and it's really kicking in. Ham Singhalau, Hamdan Spanken. Three questions. Maybe continue on wheel systems. I mean, you've been fighting a Headwind in the market for some time. And I was wondering if you could maybe talk a little bit about the difference in profitability between Maximo or Mittas Gultur and Trelleborg. Is there a big difference? Is one lagging or is equal spread? It's not really a major difference anymore. I mean, we have a little bit size, The bigger tires, the bigger profitability, but it's not really a mix. No, I say in generally, no, Without going into details, of course, we don't sell a lot of I mean, Maximo, we don't sell. So it's actually Mitas and Trelleborg. So Maximo and Kultur is We communicate them, but we don't sell a lot about them. They are lower margin, as you say, but we don't really sell any of that. But the Mitas brand and the Telebord brand, no major difference. Fair enough. Industrial Solutions, improving profitability, reorganization, new financial targets, Will there be new targets? Or how should we think about that? Yes. I mean, we are still behind the targets there. So of course, I mean, we would like to deliver on those targets, but of course, the ambitions are beyond that. But before we need to review as I discussed that, we need to make sure that we deliver on the targets that we have. And of course, now Once again, not to add on this China thing, but also for them, it is cautious as some of the areas there is Quite heavily impacted on China as well. Okay. Fine. Last question for me is on this business under development. Yes. How much goodwill is the left in the from the right hand that you did? And secondly, if you deliver on your targets in these businesses, Will there be a reverse in value? And also, should we think that there should be a potential capital gain? And how much of this will remain? But I think all the goodwill is off. Now what we have done is that we have it is one business under development as one, but we have individually gone through the businesses. And then done by the books as a net present cash flow and then also what we have That's or even down to working capital because in order to reflect it. And then let's come back if we have that problem or we if they are improving that Much record. And then if we lift it back, then let me come back on how to deal with that. But we are not doing any trying to trick So the intention is not to write it down and then create, let's say, a big capital gain. If that happens, we'll be very happy, but that was not really the intention. It was here to be Fully transparent and really value the businesses as they are to be valued in sale prices. Fair enough. Thank you. Okay. Erik Olrang, SEB. I have three questions. You said Aerospace and Seating Solutions still grew double digits in the Q4, a bit lower, but still good growth levels. Given what you know now on the pace of production of the 7 30 7 MAX, how much of a deterioration do you think you'll see in aerospace in Q1? We will grow less In 2020 compared to 'nineteen, but I still standing here today, I still believe that we're going to do double digit organic growth in that one. And that is more coming From kind of market share, I mean we've been also down to the details. As you know, in Trelleborg, we have different sub segments in the aerospace and Some of these segments, we have been very successful growing our market share. So that is really what is kicking in. And this is orders that we There is still a ramp up. I mean, there's still a ramp up in certain 350 Airbus and 320 Neo and all of that. So there's still ramp ups happening On a few other areas. And on back of that, we still feel that we're going to have 10% -plus organic growth in that part of senior solutions. And then the second question, how much of the SEK 300,000,000 in restructuring costs this year will be in business under development? How much in the core business? Majority of it is actually let's say that roughly Majority is within that business because it's coming from the launch within Q2. So it's also the spillover into this one. So it's basically within Industrial Solutions, part in Semi Solutions, but also wheels. But some of It is also within Baader. Business under development. We have to get back on that here. I don't have it from my head exactly the speed how it is. Where would you say? I mean, we've been at around 250,000,000, I think, for the group, right? 250,000,000, yes. 250, yes. So what we guided for last year was 250,000,000 and then we had another 200 on this Q2 restructuring. And then we guided for another €50,000,000 due to this business underdevelopment. And part of that business on the underdevelopment was taken in 2019, part of it, which was then also in a spillover into 2020. And how much restructuring, if we look now, assuming you exited the businesses under development, how much restructuring in the next couple of years on average? We still feel it's going to be I mean, it's dependent on acquisitions and all of that because we also need to know that this is coming partly from that we make continued acquisitions and we do So if we continue to do acquisitions, our best guess is that we will remain on this between SEK 200,000,000 and SEK 300,000,000. So but If you go to acquisitions, then of course, it's going to slide down substantially. And then the final cost. You talked a bit about creating a bit more independent business Yes. As you're doing these carve outs, could that trigger increased costs in the near term if you need To put up more overhead. Now that is more that we need to look into who is responsible for what and what is that. And hopefully, maybe Maybe in certain areas there could be more cost, but then of course these extra costs should generate more income as well. So we don't see that as a general cost increase. That's not going to cost us anything In total, because that is not what we're aiming for. We're aiming maybe for because they get bigger and they can have more kind of drive On their activity and not be dependent. There could be also some transfer between head office and these businesses. Of course, also some of that going to happen. Thanks. But I don't see that as an issue, honestly. I think we have some questions on the telephone line. Operator? The first question comes from the line of Klas Bergelind from Citi. Yes. Pieter Noden, first class from Citi. Coming back to Wheel Systems, I just have one follow-up, Peter. Judging by what you said on the inventory out that I get roughly half of the decline in the margin from destocking, we always had a demand Sequentially improving into the Q1. If you stop the destocking now, then the margin should return to at least 10%, I would have thought, Not back to the peak levels, but maybe around the percent level. Just want to say if that reasoning is reasonable. Yes. What is uncertainty here, of course, Clauses that we don't know how the UIs is doing. We don't know really on their stock levels. I mean, we know they have extended shutdowns here and Focusing on the inventory, so that with an uncertainty, but everything equal, of course, you must be, your assumption This is correct. But then of course, there is still this uncertainty on the turbulence in the market that we don't really know. As you know, when we're dropping like I can't remember now, hopefully I don't mix them up. But when you take a case Your report coming last week, and I mean, they said 16% down on sales and of course, then of course, there is kind of a big momentum As well to bring down the inventory, and that is something where we don't really know the full impact yet. But they say the same as us that they have low inventory and that they are down and so so. But that is but all equal, then of course, There should be this increase of some 5, 5 percentage points, at least on the margin. Okay. And Another one on wheel systems, pricemix. And I'm thinking about the mix here, Peter. We're starting to see some signs of better volumes in Aftermarket in North America, Europe is obviously your key area. What are you seeing on the aftermarket here? When we met you guys at Agri Tecnica in November, They and others talked about like a bottoming of replacement in Europe in 2020, given this 2 to 3 year lag from when we replace We should see a better mix. Yes, we're going from a Dottori AT mix throughout 2019. We To be a biggest year of the sale, maybe partly due to the fact that OE is going down. But nevertheless, the overall mix should improve If I'm standing here and I mean, you push me to make a guess what's going to happen in 2020, it should be a better mix. And maybe some better replacement. Okay. Then my third one is on business under development. And I'm thinking about the growth is obviously very strong in Oil and Gas, and I guess the margin has followed through, while the margin has been weak in printing and in order. Can you give us any sense, Peter, on where that margin in oil and gas hits? Is it mid single digit, high single digit, low double digit? Eduard. I mean, if ever, I mean, I think we're going from minus and in best case for 2020 to mid single digit. I mean, that is really What we see. And then part of that is, let's say, improvement throughout the year because if you notice project businesses, which is going from very low to very high, then always the first order is We'll have a margin because everybody is very eager to get these first orders with empty factories. So usually they're quoting on a lower price, we as well. And then as the factory gets more filled up, then of course, you get to get the margin, you get more bullish on the pricing. And so that is unfortunately we tell we talk about this internally. And even though we fit So but that is happening. So as the market grows, as the production grows, you should also have better margins in the order book. Of course, we see that as well. Our take on margin is improving. So we should have a better delivered margin as well as we move Quarter by quarter. But on top of that, then, of course, there is some capacity because we still talk about, let's say, tens of percent of organic growth, which is not easy to Cope within the factory, to be honest. I mean, if you have this organic growth sometimes of 50%, it's not that easy to make this in a very, very efficient way. Of course, we would like to get it up to more stable manufacturing levels in order to make sure that we have efficiency. But all in all, We see going from, if I may say, a solid minus result up to a solid plus result, but it's not going to be 2 digit EBIT margin, no. Maybe. And if we are successful and it happens as we look today, we talk about the mid single digit profitability for the offshore business. Eduardo. Our next question comes from the line of Erik Paulson at Perreto Securities. It's Erik Piet, Perreto. So my first question is regarding Sourcing and the supplier situation, I think you have roughly 23,000 suppliers or so all around the world. How does this situation look like now? And do you see any disruptions in the chain, etcetera? And do you provide for any like contingency plans regarding sourcing of your natural resources at Essentia. Yes. I guess you referred to this China situation again. Of course, there is some challenges in deals with VR being on for several weeks, and we're working on contingencies. And it's not really This is some chemicals. It's some but it's not really a major thing. But there is some challenges in making sure that you get supply On certain areas. We are not, I mean, I think in comparison to other industrial companies, we are from a component point of view, We are not that dependent on China, but we are, in a way, buying from Asia in certain chemicals. But It's not that we can get these chemicals from other sources, but then maybe we need to pay up a little bit. So that is something that we are looking into and, of course, Evaluating also daily in order to see. Once again, be aware that China was only started this week. I mean, most In most regions, the Chinese New Year was extended. The holiday was extended by a week. And still, I think only half At least half of our factories or something is only up and running now, and this half of the factories is still ramping up. So it's still very early days. We don't know really the full impact on this. And of course, we're still getting even though I said that there are no trucks, but still getting some deliveries from China, but I mean, we don't know exactly what's going to happen. I mean, this is a daily this is happening as we stand here. All right. And a final one is on, you mentioned order book year on year figures, quite Is it possible to present those more in figures? We don't want to do that. We don't want to hand out that because also the order book in the different businesses is very different. So we don't really want to mix Everything in one bag and talk about it. So we have decided and we're going to keep that, that we will not announce order intake or order book for us. Our next question comes from the line of Johan Hedberg of Danske Bank. Please go ahead. Your line is open. Thank you. I'm sorry for returning to the wheel systems and also the margin question there. It was a very bad line. I couldn't really hear. Did you say that the underlying business would support, assuming this Production or inventory reductions supported double digit margin in the Q1 for wheel systems. Sorry, did I did you say that one? We need to talk in detail about the margin. I say that the margin is going to improve quarter on quarter Substantially, but assuming what we know today. But I mean, really, to give you guidance, whether that's going to be 8, 9, 10 or 10, whatever, I don't want to give that guidance. I know it's going to be improvement. But at the moment, I think we are still a bit uncertain exactly how much it will be. It will improve And whether that will be 8, 10 or 12 or 14, maybe 14 is a little bit on the high side, but I don't really want to give any guidance on that, sorry. No, that's fine. I just want to double check if you got the line also about that there. But also Coming back to Solutions, I mean, very impressive, 3% organic growth in the quarter. How could you say a little bit about how What sort of contribution did you have from your Health Care business or Medical business here? Because that seems I mean, what I compare with Your industrial peers like, yes, I mean, it's really opposite direction of your organic growth compared with your other likes. What is the main driver there? Would you say it's the medical Medical is not the main driver. Medical, as you know, is a business that we actually been Building on acquisitions the last 2, 3 years. So we are still early days in integrating that. And I mean also the health care business is developing very well, But the order intake is very long term there. So that is something we don't see really on the next following quarters. When I comment more on the medical and health care, it's more that it's a good Business overall, we have good order intake, but that is honestly not kicking into sales in this quarter. So the high growth areas here is, Once again, we are back to aerospace and then automotive better than automotive aftermarket especially better than substantially better than we Anticipate it. But I think that is a little bit company specific, to be honest. We were successful launching some new products. We were successful going into some of the big Aftermarket change, especially for brake applications. And suddenly, we had a boost for that in the quarter, partly coming from they were actually low Earlier in the year. So this is a little bit individual. So I think we take that out. So I think the main positive driver for us is the aerospace. And then with the kind of continued little bit bounce back in Asia and all of that, but that is more regional activity. Now we expect a negative bounce So this is something which is, of course, something negative bounce back then coming from these challenges in China. China is the most important market by far For Sealing Solutions. So that's going to be a negative in the running quarter. We have 2 further questions from the phones at this time. The next question is from the line of Mads Schulz at Commerzbank. Sorry if you said that the line was sometimes quite weak. On China, maybe on the current impact for Q1, can you assume or can you make an assumption how much it will impact the organic growth on the standstill From what you know by now. And my second question would be with your change now to the business under development structure. So Would you rule out that you would do any larger M and A acquisitions at the moment and rather focus on restructuring of this area? Or is M and A still on the table? First of, China, I mean, once again, I think I need to be clear. It's very uncertain. We have been only up and running for 2 days After the Chinese New Year, and you have been reading on CNN, you have been reading everything what is happening, and you have this development day by day. And I mean the local regulations in China, Local authorities, I mean, they do what they can. But at the moment, the regulations is not really fully, how should I say, fully Coordinated. I mean, some local authorities give one instruction, regional authorities give some instructions, the national Instructions are different and some are allowed to move, let's say, a truck in between the different Regions and Sunday are not. And I mean, so this is something which is really happening at the moment. So we can only say that it's going to have a negative impact. We know it's not going to be positive, But it's honestly, at the moment, impossible to give you any flavor on exactly what kind of impact we will get. Hopefully, it will not be big, But we don't know. I mean, there is still today, for instance, we had one factory that was opened yesterday, and then they asked us to close it today. So this is happening because then they had a kind of extra infection in that area and suddenly they say, okay, now we close again. So this kind of stuff is happening all the time. And then we relate to M and A. M and A is always on the agenda, but we have always said big M and A is not really The normal way we're doing Trelleborg. So we're going to have this we're working on acquisitions, which is a few tens of 1,000,000 of euros. I mean, that is a normal acquisition for us, which is then Assisting us in a certain specific application or certain specific region or certain specific customer segments. So that is the way. But we saw on the agenda, we don't really see any big M and A. But hopefully, we will be able to continue to make these kind of smaller acquisitions. And the last Question comes from the line of Robert Davies of Morgan Stanley. Oliver. My first one was just, you mentioned you divested or sold a small business out of France. Could you give us a little more color on exactly what you So maybe some of the financial metrics of that business, what was the sort of margin profile? Or how much did you sell it for? I mean, this is a small business, and this was a business which was doing some kind of printing related rubber rollers. So that they will be sometimes when you print, you have rollers, which is kind of assisting the printing. And we said this is not really a core, even though it's related to the printing, printing on textiles in This way and, let's say, stretching the textile when you print on it. So it's kind of a supplementary business For the printing, and as we are focusing this, we said this might not be the core offering for this one. And then we had a taker. And honestly, Always honest and frank, of course. We sold this also partly because they also managed to get to sell the real estate next So the financial metrics in terms of multiples and stuff like that was not really the best. But in total, of course, we managed to get out of this business. We managed also to cash in the real estate, which was part because also now I'm explaining, This what we sell was a location in Cerne in France where we had a big factory before where they have been downsizing and then we've been moving some Pure printing blanket manufacturing from this site to Italy a few years ago. So we're standing with the real estate, which was far bigger than With this acquisition, they bought the business, but they also bought, let's say, the real estate. So for us, it was a very good cash inflow. But maybe once again, that's the term of a multiple. We talk a few low single digit multiple on EBITDA. But I mean, in total, if you As I also said that we cashed in the real estate, it would turn out to be a good business. So this is the kind of decisions that we need to take. But it had no impact whatsoever On kind of the performance because it's such a small activity. But this is the kind of cleanup that we need to do in this kind of businesses and To decide whether we but once again, we jumped on the opportunity here to once again to get out of the real estate as well. I will not restate the numbers. Understood. And then maybe my second one was just around some of the regional trends. Could you Can you give us a little more color from a country perspective between Western Europe, which was down 4% with a much regional variation? And then a sort of follow-up, I guess, For North America, which was down 2, what's your outlook for the North American business given industrial production is trending lower? Country development in the But we don't normally No, we can say, which is so Yes, but it's mixed bag. So it's Yes, no, we don't really. I mean, of course, in Germany, it's a little bit more down than the others, but otherwise, it's really But it's small variations. So we don't really we cannot see an overall major trend. U. K. Is actually slightly up In the quarter. So but that is also individually individual invoicing by monthly ends and stuff like that. So You shouldn't probably draw we at least don't draw too much conclusions out of development in each country for individual months. And then on the outlook for the North American business, given the ISM and BMI readings and production has been struggling there. Are you incrementally nervous about the business in the early part of 2020 in North America? Not really. I mean we are still kind of Generally, building our presence in North America, as we're sealing solutions, we have made quite a lot of acquisitions a lot few years. So we are not really Dependent on the market in that way. And the same applies for the wheel season security. We're fairly out of a small market share. Then there's individual businesses where we have higher market share. But In most cases, I must say, in North America, we are still in kind of a growing mode or establishing mode. So We are not too concerned about our overall market development there. We have probably higher market share in certain, let's say, European, like Northern Europe or Germany or UK, Well, we need to be more careful in following the overall development. But in U. S, in general, we still have a possibility to grow even if the market It's slowing somewhat. Good. Okay. I think that concludes the Q and A session. A big thank you from my side. Any closing remarks, gentlemen, from your side? No, no. For us, for Teleborg, solid quarter. 2 out of 3 BAs actually performing on a basically all time high Lebels and then wheel systems, we feel that we have a very good platform, but we are suffering, I dare to say, very challenging markets at the moment when you talk about organic growth On the OE is down by, let's say, 15% or something, then of course, it's quite tough to compensate for that. And I think we've been doing better And the overall market in wheel systems. But even then, of course, we are suffering. So that is something where we need to position that and make sure that we are ready when the market actually turns up. Thank you. Okay. Thank you. Bye.