Earnings Call: Q3 2019

Oct 24, 2019

It's working now. Okay. Okay. Then we start all over again. Thanks to all of you for welcoming us here for the welcome to all of you for joining us here on the Q3 presentation, where we're going to guide you through the financials for Trelleborg following Q3. As usual, starting I'm starting giving you the overall highlights and also commenting on the business areas. Later on, then joined by Ulf Berghult, our CFO, who will guide us through the financials, and then we're finishing off with some summary conclusions and followed with a Q and A, then moderated by Erik Goldrang. And And then after that, we will, let's say, sum it up again, of course. But As usual then, agenda, starting off with some highlights and then guiding through the BAs, business areas for us, financials, summary and Q and A, finishing off with that. So starting with the overall Headlights highlights for Huttralerborg. Sales in the quarter came in with an increase of 6%, then supported by currency and structural moves and acquisitions, primarily within Seating Solutions. Organic sales, though, decreased with 1%. And if you don't exclude the project business of Trelleborg, it actually Came in with a decrease of 3% sorry, yes, with a decrease of 3%. If you go through here, we say we have a little bit tougher times in general industry and automotive and then supported with somewhat better development, continued good development within aerospace. And then as anticipated and guided before, We see a fairly strong increase then in oil and gas and infrastructure construction. Get back and comment more on that later. EBIT came in at €1,000,000,000 roughly €1,000,000,000 corresponding to a margin a little bit shy of 12%. And I mean this is a decrease compared to last year and decrease basically coming from get back and comment on that more later on, but from some market headwinds in related to our specialty wheel systems and then some actions connected to that. But also to highlight in comparison to last year, we had very Low central costs last year due to some extraordinary income in that line, and that is also a difference compared to last year of almost a little bit north of SEK 50,000,000. We also, as for sure most of you remember, we announced Some increased, what do you call, efficiency measures here after Q2. And these measures All kicking in even though the majority of this is not really in this quarter, and that will not be in the running quarter either. The majority that will be kicking in, in 2020. We are working on this, of course, and it will be probably increasing the number of redundancy following these actions, but it will not increase the costs allocated to these measures. That means that the items affecting comparability came up of SEK 127,000,000 which increased compared to last year. But I mean Ulf will get back also and from the guidance that we've given for the full year 2019. Cash flow, very strong in the quarter, coming then from, as I already guided, some inventory focus. And of course, also with this negative organic sales, we also See, let's say, good outflow from accounts receivables as well. So good development of working capital, while CapEx is on the same level as last this year, and that means that the cash conversion is now increasing. And of course, as we go into more uncertain territories In some businesses, we will continue to focus on the cash flow and continue to make sure that we deliver cash going forward as well. Looking at the organic sales geography, you see it's kind of negative All over the world, with an exception for us in South and other Americas, but that is a small part, and I mean, of Tralborg and not really material in the total If you look then in Western Europe, down by 2% North America, down roughly the same, 3% down and then we have Asia and other markets down by 9%, and I know are some concerns? China is down. Here, we're down by some 5%, 10% organically. So they are down slightly more than the overall Asia, but that is being compensated by for us by good development in India. So that is kind of why we're ending up roughly at the minus €40,000,000 as well. So basically, the same development all over the world if you kind of try to generalize a little bit. No big differences between geographies for us. Going through the business areas. Coated Systems, we've had a headline there, stable profitability. And I mean, we have, let's say, basically same margin as last year and EBIT growing slightly more than the net sales growth and actually underlying a little bit better Since we are hitting the quarter with the customer insolvency in South America, which is hitting us, we put away a reserve. We don't know exactly how it will end up, but we are fully, let's say, reserved for whatever happens in these insolvencies that cost us roughly SEK 10,000,000 in the quarter. Coated fabrics developing well, growing in aerospace especially, but also growing into some other segments like medical and some other also. General industry actually also developing quite okay in this area. Printing plant is negative year on year besides Asia actually. So Asia continued to develop well here, and we're growing our market share in Asia while we're kind of keeping our market share in the rest of the world and developing in line with the market. So that is kind of the comments on Coated Systems. And moving on to Industrial Solutions, where we have organic sales minus 1%, but with then structural growth plus 6%, we're coming from an acquisition in the quarter. I'll get back and comment on that. Lower sales in general industry automotive, actually stable in this area. We're developing substantially better than the market here due to some innovations and some growth of market share in specific segments. So we are not hitting this area. I'll get back to you. Sealing Solutions has been hit by automotive, but not really in this area. So this is more general industry going down. And from a geographical perspective, we are losing a little bit in Western Europe and North America, but then positive especially in Asia for this business area. EBIT is slightly down on weaker sales mix especially, so but basically in line with last year, and we are very happy also to finalize within the quarter the Signum acquisition, which is then strengthening our position, especially in LNG, offloading LNG transport. So it's not I mean, just to clarify that, it's not really linked to kind of The let's say, the drilling or kind of extraction of LNG is more linked to the infrastructure development you have, and you're offloading LNG into ports and new power stations and all of that. So we don't mix up these with different segments, and that is a segment which we feel It's a growing quickly growing segment, and it's also great supplement for us to develop better solutions for that specific segments. So that is the comments on Industrial Solutions. Moving on to offshore construction. Very strong growth, as you see here, organic 27%, which we guided for. So we are happy now that this growing order book is kind of getting through. And we also say that this basically good organic sales growth in oil and gas and infrastructure segment. And this is in terms of order intake is the best quarter for years, if you put it like that. So we continue to build orders here. And I mean, it's really more the challenge here is more coming not from orders going forward. It's more to make sure that we get profitable orders in and then we can get good margins on what we will deliver in the future. So kind of a little bit changed changing the focus here now. EBIT is increasing, but as I said, we still have an order book, which is not of the highest quality here. But I mean, we believe that the order book will proving quality. Of course, it's not going to happen quarter on quarter, but we see now with confidence here going into next year that we will go into next year with a better order book and better possibilities to deliver even better profitability. And we say also recovery will continue in Q4, so the sales growth that we Today in Q4, we'll actually organically be even better than we've seen in this quarter. So it's but then, of course, it's going to be always a struggle here. When you have this kind of growth figures, It's always a little bit uncertainty whether you actually are able to deliver what you have in orders. But that's going to be the challenge here forward, but I mean, we're going into this quarter with a better order book than we're going into Q3. And then we hopefully also we continue to build order book also in Q4 for 2020. We also hear, which we have not really commented on before this, we made a small but interesting technology acquisition, which is focusing on low density products called Deep Springs, basically a development company in U. S, which is then more, let's say, improving the performance of products and actually creating own sales. So this is something more of an internal acquisition, but Very, very interesting for us, but kind of difficult to fully explain without going into depth. So but I'm happy to tell you more about that going on. But from sales perspective, we will not have an impact. Ceiling Solutions, execution in tougher markets is the heading. We continue here to adjust, continue to deliver organic sales is down by 2%, but then supplemented by structural growth of 5%, and then on top of that also some currency translation on this one. Basically, it's a little bit softer all over the world for no Drama anywhere actually, but I mean we are slightly down, and we also have then general industry. And here also, automotive is down, and we that is maybe we're suffering a little bit also. We say our margin is down a little bit, organic sales and unfavorable sales mix is in some automotive Segment is quite a lot down, which has also been impacting the manufacturing units. So that is something we expect to be more balanced in the next few quarters as we see what we read today, of course, is changing. But if you see it today, we don't expect the drop in automotive for this year. Continue to drop, but not at the same pace as we have seen in the last few quarters. It's going to be a little bit more stable going forward. And then hopefully, it will be Easy for us then to manage capacity and make sure that we adjust. We also note here, aerospace continue to be very strong. Of course, we have the Boeing situation here, which we don't really know what will happen. But at the moment, we continue to see good aerospace demand, and we don't really see that turning anyway in the next few quarters, but to continue on a very strong sales growth path. Final on the business areas. Then, of course, the travel market headwinds, inventory adjustment, Telebrue Wheel Systems dramatically down, minus 6 percent. And then, of course, that is going into the quarter. As you those of you who are following us closely remember that we said the end of the quarter, Q2 was quite dramatic, and that continued there in, and we say, basically declining organic growth in more or less all areas. So we say OE down, we see aftermarket down, and that relates both to agriculture and material handling. So for us then, when we saw that coming, we have substantially underproduced in the quarter. So on top of this kind of organic sales decrease. We have also done inventory adjustments, and we have underproducing. And also, we are also on top of that doing some volume transfers between plants for simply to adjust a little bit for more kind of new ways of supplying some markets, but also to facilitate for future more efficient setup, basically moving production to our Serbian plant. And in the quarter, that has been costing us some money. So overall, market headwind, of course, is the majority of the profit drop, but also there is also tens of 1,000,000 of Swedish kroners coming from each of inventory adjustment and volume transfers. The good on the inventory adjustment is, of course, that turns into good cash flow, which you can see as well. So we have some cash outflow, which is better than the EBIT in this business area. And we also say that we don't see really any change in the short term here. We see that this kind of negative, especially from lesser production volumes and also these Transfers will impact also Q4 and, of course, on top of that also. So we don't see really any change in the running quarter even though we Still believe in the underlying market trends here of growing agriculture production and also growing, let's say, for the Mod Material Handling. We see this growing as well in terms of global trade. And on top of that, also this e trading and of that, which is also benefiting the material handling. So overall, tough quarter, and we'll continue to adjust and we'll continue to build the platform for the future when this market eventually will turn up. So with that, Ulf, I'll leave it for you to guide us through the financials. Thank you. So my first slide, we have then the total sales. As you can see, then we have then a total Sales development of 6% in the quarter, of which inorganic is minus 1%. And as Peter then told you earlier, then we further take away the project business, we are then in the quarter minus 3% and year to date and also then from the organic growth flattish 0% in year to date. We are minus 1% on excluding project based business. The structural growth is coming in 2019, then 1 in quarter 1, SilkPro within Sealing Solutions. And then in beginning of quarter 3, then within Industrial Solutions, The acquisition Signum. And then organic, as Peter then said earlier, then the major swings there that we have offshore construction plus 27%, And but then also wheels on the other side of minus 6%. The next slide is then the quarterly development. You can see then that we have on the bottom line, you can see then we have a negative organic growth. But on overall sales growth, Including then the structural and currency, we have 14 quarters of positive sales. And of course, then later then It's been fueled by then the acquisitions. And unfortunately then, on organic growth, we have a negative growth then in quarter in this quarter. Next slide is then the rolling 12 months. This is then the highest Q3 so Within Trello Boy and again impacted by acquisitions. Next slide Then the EBIT, you can see then that we have in the quarter then a minus 9% on EBIT from down to 1,036,000,000. Also, the margin is down from 13.6% down to 11.7%. And of course, that is then the main two impacts We have on the positive side, we have Offshore Construction delivering the first positive quarterly results in quarter 1 Since quarter 1 2017. And then on the negative side, we have then the wheel systems that Peter then mentioned that the sales drop, The movement that we need to do in order to create a better footprint going forward, but also then we have some under absorption that we are taking in order to adjust our inventory. And the other third one or the third one is then on ADAS that we are kind of in a normal mode. We had a natural low cost last year in quarter 3 2018. The translation impact in the quarter that is mined is only SEK38 1,000,000. Year to date, that is SEK 123,000,000 And then as Peter mentioned earlier also, then if you look in the margin, it's slightly also kind of a mix Between BA, as we have then, ceiling and wheels going down slightly and then offshore coming up. Then we have on the next slide, we have the rolling 12 months numbers. And this is then The first EBIT drop we have had now after 25 consecutive quarters of improvements. And on a rolling 12 month basis, the margin is on 12.9%. If I look on then the P and L, the next slide, we have then The financial net is low in the quarter basically than due to that we have some positive Exchange differences, FX impact. The tax is also quite low in the quarter due to favorable mix between countries. It's 22%. But year to date, it's 25%, and we're still guiding to that we will be around 26% for the full year. And also then I see in the quarter, you can see then the impact from the launched restructuring program that we did in quarter 2. So we are slightly higher than on the SEK 127,000,000 versus the SEK28,000,000 last year on our restructuring cost. And the guidance for full year, that is the SEK 500,000,000. Next one is then earnings per share. You can see then that we have in the group total, we're down 15%. If I take away then the restructuring, we are down by 5%. The good thing now in the quarter, as Also Peter mentioned earlier that we have a very good cash flow. And as you can see, there are large improvements coming down from working capital. We have put more focus on as we have done on the cost base, on working capital. And it is slightly still slightly high if I look in absolute terms. But also then that will have an impact True terms. But also then that will have an impact due to that we're doing some restructuring and that will we are carrying some extra inventory. And also then, when now offshore is coming back into business, that will also consume working capital. But again, it is on healthy levels. The next one is cash conversion. We took And then on from €69,000,000 up to €82,000,000 And we would like to be then above €82,000,000 And also then we will have going forward More focus on CapEx spending, and we are kind of ending it. And when we're moving into 2020, we are stepping down In CapEx spending. And then only slide then on Page 21, in order to explain the net debt, as we have We are then the impact from IFRS 16 on lease debt, which we also then took the opportunity then to reclassify By the pension debt. So we had you can watch then the SEK 10,000,000,000 we added the pension debt, and then we have restated, and then we have the leasing debt. So in the old ways so right now, we have then a net debt of SEK15,900,000 including lease and pension. Next slide is then the leverage, which is then up then from 1.9 to 2.6. And then we have on excluding lease and pension liability, that is in from 1.8 up to 2.2. And then the next slide is gearing and leverage over a period of years. And then It's moving in. So the 2.2 percent, and then on the what I can mention, on the leverage, of course, we will have these are not pro form a numbers. And based on that, we get the debt as we've done acquisitions, but we don't get the full EBITDA from until we have run them for 12 months. And next slide is then the return on equity, which you can see then, of course, with the falling then decline in earnings, we are down then For the total group, then from SEK10.3 billion down to SEK9.4 billion. And then I will finish off with my guidance for 2019, the CapEx is SEK 1,820,000,000. It's We most likely will end up below we're down to the €1,800,000,000 not to the €2,000,000 Restructuring costs will be around €500,000,000 And then I said Previously, the underlying tax rate will be about 26%. So Peter? So continuing then with the summary. So as a summary, I said sales is up for us by about 6%, driven by currency and structural Growth for coming from acquisitions then primarily within Sealy Solutions, but also in this quarter also within Industrial Solutions. Organic sales total down by 1%, which is then a mix. So we should say general industry, a little bit short of where we want it to be And there was and automotive down, while then supported positively by aerospace, oil and gas and infrastructure construction. EBIT down roughly SEK 100,000,000 compared to a year ago, coming then primarily from, say, lower central costs or different. There's a more natural central cost in this quarter and then primarily from a drop that we had in wheel systems coming down from market headwinds, inventory mention some our own incentives to shift production. Efficiency measures, which we announced, is running according to plan, slightly upgraded, Slightly more activity in this, but it will not cost us more and but that will have an impact primarily going into 2020, which means that items affecting comparability is some up compared to a year ago. But as Ulf Already comment on keeping the guidance for this year. Cash flow strong coming from a working capital release and a flattish CapEx spending. And that means also cash conversion is up, and we are now above 80% again, where we expect it to remain now as we're focusing seeing slightly more on the cash flow going forward as we see some tougher markets in some areas. Priorities, of course, manage the market conditions, stay close and try to read what is happening and be ready to act whenever necessary. We continue to work on portfolio management. Of course, we are addressing some parts of the portfolio where we would like that to improve, continue also in cost general operational excellence and efficiency measures and also continue to work on our footprint As you know, especially within wheel systems, there's still some changes ongoing following the CD acquisition a few years ago. So there are still some actions from that kicking in, especially now in Serbia, and we're also addressing with some investment in Czech Republic, where we're going to grow our capacity in especially one of the plants in Czech Republic in order to create a better long term footprint, continue to focus innovation and especially then what we call ease of doing business with us. We are working closely in the customer interface in order to make it easier the customers to do business with us in more efficient way, but also to support them in a better way. And of course, now we continue to make acquisitions, and we continue to focus and integrate in Acquisitions, as you mentioned, also maybe on the medical and health care area, which is this acquisition of SeelPro in Sealy Solutions, which we now also created a platform for global growth in that area, and that is kind of a new strong focus area within Sealing Solutions going forward, while also this acquisition that we did in Industrial Solutions is a very good fit for them, and we're growing our strengthen our leading position in especially in these LNG transfers. Outlook for the running quarter. We keep the guidance going into this, and we say it's going to be on par. We're going to sell as I said, the organic development is going to be similar in Q4 as we saw in Q3. It might be a slightly Continued kind of slightly weaker in kind of the general industry. We continue to see automotive probably getting slightly better since we don't see kind of inventory adjustment kicking in as much in this quarter as we've done in the last few quarters, and then we continue to see a strengthening in oil and gas and infrastructure construction. So that is kind of an overall mixed bag. But overall, we expect the organic growth to be on par what we have seen from Q3. So that's really where we would like to end and then inviting Erik to guide us through the Q and A session. Okay. I'll start with 1 or 2 questions on my own. You highlighted The one of the priorities being continued portfolio management. That has mostly meant acquisitions now for a number of years. And my question is really that as you we'll try to position the group now for the next upturn. Is the portfolio the way you'd like it? Or is there room to perhaps be a bit more active on the divestment side as well? There is always kind of divestments on the horizon as well, but it's also linked also to valuation and the way we believe in the markets. But I mean, that is So always on the agenda. And we are working in both ways with this, to be honest. We need to be honest, always honest, of course. But I mean to tell you that the way we look at it, so portfolio is definitely a two way activity for us. But for us also portfolio optimization, what you might not see is also putting priorities within the businesses and stepping out of certain segments stepping into other segments. There is, of course, exits ongoing within the portfolio, but it might not be seen as kind of divestitures. Very good. The second question for me, if you could give some more guidance on the Offshore And Construction division, you talked about sustained or even higher rate of growth in the Q4. Obviously, this is one of the key earnings drivers now for the group, Meaning the pace of that growth into 2020 is quite important. So any indication of sort of where the last couple of quarters orders have been running in relation to sales To set the stage for what to expect next year? It's higher. I mean, we have the highest order book that we had for many years. I mean, it's difficult, Terry, to give you a guidance, but we can say it's higher, and we expect the profitability to improve in the next few quarters step by step. But it's really to give you a guidance on what levels. We don't want to do that. We simply see it's moving in the right way, and it is improving, and we expect improvements here step by step in the next few quarters. That is really I don't know if we're going to tell anything more, but I think that's what we can tell at the moment. Okay. Let's turn to the room and see if there are any questions. Yes, there are. Hampus Singelau, Handelsbanken. Two questions. On wheel systems, could you maybe talk a little bit where you are in the inventory reductions? We should speak more to come into Q4 or a bit less. Second question is on Spartanburg. If you can talk about capacity utilization, how things are going there? And then lastly, I would like to hear a little bit about cost saving. If you could Quantify cost savings during the quarter and at least say if it's less or more, will we ship back more next year? Finally, I mean, we are stepping up. So the actual cost saving this quarter, we talked total, I'd say, a few tens of 1,000,000 of Swedish kroners probably from these new measures, if that's what you meant. And that's going to increase in Q4 and going to increase even more. But the LION part of it will be in 2020 and not in this year. But we talk a few tens of 1,000,000 of Swedish kroners. I mean, it's not really the big, Big chunk of it will be in 2020. So when you add more people to the headcount reduction within the same cost. But that's, of course, that is improving the run rate. But I mean, this is not going to improve short term. That is going into 2020 because this Headcount reduction is also linked to a few moves of production and all of that. So that is also why it will take a little bit longer, but we have identified some more efficiency measures, if you put like that, going forward. And then you said sorry, you get back another one. On wind systems, where you are in the inventory reductions? Inventory reduction will be less in Q4 than in Q3, but there will be inventory reductions as well in Q4. In Spartanburg? Spartanburg is It's still I mean, we are growing. I mean, we are probably, let's say, making profit in North we are making profit in North America at the moment, but I mean, we are not really supported by the underlying market, let's say. So we don't really see that there is not really a substantial improvement quarter on quarter. We are kind of growing our market share in North America, but that is an overall shrinking market. That is kind of a little bit tough at the moment as well. So it's difficult. We're working on it. But at the moment, it's kind of quite tough markets in North America in especially in agriculture, but also in material handling. Both material handling and agriculture is quite tough in North America. Erik Paulsen, Pareto Securities. Can you talk a bit about the CapEx profile in the coming years because you said it's going down now. What we said is that we what we divide into what we have underlying, which is in line with the differentiation, About SEK1 1,000,000,000 or SEK1.1 billion. And then we have what we call strategic CapExes. And we have been through a phase now in 2018, 2019 then partly slightly in the beginning of 2020 where we have larger strategic CapEx, but that will then go down. So what we have then we've been more strict on strategic CapEx as going forward. So but it will not be down slightly more than underlying depreciations, Not in full in 2020, but it's when we're moving into 2021. So it will be sliding down. Right. Can you tell us anything about restructuring charges for 2020? Again, that depends on what we as Peter said before that we are we don't with the current market conditions, we are on the business areas that we want them to be On the cost base. So what we said is that we and then that might be that we need them to take further restructuring costs. But right now, we Yes. The guidance on €500,000,000 And then next year, we see then most likely, we will get back to the guidance of €250,000,000 Right. Thank you. Okay. Seems to be no further questions in the room. Operator, do we have any questions from the telephone lines? We already have a question from Mathieu Soult from Commerzbank. Sir, please go ahead. Hi, Peter. Yes, first of all, maybe also, Pete, you spoke already on facility adjustment. Do you have Specific target for Healthcare and Aerospace in mind, which you would like the group to have in, let's say, 2, 3 years down the road? Sorry, Malte, I didn't get it really. Christoper, maybe. Okay. I will try to rephrase the question again or Speak a bit louder. I mean, you talked a lot about portfolio readjustments. And do you have a specific target for Healthcare and Aerospace Do you want to reach over the next 2 to 3 years? No. I mean we don't really have a specific target besides that we want to continue to grow it. Mean, we are expanding especially within aerospace, we are expanding our offering and we're moving into new ceiling families. We are penetrating more of the sealing applications within engines. We're also targeting more of what we call airframe seals or what we talk structural seals on an airplane. So we are basically having very high market shares in the segments where we are present within sealing solutions. So the growth here will be dependent on that we are able to grow our, let's say, offering into those segments, which we think we have good possibilities to do as we are kind of already established as one of the main suppliers. And we know there is a lot of supplier cutting and all of that within the aerospace industry. So I think we are well equipped to grow. I mean, our market share in existing segments, there is a few maybe, let's say, what we call Airframes. I'll be down to details. But I mean, in some of these product families, we still have potential to grow, while in others, we're probably on a market share that we cannot grow. So the growth there We'd be mainly coming from extensions in the offering, and we see good possibilities to do this. And the same basically applies also in the other area, coated systems, where we also have aerospace exposure on these escape slides and all of that. That is also where we're working heavily together with the customers in order to develop lighter materials, in order to kind of save some weight on the airplanes. And there also, we have good momentum to get even closer to our customers. So this is coming primarily, I mean, this is coming from basically organic development, and we expect grow. And the same applies for Medical and Healthcare, where we have made a few acquisitions in the last few years, and we have now created a platform for growth. So that's going to come through pure organic growth where we kind of leverage the solutions where we have to individual customers and moving in that to wider space. I mean because most of these all of these acquisitions we've been doing Has been fairly local, original companies, and now we're pulling it into a global sales organization and then being able to offer it to more customers. So both of these areas is going to grow. And there's going to be a stepwise, let's say, not a stepwise like that. It's going to be a continuous growth and continuous focus in extending both the product offering as well as the customer portfolio. Okay. And maybe a second question rather on wheel system. I mean, you some years ago, you gave some synergy targets also with CGS acquisition. Maybe you can Update us there where you are, what you have achieved and where you have been maybe short, where you have exceeded the target. And particularly also maybe on the second comment, also say something about The technology transfer between trailer book and meters and if you have been able to grow also in your anticipated larger sizes, Construction tires there or where you see the business developing going forward there? It's not easy to say now when we look at the performance, let's say, the actual underlying EBIT performance. But I mean, the integration has been successful. We have been able to position the METAS brand, the Gontraleborg, in a very good way. We have been integrating and closing some close to 15 sales offices, integrating the sales offices. We have been getting purchasing synergies. So the integration as such has been good. What remains on the synergy side is to grow the sales, especially traction, and that is kind of more a long term range extension and then putting that into to the market afterwards, and that is where we still have some way to go in order to but that is also not clearly, let's say, that we are late. It's simply that's a long time because it requires investments like we do in Serbia, like we do in Czech Republic, and it takes time to get into that. So the integration has been good. And then, of course, it's not easy to stand here and blame the market. But I mean, I must say it from when we did the CDS acquisition a few years ago, I think us and Everybody else expected, let's say, that the agricultural market to bounce back, but it's not it has not happened. Since then, we believe we were in a throw, and I think also everybody else, if we're not blaming analysts, they are also wrong sometimes. So I think also that analysts were also, let's say, in line with us here. And that is really the big disappointment for us and the big Cannot I mean, of course, we always try to do better, but if we look at the pure integration efforts made following the CDS acquisition, That's actually internally been very well made. We have built a new organization. We changed the organization. As I said before, we have closed sales offices. We have gotten kind of these moves in between the factories. But then unfortunately, the market has continued to develop negatively organically, even though I think when we made acquisition that everybody expected it actually to improve from that level, but that has not happened yet. But while we still see that underlying market, more food is produced, more advanced tractors is coming on the market. We know now we have AgriTeknica, which is the biggest trade show for this coming up in the next weeks, and we know there's still a lot of launches of new better products, more digital solutions. So I think the industry is getting more sophisticated. The Production of food is increasing. But unfortunately or strangely, if I may say, it's not really coming into sales yet. And it's not only for us because that is the overall market. So that is the way We'll look at that at the moment. We're working hard, of course, to adjust for this and to improve from this base. But at the end of the day, We cannot blame ourselves for the integration. It's simply the underlying market, which has not developed as we expected for the last few years. Yes. Thanks already for that. And on the R and D synergies, are you Yes. That's ongoing. I mean, We have been changing I mean, now we're down to the details again. We have changed the curing systems for our tires. We now do nitrogen curing instead of steam curing, which is then saving energy and then by saving cost as well, improving our CO2 footprint but also improving the efficiency of that. There is several we also now, if you relate back to this Agrotechnica show, which is coming up. Now we're launching what we call a new NoTrack system, which is actually a joint which is a combination of pneumatic tire and rubber track with the benefits of let's say, maintaining the benefits of both. And that is a development that is ongoing between CDS, if you say CDS and the Trelleborg organization, which is now 1. And now I mean, it takes some time to do it, but we're launching this now together with 1 of the major tractor manufacturers. Also from a production innovation, it is happening. And also from a product innovation, it is happening. So this is really also You can always push a little bit more, but things are happening and things are improving. We have one more question on the line. Yes. We have another question from Robert Davies from Morgan Stanley. Sir, please go ahead. Yes. Thanks for taking my questions. I guess just you have two questions really. One was around the Wheeled Systems business and the ongoing inventory de Stock that you mentioned in sort of still persisting into the Q4. Could you give us some sort of idea on a sort of relative balance? I guess, I'm Sort of asking in the terms of what are your sort of expectations in terms of margin profile for that? Can you actually get margins up In an environment where you're getting an inventory destock in that business? And then the second one, I was just sort of more broadly on some of the end markets. You mentioned sort of autos, I think, progressively getting better. Is that from a demand standpoint? Or is that just a comp effect as you're moving into the back half of the year and into early 2020. Thank you. Now if we talk about automotive, I mean, our reading of the situation is not really that the underlying market is improving. It's more that the destocking is flattening out or we're more going to continue to supply in line with the demand. So it's not really we don't see an improvement in the underlying demand. It's simply that Our, let's say, loss of sales in that area has been definitely above the kind of the market development. So that is more and Inventory adjustments are true when we get more into. So that is the way we look at that. And then on the margin in wheel Of course, as we guided here, we don't expect the margin to get a lot better here in Q4 compared to maybe that we can do a little bit uptick, but it's not going to be, let's say, a bounce back here in Q4. We expect also from a we of course, also from a seasonality point of view is a tough quarter Q4. And on top of that, we're going to continue to do inventory adjustment, but maybe not to the full extent that we did in Q3. But nevertheless, there's going to be a negative push on the margin coming from inventory reductions as well as coming from seasonality. So that is the way an important quarter For us here is, of course, not maybe Q4. It's more we're going into Q1 and Q2 next year where we hopefully will see a market improvement coming. And that is also from a profitability point of view, especially for the agri part of wheel systems, then Q1 and Q2 is the most important quarter. So it's not really Q4. That's great. Thank you. Very good. I have one more question, which relates to your comment about the negative mix impact on Sealing Solutions in the Q3. You expected that to improve a bit in Q4. Should we expect The pace of year on year decline and for the margin for Seiling to more or less go away in Q4? I don't want to give that details really because, I mean, when you talk about mix In Q4, it's a little bit linked to automotive. Is automotive shrinking? And on top of that, we also have some kind of downgrading about the factories, and we expect that to improve. But on the same time, we maybe also expect the Enel Industry to be a little bit tougher in Q4 compared to Q3. So overall, I don't think as we see it today, I mean, it's not going to be a big change on the trend compared to what we've seen in Q3. I don't really want to Send any signals there is a difference at the moment. Very good. There appears to be no more questions. Thank you so much. Peter, any finishing words? Thank you. No, I mean, I want to say it's a tough I mean, we are developing a quarter which is not as good as last year. And I mean, again, the explanation is especially in wheel systems and then some central cost compared to last year. But overall, besides that, I mean, we continue to work hard to adjust of course, basin to adjust operations to the underlying markets. And of course, we need to continue to watch carefully what is happening going forward. But I mean, the major priority for us is, to get wheel systems in the right shape and in the right position in order to really get the gains when the markets eventually turn up The underlying consumption, the underlying production of food and the underlying movement of goods is there. It's simply they're not buying tires at the moment, That is something that we need to adjust for and something we need to be ready for when it eventually turns up. Thank you.