Earnings Call: Q3 2018

Oct 31, 2018

Welcome all of you to this presentation of our Q3 results for 2018. As usual, start by myself, giving you some overall takeaways from our side and then go through our individual business areas in a similar way and give you from our main takeaways per business area. And then Ulf Berghold, our group CFO, will guide you through more the figure part of the report, And then we will finish off with some comments from me as well and, of course, also then opening up for a Q and A session following our presentation. Agenda for today. As usual, same agenda as we have when we present our quarterly reports the last a few years actually. Highlights, starting with some general highlights, comments on the individual business areas, financials by Ulf, and then some summary and finishing off with the Q and A. So starting, we have a headline saying solid quarter. The quarter basically developed in the same way as we had for earlier in the year, of course, impacted by the seasonality here. As you We have a major part of our business in Europe, which is an impact by the holiday season and also with some seasonality in Businesses are usual, but all in all, ending up with a record high figures in all aspects of Votrelleborg. Sales up at 8.3% and increased by 14%, of course, driven both by organic growth similar to Earlier in the year, some positive structural effects coming from some acquisitions made and then, of course, also assisted with the currency as We report in Swedish kronas, but mainly sell in other currencies. EBIT up also record high for Q3 for us, SEK 1,100,000,000 and increased by 23%, which is, of course, showing good leverage in relation to the sales growth and also then giving us a margin in the quarter of 13.6%, which is also the highest EBIT margin we ever had in quarter 3. Get back in comment on the EBIT later on for the individual BIA, but you see it is growth all over with exception of offshore production. Items affecting comparability, a little bit low in the quarter, and Ulf will give you later. We'll actually guide down these items affecting comparability to the full year, but Ulf will get back on that. But I mean basically in line with our plans, nothing Nothing strange in that. Cash flow, slightly lower compared to a year ago, driven by a higher CapEx, which we also guided before that we will invest more. We are investing more in order to improve our structure, of course, also get some structural savings by moving some of the operations and So then some focused investments that is more than usually for us in growing in specific segments. Also with satisfaction, we continue to make acquisitions, 3 bolt on acquisitions signed in the quarter, 2 of them closed and one pending here. We expect a Silpro acquisition in TSS, which will be closed, let's say, only beginning of next year, but the other 2 is already in the books. Looking at the sales, it's basically the same development that we've seen. This is, as I said, excluding our project related businesses since that is a little bit bumpy and not really depending on the underlying markets. Basically, same growth, strong growth in Western Europe, strong growth in North America. Other Europe, a little bit depressed, but still small numbers. Asia and other markets still growing. China continues to for us organically to grow in excess of 10%. And then we have extraordinary high Growth figures in South and Central America, but I mean that is a very small part of the group, so the figures is a little bit strange, To be honest, nevertheless, very strong growth, but it's not really impacting the overall figure. So but basically, development, same as earlier in the year. And we are already now, I can comment also, we foresee similar development here going into Q4. Getting back then to the business areas. Coated Systems, We see organic sales unchanged, but structural growth is strong, supported by 2 acquisitions done in the year. Also here, as earlier alignment, we are changing and mixing as a focus on a mixing operation within this business area, means that we're leaving some external sales, and that is impacting organic growth by roughly 1%, and that will continue to be a negative drag for this business area, at least for the next two quarters as well in a similar level. So that's going to push down the organic growth in Q4 and Q1 by 1%, which is then, Let's say, long term, going to create more and more efficiency for us. That is, of course, why we do it. Quoting about this is now this is 2 operations here, Coated Fabrics and Printing Blankets. We have a similar development in both of them. Coated fabrics doing good. Aerospace doing very good. Generally, industry in automotive also continuing good in this area. We are Still a little bit subdued, what we call in the transport segment. We are big then in one specific segment here, which is gangways for rails, would have changed the kind of the how should I say, the law has changed and we are still fine tuning here in order to comply fully with the new regulations. We are through that, and it's going to be an improvement going forward. Printing Blankets, solid in the quarter, A little bit weaker in Europe, but supplemented by good growth in Americas and Asia. All in all, nevertheless, ending up on a flattish Sales development, EBIT growing by similar sales, as you see, supported by the acquisitions and also with a general good were cost control. And then I noticed also in the quarter this acquisition of LancoTech, which is an American factory, which is then supplementing our offering within a specific segment related to polyurethane, which is going to be beneficial for us, especially targeting medical applications and aerospace applications going forward, a nice supplementary acquisition, which we have been in the making for some time and therefore happy to be able to sign it. Industrial Solutions, I would say, very strong organic sales development. It is 9% up, especially driven then by general industry and basically in all geographical regions is improving. If you should highlight something going down, the building related segment is down a little bit, but honestly, that a little bit up to our own decision. We went in with some pricing price increases linked to some raw materials, specific raw materials linked to these segments, and we expect that to improve going forward. But in the quarter, we've been hit by this action initiated by ourselves. Also note here, we have some inflationary pressure in part of this business and also some extra cost related, we call bottlenecks, qualified operators, especially related to some countries in Middle Europe, where it's actually Getting tricky to find qualified labor, which is then creating a turnover higher turnover than we would like it to be, which is then creating extra cost. And on top of that, also, we expect an extra inflationary pressure in those areas linked to the salaries, and that has also been somewhat hitting. Not any big figures here, don't overestimate it. But nevertheless, there is a negative impact coming from this in the quarter. And all in all, solid improvement in profit here as well. Margin, as I said, somewhat impacted by these extra costs related to the labor issues, but nevertheless, under good cost control and good leverage in all. Also here, we can also note that we opened a plant in Mexico related to building and some automotive some building related products and also related to some automotive niches. So that is also spreading basically spreading our footprint from U. S. Into Mexico and thereby be or we will be able to cover better coverage of some existing customers in this part of the world. Moving on to offshore construction. Continued negative strong negative organic growth. We have been downsizing this a lot, But I mean, this has been negative organic growth substantial negative organic growth for quite some time now. And this is, of course, creating a hit on the profitability here also. And here also, we have to note that we have we were expecting So some big projects to be delivered in this quarter and in Q4, but some of these big projects, specifically one big project Australia, that has been pushed into Q1 or Q2 next year. We will have to wait and see, especially linked to our customer did not get fully the how should I say, the governmental permits in place to conclude a project this year. So that's in the order book or almost in the order book, put it like that. There's always some unsecurity when these things happen. But this is kind of the reason for this more downturn in this area than we kind of expected only a few months ago. However, with satisfaction, we see now the order book is growing fast. We have, let's say, oil and gas related businesses. We have the best order intake in the quarter for more than 2 years, and we also are within the running quarter, we are also quite positive on the order intake for this running quarter. However, we have to note also this growing order intake substantially growing order intake is not benefit us for the next few quarters. So that is why we guide also that we see this improvement coming in 'nineteen early 'nineteen, but mean, the substantial part of this is going to come only in the latter part of 2019. Valid also for the infrastructure segments, of course, somewhat supported by the push of projects 2nd part of the year into next year, also supporting the infrastructure part of it also where we see we have a good order intake, both in the Marine Operations and also with the tunnel segments also here where we have gotten or we have gotten and we'll get So some nice orders, especially for China in that segment. But we want to be firm on our guidance here. I mean, this is a little bit changed compared to what we said before linked to this push of projects, we expect Q4 still to be in the red. And as we see it today, we expect a slight profit then going into beginning of next year with an uptick on the later part of next year. So that is the way we see it at the moment. So the challenge is, of course, that organic sales will continue to be negative, but activity level is very high. So this is something that we have to balance and have to make sure that we focus on long term and not really on the short term here. Moving on to Ceiling Solutions. Also very strong organic sales, 8% up and It's coming from all over the place, all geographies and basically all market segments, including automotive, because we got some questions on that. But also, automotive is growing in the quarter, although not with 8%, but it's still a solid growth also in the automotive related segments. We, of course, see a slight downturn there, but it's nothing really dramatic, and we continue to gain market share in the areas where we are focusing. Highlight also Asia, of course, we are focusing a lot on Asia here, and Asia is then growing even more than the 8%. EBITDA margin up solid and, as you see, with good cost control and reasonable leverage. But we also have to say here, we continue to invest in order to support the growth going forward. So we are not really allowing all the leverage to drop through. We also continue to invest and to grow into segments like the Medical segment. You see here also we signed the acquisition for Silpro in Minnesota. Very happy for us. We just then kind of creating a completely new platform for us in Healthcare and Medical. And of course, linked to that is also some marketing and sales efforts in order to utilize this new platform in the best possible way. Also with satisfaction, we also inaugurated in Quarter new innovation center in Germany decided to put it up in Stuttgart because we believe Stuttgart is a good location for these kind of activities. And we have a completely new setup here, which is going to offer us a much better platform in order to approach our customers in an even more professional way. But all in all, as you see, a satisfactory development of Sealing Solutions. Wheel Systems also growing 3%. Some all those are some mixed. I mean, we continue to grow a solid growth in the, what you say, agri sales in North America growing more flattish in Europe, more somewhat weaker in Asia. AgriTire, very well. Original equipment continued very well, but we still have a, let's say, a bit small, what we call subdued demand for aftermarket overall, and we are linking that a little bit to the weather situation, which has been kind of pushing down the aftermarket a little bit, but we still feel there is an underlying demand, but we will need some assistance in order to get us to really trigger the expected growth in the aftermarket. Other segments, as you know, Agri is some 60% of the sales and other segments with the NDS, which is related to industrial and construction, all doing well. Here, we're adding capacity. We are now also gearing up. For those of you who have been following us for some time now that we've been investing in Serbia and the footprint in Serbia is now getting ready. And thereby, we will be able also to continue to capture markets, especially in the construction related segments. So very happy for that development. And all in all, of course, we have a margin continued margin expansion. We are 1 percentage points up compared to a year ago, and you see also there is a good leverage from the sales. But looking at that, you also need to be aware, which we don't really comment on here, but the comment on the report is also that Synagis is kicking in and Synoduce is assisting us as expected in the quarter. And also here, we continue also to make supplementary acquisition, acquired the market leader in off road tires TRS in New Zealand, which means now that we clearly can say that we are the market leader for especially agricultural tires in both New Zealand and Australia, which is an interesting may not be the biggest market globally, but nevertheless, an interesting market for agriculture, which we now are also using that platform also to push into Material Handling and Construction in Oceania. So that is overall satisfactory development of Wheel Systems as well. Moving on, Handing over to Ulf then on the financials. So please. Good morning. I will then guide you through then the consolidated group and then My first slide is then the sales. You can see here that we have an organic growth of 4%. And if I then as Peter said, also then excluding Base business, which is then lumpy between the quarters, then we have an underlying of 6% organic growth. And then to highlight, Even though you've seen the numbers, but good numbers within Industrial Solutions having a growth of 9%. You have a Cleaning Solutions with 8 Percent and then wheels not in the same magnitude, but all over 3%. As Peter also mentioned, we have closed well, not closed, we Signed 5 acquisitions in 2018, of which 4 we have closed, and then Silpro will then be Closed in the beginning of 2019. Next slide, that is then the historical development of sales. And then you can see then we have 10 quarters of growth and where we have 7 quarters of positive organic growth. And the guideline we have is then to we have the sales growth of between 5% 8% over a business cycle. The next slide is then the rolling 12 months development. And then you can also then see the quarter by quarter development. And the Q3 now in 2018, that is the highest quarter so far in Trello Boy. The next slide is then our EBIT. We that is also then the best Q3 so far in both absolute terms in EBIT And also in margin, we have an EBIT increase of 23%. We then we Impact by translation of SEK 60,000,000 when we then that is a translation impact, that is not a transactional, it's a translation impact of SEK 60,000,000. We can also say that I've seen that there's been some issues or questions about The central cost, and then we have a guidance on the central cost, which is between SEK 40,000,000 70,000,000 per quarter, and then that means that it should be about SEK 55,000,000 In this month in this quarter, we have exceptional lower cost. That is due to that we have normally then we have also then we assess provisions, accruals. We also have FX items impacting was M and A activities. And particularly this quarter now, we had a very positive one off accruals or provisions That said, I also want to highlight then that we have, if you look on individual business areas, we have Coat system, which is 19% up in profit. Industrial Solutions is up 19%, Sealing Solutions is up 21% and Wheels is up 25%. So it's a very strong underlying almost from the business areas. And then if we then assess the year to date, that is the year to date that is the best so far in the group in also in absolute terms in margins for 9 months. If we then look on the next one, that is the rolling 12 months development. And you can see then that we have 22 consecutive improved EBIT quarters. We have an EBIT margin then on a rolling 12 month basis on 13.9%, and that is also the best ever for the group. This is then the P and L statement for the group. We have then low restructuring In the quarter and also then if you look on the full year to date, we also then consider then below previous year's numbers. We have a guidance of SEK 250,000,000 and we will then as we see now, we will have we will be between SEK 150,000,000 SEK 200,000,000, more close to the SEK150 1,000,000 than the SEK200 1,000,000 and that is then for 2018. The financial net has 2.6 percent versus then last year of 2.4 percent and that's basically impacted by a higher base rate and in particular than the U. S. Dollar. The tax rate is 24% in the quarter versus last year's 22%, but then the underlying guidance is still 26% for the group. If I take then the next slide, which is then earnings per share, we have then, if I look on the If adjusted by items affecting comparability and looking at underlying, we have an increase of 21%, up to 2.98 Next slide is then the cash flow, the operational cash flow for the quarter. It is, as you can see, then much better good, solid operation operational from EBITDA improvement. We also have impact in the quarter by higher CapEx activity, and that is particularly then within Industrial Solutions and Sailing Solutions. And also we have somewhat higher working capital, which has come from a higher activity and then mainly from Sailing Solutions. Next one is then the rolling 12 months development on cash flow. And then that is, of course, also then impacted by our higher CapEx activity. And the guideline for this year, as we previously said, is that between SEK 1,800,000,000 as we see now, it will be more close to the SEK 2,000,000,000 than the SEK 1,800,000,000. And then the next slide is then our leverage year on year performance. We are then having which is then going down in for the group. And then also then I also want to mention that we have an FX impact, of course, which is then about SEK 800,000,000 negative so far year to date on the net debt. And the next one is then you can see then the historical development and where you can see that we have come down to very, very good levels. The next one is then return on equity, where we have a long term target of 12%, unfortunate or not unfortunate. But if we just to explain the numbers, that is then the rolling 12 months 2017, that was impacted by the capital gain of a mixing unit that we sold in quarter 1 2017, which is still then in the rolling 12 months of 2017. And then an opposite, in the rolling 12 months 2018, that is then impacted by the Higher restructuring charges that we then took in quarter 4 2017 based on that we closed then one unit within Business Area Offshore and Construction. And then coming to my last slide and is then the financial guidelines. Then I said, we have had a guideline guiding on SEK 1,800,000,000 to SEK 2,000,000,000 on CapEx. We will then be close more close to the SEK 2,000,000,000. The restructuring charge will then be about SEK 150,000,000 to SEK 200,000,000, previously SEK 250,000,000 underlying tax rate, that is 26%. And then And then intangible asset amortization, that is about CHF 300,000,000 So Peter? Thank you. So getting back, I mean, we had a heading solid quarter. Sales is up by 14%. Profit is up by 23%. Organic sales continuing as earlier in the year, also with a record high EBIT for Q3 and also with a record high margin for Q3 for Trelleborg. And also then operating cash flow, somewhat lower than a year ago, but that is basically based on decisions by ourselves to invest more than before in kind of focus oriented investments. So that is something we actually believe is good. And also, satisfactory also that we continue to make bolt on acquisitions because we believe that is highly value accretive long term for us, that we continue to build our positions and continue to reinforce our already leading positions in selected segments. Then looking overall as our focus, same as before, basically manage our market conditions. I mean, I'll get back to but we don't really see any changes in that one. We see it continue as is, and we're going into Q4 with a stronger order book than we went into Q3. So we don't really see any downturn in any. We see some downturn, but overall, The mix is the same. We see some upturn in some segments, and we see some slight downturn in others. But overall, the guidance remain exactly the same. Managed sales and margin, as we say, market positioning, that is, of course, we continue to work on creating our leading positions and doing that in various ways, continued portfolio management to improve. I didn't comment before, for instance, on this move, Ulferno move from Houston to that's, of course, important for offshore construction that we're getting that into a better and more lean setup. And also with satisfaction, I can mention there as well, we have already received our first orders for manufacturing in Skalmersdale. So that's also going to be off to a good start in early next year when these operations is up and running. Some constraints in the supply chain, I think, is nothing changed compared to a quarter ago. I mean, we still have some tight availability of some raw materials, tight availability for qualified labor in certain areas, but nothing really deteriorating. It's the same situation or similar situation as we had a quarter ago, managing in a good way, and we're not really concerned about it. But nevertheless, we need to recognize there is some challenges, good challenges, I should say, because based know that you have a little bit higher demand than you were prepared for. Continued focus on innovation, smart use of technology. Of course, we continue to invest quite a lot, as we said, in the Innovation Center within sealing solutions and also continue to launch new kind of business models and new products based on new technology. Also integration of recent acquisitions. I said that, I mean, the biggest acquisition which is still benefiting us is, of course, the acquisition of CDS 1.5 years ago, and we're now Moving into a situation with these investments that we're doing in the manufacturing setup is, of course, taking some time following the acquisitions, but we continue to see the benefits from this. And we are fully in line with the synergy extractions, as we commented on the Capital Market Day earlier this year. So no changes there, and it's moving in the right area. The outlook in total is the same as we had previous quarter. We see it's moving on par with the other one. Of course, we will note, Like all of you, there is a slight downturn in automotive in certain geographics. But overall, it's not really a major thing for us, and we continue to grow our market share in those automotive segments, which we are focusing on. So we feel that is a kind of a reasonable good development, but of course, not really with a good underlying. And then we note in other areas like in oil and gas and some infrastructure construction related areas that the demand is going up, which is more late cyclical area. So all in all, we will see this is balancing each other in a good way. And I said before, Order book going into Q4 is actually stronger than it was going into Q3. So that is kind of with a self confidence that we are making this guidance for the running quarter. So I guess that's it. Opening up then for Q and A and inviting Olof up to the stage as well to join us and guide us through this Q and A session. Thank you, Peter. I'm Ulfla Forschhammer, and I'm working at the Denmark as an analyst. And I can kick off with 2 questions. And firstly, a quite positive outlook for Q4, but we're soon approaching 'nineteen as well. And it would be very interesting to hear your thoughts about what you're seeing in different segments for 'nineteen as of now. Now I mean, I do say positive, but I don't see it as a positive. We see it continuing in the same way. We don't see really any changes. I mean, I said there is some changes within the individual market segment. But as a totality, we see general industry continuing as before, automotive, slight downturn by compensated by growth other areas, we still feel that, that kind of the agricultural market is somewhat subdued. Of course, we saw that the OEs has been growing in a nice way, but we still have some push in the aftermarket, which we're expecting to turn up eventually because we know the tractors are being used and we know the farmers is using the equipment. So it has to eventually, they have to buy new tires as well. We still feel that this market is a little bit depressed. Well, you have to wait and see. I mean, we are not overly concerned about that as we are using this to move into new, more efficient structure and continue to invest in order to be better positioned to capture this growth. So but nevertheless, So there is the potential positive coming, but not really confirmed yet. So don't misunderstand me. There is not really confirmed in the figures. It's not going this quarter. But nevertheless, if you go into 'nineteen, we have some wishes that it might turn there. But overall, we cannot really see talking to the customer, looking into our order books, we cannot really see any changes. But then, of course, we note on the same way where we are not leaving our own world, we see also that there is some political movements globally, which might impact this and which might have an impact on the kind of global demand. So of course, this stated with some extra uncertainty. But of course, who knows if U. S. Make a deal with China, something suddenly is being positive or There is a nice Brexit. Who knows what happens? But nevertheless, we need to look at that, and we need to say there is some uncertainty in the markets which we cannot influence. But overall, everything continue as earlier in the year, and we don't see really any changes, but some mix issues in between some individual segments. Yes. And in wheel system, you were mentioning that you're ramping up Production in Serbia and I guess also in North America. And we're seeing quite good demand, especially for from the construction segment. How would it be possible to quantify it in any way how much more capacity you will have in I don't really want to I mean, the construction we are very I mean, we are big globally. We are probably number 2 globally in Ag Tyres. We are number 1 material handling tyres globally, but we are maybe on top 10 for Construction Tyres. So Construction Tyres is kind of the smallest segment for us and, of course, with the strongest growth opportunities. But also, we need to note that also in the construction segment as a total that there is quite a lot of commodities. So we are not really Targeting the full construction tire market, we are targeting, let's say, the high end applications, the demanding applications. So even though the construction segment is a lot bigger probably than the Ag tire segments, but the interesting segments in the construction segment is less than in the Agtire segment. So we are working on it, and we are launching kind of Product family by product family, we see good growth opportunities, but it's not going to happen immediately. That is something that we're going to launch step by step. We know it with satisfaction. There is quite a high kind of demand, especially from the OEs, but we also want to make sure that we have a balance in the aftermarket and the OE exposure in that segment. So that is something we're working on in order to get. We're adding I'd say we're adding capacity, but we're also at the same time, investments, let's say, in Serbia, we're investing in Czech Republic, investing in China, investing in the U. S. So that is also part of the reason for the high CapEx levels in the quarter, and we definitely feel that we're moving into We have better overall structure within Wheel Systems, fully aligned with our plans that we had a few years ago. So it's nothing really at least internally, no surprises. So this is kind of moving, and we feel that we have a solid creating a solid platform then to continue to grow in Asia, We continue to grow in North America, continue to grow into the Construction segment, while we are more kind of well established, if I may say, in the Agri segment and the Material Handling segment. So this is a little bit Portfolio management that we're working on that in that area, fully aligned with our expectations, but maybe with somewhat subdued demand, especially in the agri aftermarket, where we kind of expected better growth, but that is supplemented with probably a better growth expected in the Agri OE and continued good growth in the Material Handling and Construction segments. Do we have any questions from Agnieszka, please? Agnieszka Villela, Nordea. I have a couple of questions on the outlook. Firstly, you say that your order book today is higher than what it was when you entered Q3. And I wonder if you exclude or include the, say, oil and gas Segment orders in that? Include everything. Include everything. Yes. So if you would exclude them, can you tell us about kind of visibility of that? Similar, similar. I don't really I don't know exactly the figures, but then I think there's no dramatic change. I mean, it's the same. It's the same. But we have growth in certain general industrial segment as well. So not really only related to that, but also a little bit down in some other areas. Yes. And how long So yes, I want to clarify that. So okay, as I said growth in the order book, yes. As we say, the underlying demand is basically the same. We don't see any change in the underlying demand. And no concerns on the Automotive segment either from your side? Of course, we have concerns. We're looking at it, and of course, we note externally. But looking The numbers, we it's a little bit lower growth rates, but it's still growth. And then also, can you just remind us about your visibility for the businesses apart from oil and gas? We have generally good visibility for the next 60 to 90 days. Beyond that is a little bit more guesswork. And then just a question on wheel segment. I appreciate the fact that you're quite satisfied with the development, but when I look at the EBIT change And considered organic growth, FX and acquisitions, I think that the leverage on organic growth was Quite subdued in the quarter, especially if you think that you got the synergy in There is some improvement possibilities in this, as always. So of course, not all stars are aligned. There is always some stars which is misaligned. So we are, of course, working on that. There is a little bit higher inflationary pressure in certain areas, Czech Republic, which we need to compensate. So we're implementing pricing. For those of you following the market, I mean, we have been implementing price increases on that to percent for that. We have some hit in the quarter for some extra inflation, which is not fully captured. There is also some price rollover situation. So also, I mean, not really raw material impacted, but more that we have a kind of a formula with some of our OEs, it is then impacting it also. So we have a slight negative from that as well. But so there is always some so I mean, in optimum situation, we would have had higher profit, but overall, it's always a little bit ups and downs. So of course, I mean, you're correct in that. If every if you have a 100% full drop through with nothing else, then probably should have been better. But that is something we cannot okay, we cannot preact on some things. We need to so we're working on that, of course, to correct going forward. So that's what I said, the overall satisfaction, but we can, of course, always find some issues that I think it could have been managed better, I shouldn't say, but where we could or would have wished for a slightly different development. And how much synergies are left For that business and what's the run rate today? I don't know. I mean, I can't remember. I don't know if you have the figures We're pretty optimistic on each quarter, but if you go back to the Capital Market Day, we have Specified the synergies to be achieved in 2018 2019. I don't have it on top of my head, but But there is documentation we will give you the details. Okay. Thank you. Olof Sedran, ABG. Just a couple of questions. The restructuring costs Lower than expected, and you're guiding for somewhat something lower as well. Does this reflect Less activity? Or is it simply delay of activity that we should now No, I think it's more than it's last year, we had much, much higher. That was due to that was then closed Houston and then moved up to Skelmersdale. And this is just slightly lower, but it's also partly driven by acquisitions. And then it also depends what kind of acquisition you do and if it's a larger or smaller one. So but next year, we will come back next year To guide you when we release a quarter? It's not. I mean overall, of course, it's good that it goes a little bit up and down. It's linked to acquisition, linked to activities. So some of the actions is Okay. Due to some acquisitions and due to some changes, pushed it forward a little bit. But we still have plenty of possibilities to improve. It's simply that we will have a slight downturn here in the 2nd part of the year. Okay. And then I have a question about the group costs That were fantastic in the quarter. We would like to keep it like that there every Should we put in No salaries for us. No salaries for us. SEK 12,000,000 For 2019 or No, no. But what you need to do is that we will have one offs, I'd say, when we do because we do assessments on provisions, accruals. We have all M and A costs centrally, also M and A accruals, M and A provision centrally. So we need to see those. And then it happened to be that many items then turned kind of a positive in quarter 3. It's not a Big thing, but you need to regard it as kind of a one off. So the underlying is the guidance between SEK 40,000,000 SEK 70,000,000 in the middle of 55,000,000 and that's where you need to do. And then we if we pick up something more significant, if that would going forward, but it's not major significant, then We guide you, but you need to count to 55. And if you look at year to date, we are, let's say, on the lower end of the guidance. So this is really the way we look at it. I mean, we are on the lower end of the guidance for, let's say, 9 months guidance, if you put it like that. So this happens. And of course, we're happy that they are positive this quarter, but it could be slightly negative next quarter. It's depending on what is happening. Okay. And one last one for me. In wheels, We hear a few tire manufacturers talking about high raw material cost going into next year, etcetera. What's your view on that? It's a little bit difficult to say, to be honest. I mean, we still see it depending on in the Visual Raw Materials. But in general, we are not really expecting any push upwards, as you say, that there is some, I should say, challenges in some raw materials like carbon black and that, depending on the Russia relation with the rest of the world and how to do that. Iran is there as well. So there is a few of those which have changed kind of the supply chains in the industry. We have no General concerns about it. We think we're managing in a good way. And if it happens, it's not really a big thing, then of course, we need to change pricing. So we are not really concerned about it. I think we are compared to the now I should say, they have to comment themselves, Michelin and Bridgestone and others. But I mean, they are, of course, more Both the consumer markets, we are exposed more to specialty tyres. I shouldn't say it's easier for us to adapt pricing, but somewhat easier probably because we are more focused on individual segments. So we feel confident that we if the raw material pricing goes up, we will be just of course, we will with some delay, but not really talking about any major things here. So at the moment, Olof, we cannot See that is not on the top of our agenda, let's put it like that. Johan? Yes. Just a quick Question on the offshore construction business. I mean, you have this transfer of the operation from the U. S. To the U. K, which I have said previously should Sort of give you benefits around SEK 100,000,000 per quarter or SEK 100,000,000 per year. How where are we with regards to those savings in terms of I mean, how much did you get into in Q3 3, and what can we expect in Q4 and It's kicking in. But of course, the major of this saving is only going to kick in when we actually start to manufacturing the new So and that is, as I said before, we have gotten the first orders, and that's going to be we don't have exactly the delivery time on that. But we're going to start to make this in U. K. Instead of U. S. Here in beginning of next year. But parts of that saving has already come with the cost cut down, but some benefits will come also when we start to manufacture. So that is kind of a going run rate. So I have difficulty saying exactly how much is kicking in at the moment. We see the benefit. We see, of course, the cost is going down. The Houston cost is disappearing. But we don't really see the benefits yet of manufacturing in a more kind of more and more competitive setup, which we will have then in when we move everything to U. Sorry, I don't want to give because it's also project dependent, and this SEK 100,000,000 is plusminus a little bit as well depending on the orders we get. Thank you. Erik Kollering, SVB. Three questions. You've touched upon some inflationary pressures on the raw material side. But if you look at the net in the Q3 and also the outlook for the Q4, do you fully compensate yourself for both full material cost inflation and under If I take overall, I think it's slightly negative in Q3, but we're talking about a few individual 1,000,000 of euros on the totality is really neglectable, and we expect it to be I don't know what we say. Q4, I don't know about that. Moving into Q4, we will partly compensate that. But we will not have the Full impact because of barrels again. We're going to let's say, EBITDA, but then we also have to speculate what's happening. But with the anchoring, let's say, plusminus a few €1,000,000, that is something we need to accept if you look at the total group. And then on the second question, if you could say anything about what kind of magnitude in the oil and gas recovery That the Q2 or the Q3 order intake reflects, you said, the highest in 2 years, but I don't recall orders being that high 2 years ago either. So Are we looking at sort of a mid single digit return to growth next year? Or will it be significantly into the teens? I really want to wait I'll see the order intake here for Q4 and Q1 next year, but we see there is a strong uptick. And of course, with the current Order intake, then of course, if you look at the full offshore construction, you need to be aware also oil and gas is one thing and infrastructure is the other thing. But for oil and gas, we will need more orders in the oil and gas related businesses than we got in Q3 in order to go into solid profitability. But at least, it's moving in the right direction. So it's not sufficient to bring us up to a solid profitability. We need more, but we See movement and we expect growth in order intake also in Q4, of course, depending on when we exactly get to order. But we see the activity level is lot up. And then we say activity level is up, and we're looking at drilling is still very black. I mean black, red, just like. This is still very red. So that is, of course, we don't see any light in the tunnel, and that is why we did this kind of restructuring moving from Houston to Skelmersdale in U. K. We're cutting down capacity because we don't expect that market to go back, and we don't really see some increased activity, but not in all in dimension to compensate what we lost. While on the other area, which is more subsea, which is then for us, we'll distribute the buoyancy model, bend restrict the subsea insulation, there is very high activity level. So there is the expectation that that's going to continue to grow. So there is something which is getting back. And we have seen the first we got the first big order. Of course, that we're talking about orders also between €5,000,000 and sometimes up to €20,000,000 And these kind of orders, we have not been getting at all for the last 2 years. We got one order in this quarter, versus the first big order for 2 years, and we still have a few of these big orders in the pipeline. But when exactly they will come in, we don't really know. I have to wait before I can give you even better guidance for 2019. We need to look at the order book here for Q4 and Q1. Only thing I want to guide for is activity level is high, order book strongly increasing, and we believe we have expectations that we continue to grow with order book here into Q1 and Q4. And that is why we say that it's still going to be somewhat challenging for the 1st 6 months of next year. But with the current trend, we feel comfortable that the 2nd part of next year is going to be much, much better than it is today. Then the final question. Going into this year, you said that it would be an investment intense year. Is that still the case? Should we still expect CapEx to fall materially into 2019? Yes. We expect it to continue to be on a high CapEx level, and also we're going to give better guidance here in the next In Q4 report. Q4 report, but it's going to be continued to be on a higher CapEx level than it be in Trelleborg in the long term. 2018 or 2019 as well. For 2019 as well. For 2019 as well. 2018 and 2019. 2019 will be high as well in compared to historical averages. Do we have any questions from the phone? Thank And our first question comes from the line of Erik Paulsen of Pareto Securities. This is Erik. Regarding Automotive, touch upon it earlier here The outlook and sealing solution, and also Agnes can touch upon it. What is your current exposure within Automotive? I think it was 11% for 20 'seventeen, how does it look like now on a rolling 12 month basis? Similar. I don't know exactly the figure. Between 11% 12%, Looking here at Cristoffer, those are the figures. So I think that they're very similar. So slight 11% is probably a good reference point. Okay. And the second one on the acquisition multiples. What do you see here now? Are they still a High or have they come down in the recent market turmoil here? Yes. No, as you know, there's been a turmoil the last few weeks or months here, and we still have to wait and see. I mean there's still activity level. There's still a lot of companies for sale. And of course, we need to watch carefully what the multiples are. Of course, this turmoil has not been good for the multiples. Of course, we will try to use this in our discussions when we are buying something and when we're selling, we tend to try to forget about it. So this is, of course, a discussion point ongoing, and we basically have to wait and see exactly what's happening. But yes, the difficult really, I mean, I trust you understand that this is a bit up in the air at the moment and is a discussion point on the valuations. Okay, great. Thank you. Thank you. Our next question comes from the line of Klas Bergelind of Citi. Please go ahead. Peter Renouf, it's Klas from Peter. I have a couple of questions, please. First on Offshore and Construction, just to understand the moving parts. You saw delivery slippages, But you say that the savings are coming through. But then I want to understand the margin impact. Organic sales down 19%, which was In line with expectations, but the margin was quite a bit lower. And out of the backlog, are we looking at was this a weak price quarter? Was it mix? And on the new orders that you're taking now, which gives you visibility into the second half of next year, is pricing Higher on those orders than what is leaving the backlog right now? Or is the cost and volume effect mainly that will lift the profitability In 2019? I think that the profitability is more a fixed cost issue. It's an under absorption. We did not I mean, standing here 3 months ago, we did expect to sell a little bit more in this quarter. So we expected, say, the cost absorption to be higher. And that is also the challenge here looking into the 'nineteen figures is actually what kind of volume we get. I mean, when we look at the Direct margin, as we call it, which kind of where we absorb the projects with the margin excluding the fixed cost. I mean, they're on an okay level. It could be better, but they're on a okay level. So really, the dependent here is actually how much orders will get how much orders will we get, how much direct margin will we get to cover the fixed cost. And that is the big, big question mark for us, and that is something that we need to work on and make sure that we manage in a good way. But we feel that we have been cutting costs a lot in this area, and we are on a level where basically we don't feel that we should be cutting the fixed cost anymore, then it's better to wait until the orders comes in. Otherwise, we start to really destroy the overall business, and that is something we don't feel is justified at all at the moment. Okay. Then I want to come back to Automotive. You say 11%. But If you break out the break ins, which is more aftermarket, more recurring and any other business that is more stable versus pure production, What is the pure car production exposure within Teleborg right now? Yes. But probably, I mean, say, sixty-forty or something like that, maybe 60 oE and 40 the market, but it varies a little bit. But the answer we should be what we call OE. There's also some kind of aftermarket related business in that when we fuel injection seals or something. I mean, as you say, we have very, very limited sales directly to the OEs. I mean, we're selling to sub suppliers. And really with this Tier 2 or Tier 3 supplier, some of their business also goes into the aftermarket. So maybe if you group everything else, let's say, our best guess is probably fifty-fifty, 50% OE and 50% aftermarket. But honestly, it's really difficult to give more better figures than that. Okay. My final one is to come back there on Industrial Solutions and the cost pressures. You said that you had the rules on one side, and then you said that Costs were increasing thereon. Labor shortages, wages are up. How should we think about this impact into the 4th quarter? Will it get worse? Or to what extent can you offset it through pricing? Our ambition, of course, is not going to get worse, that it's going to Better, but I mean, we know that we need to watch it more careful, and we do expect some higher inflationary pressure overall going forward. But that is something we're working on constantly, of course, with price adjustments and with other kind of ways of compensating. So we Okay. We note that this is an inflationary pressure, but we are honestly not overly concerned, at least not at the moment. Thank you. Our next question comes from the line of Malte Schulz of Commerzbank. Please go ahead. Your line is open. Hi. Thank you for taking my questions. To your left, first of all, to the procurement issues. Did they Particularly impact the organic growth in Sealing Solutions like we have seen it in the last quarter? And can you quantify it? I mean, last quarter, we had approximately you said a 2 percentage point growth impact. What would we have seen if it would have been if you would have liked it? And second question is on the items Comparability. How should we look at it going forward? Do you still regard the EUR 250,000,000 as a good Guidance? Or would you also go there for a little bit lower figure? Yes. As on the last question here, I would say that if you Need something today for 2019, you should guide for €250,000,000 What was the first question? Sorry, Rod. The first one was then The impact on Senior Solution on Geordenberg. Yes. And the arrears, let's say, arrears as we fall in, basically on the same level. But I mean, another 2% you said, I think that's a High, to be honest. I mean, we talk about, yes, fairly small figures. And we will always have some areas. It's not that it's going to be 0. So I don't know, 0.5%, 1% maybe or something like that. But then it's not really a major, major thing for us. And once again, I mean, I know you're focusing on that, but the reas will always be there. So it's not really if we supply all the reas, then probably we will have another percentage points plus. But it is not, let's say, realistic to say that you have no areas. So it might be, if we have full capacity, a lot of availability, we will sell another 0.5% to 1%. But that is not really realistic to end up in that. That is an important thing for us that we don't feel that we're losing any sales. It's simply that there is a slight delay in deliveries in certain areas due to limitations of supply. And it's not all as I say, it's not only our bottleneck. Is also some bottlenecks in supply of some raw materials and all of that. So it's not really only caused by us. It's also caused by supply chain in other aspects. Our next question comes The line of Hampus Engelau of Handelsbanken. I have three questions. Starting off with Sealing Solutions. This business, I think, continues to Surprise on the margin improvement, even though that you have downplayed that for sometimes, especially on the second half. Could you maybe discuss a little bit about The 90 basis points margin improvement. I mean, how much is price realization cost? And of course, we saw the volume growth during the quarter. That's my first question. If I understand you right, the growth in GSS is very wide. I mean, we cannot identify Aerospace doing very good. We have some segment is doing also very good. We continue to benefit from kind of Construction Equipment part of it. So it's really widespread. I mean, I cannot really highlight a specific segment. It's not a specific segment explaining it. So it's really a growth all over the place. We continue to work what we call on advanced delivery services, adding more services to our supply. We might be sorting small assembly packaging, clever packaging, some RFID solutions, so some automatic feeding into the production line. So it's a wide variety of activities. But don't you must not forget that we have Within Sealing Solutions, we have close to 500,000 active articles every year. So of course, there is none of those products which is really driving the overall sales is really widely spread among a lot of different, let's say, small I mean, a big order within Sealing Solutions is €1,000,000 I mean that is a very big order. Most of the orders here is, let's say, a few €100,000 on annual supply. And then if you compare that to the total figures, you see it's not really any major impact from any individual sales. On the margin improvement, is that mostly volume? Or is it price during the quarter? No, no. I think it's more Volume oriented, and honestly, I mean, Hampus, we continue to invest. We continue to grow. As I said, we continue to invest in our, let's say, innovation center. We continue grow our presence in the aerospace area. We continue we have been investing quite a lot now into medical, which we don't really see the benefits of. So I think the actual drop through, I mean, I trust you see the figures and you know that we're working with fairly high gross profit levels. So I mean, if we were Interested in simply seeing the full drop through, you will see more than this. So on top of this, that you see this drop through that there is So quite a lot of investments in selling expenses and R and D. And if I move on to Wheel Systems and maybe Going back to the U. S. Operations. Where are you now? Could you maybe talk a little bit about Volumes, etcetera, how you're breaking into that market? Yes. We were still not where we wanted to be. Let's put it like that. We are quite far away. We would like to grow more. As you say, it's been good in certain aspects, but but not that good in other aspects. So overall, we are still, to say, a little bit behind plan, to be honest. We would if we looked at the plan we had 2 years We should have been a little bit longer, but we're moving in the right direction and we feel certain that we're going to get there. And eventually, we're going to get these market share gains that we are aiming for. But it's also a little bit, I should say, the competitive situation in U. S. Is a little bit tricky at the moment due DSE import duties and tariffs and all of that, that we need to be aware that we don't underprice and we don't overprice. So it's a little bit turbulent in that aspect. But Overall, just say, there is more to do than what has been done. So we still see that as kind of an uptick. But once again, it's a little bit turbulent at the moment due to these imported tariffs. And in certain tire segments, there is quite a lot of imports from Asia, which has been hit by these tariffs. We are not exposed to that. But then, of course, we are also partly exposed to it, I should say, but we were working through that. But the majority of our sales in U. S. Is not impacted by that, and then we need to make sure that we position ourselves in the correct way. So it's a little bit both challenging and showing quite good opportunities to prove it here as well. But that's something we're working on, and Ulf and myself was there only a week ago. So this is something we designed at the end that we're going there today as well, and partly that is also linked to this situation. Okay. Unfortunately, we're running out of time. So any closing remarks? Now only to send a message again, a solid quarter for us. We are growing sales. We are growing profit more than sales. We're showing the highest sales ever for highest profit ever for Q3, highest margin ever for Q3. Cash flow was slightly down, but that is linked to kind of decisions by us to do CapEx into growing into a better structure. So we are confident, but with some, of course, humbleness that we need to identify that the markets are A little bit more and more unstable at the moment and there is also some, so say, happenings outside of the actual market, which might influence the business. So we need to stay on our toes and we need to make sure that we are continuously So we need to stay on our toes, and we need to make sure that we continuously adapt and continuously change where we would like to change and where we can change. So that is really the message. So thanks to all of you and looking forward talking to you again. Thank you. Thank you.