Earnings Call: Q2 2018

Jul 20, 2018

Ladies and gentlemen, welcome to the Kjelliborg Q2 2018 Report. Today, I'm pleased to present Peter Nielsen, CEO and Urs Bergel, CFO. For the first part of this call, all participants will be in a listen only mode. And afterwards, there will be a question and answer session. Speakers, please begin. Okay. Thank you. Welcome to all of you to this Trailersborg Half Year Report 2018. I'm speaking, Peter Nielsen, CEO of Trelloborg. And also later on, I will be joined in the call by Ulf Bergwold, our CFO. And also Supporting us on this call is Christophe Schurgren, Head of Investor Relations, who might also step in if any specific question pops up later. But then moving on to the agenda. And of course, as usual, Guiding us through this is some slides, which I guess you have picked up on our web page. And then turning to Page 2 with the agenda in this pack. As usual, starting with some general highlights, guiding you through the business areas, and then Ulf who will guide you through the financials, then finishing off with the summary and some comments on the outlook for the running quarter and then finishing off with Q and A. So that's agenda. And then quickly moving to Page 3, which is the headlines for the quarter. Heading on this slide and also for the report, continued earnings improvement. We continue to move our earnings up. And this is actually several quarters in a row now that we've been able to increase profit rolling 12 profit actually more than 5 years now. So that has been a steady increase and will continue this quarter. Sales is up in the quarter by 6% assisted by organic sales, 2% in total and then excluding private deliveries as we report these two Organic figures and sales is up by 4%. And also to note here, we see, let's say, an increased positivity going into here in the running quarter Q3. I mean, we had in the finishing of the quarter some sliding of sales, let's say, impacted by some tightness in certain parts of the supply chain. So we're actually going into Q3 with a better order book Then we went into Q2 seasonally adjusted. So we are confident about the running rate going forward into the running quarter. More comments about that later. EBIT increased by 19% year on year, corresponding to a margin of 14.7 percent highest EBIT for Traalborg in a quarter and also with a margin which is well ahead for of last year, equal quarter. Items affecting comparability came at minus €32,000,000 Ulf will get back and comment on that. No change. There is, of course, some lumpiness in between the quarters and this, but the guidance for the full year remains. On this one, cash flow on a similar level as last year, slightly down on cash conversion, impacted by somewhat higher CapEx this year compared to last year. Ulf will comment on that as well. And we also note its satisfaction that we continue being able to make bolt Acquisitions, which is supplementing our already strong positions in these two areas. But some more comments on that as We talk about this in the individual quarters. Then moving to Page number 4, a little bit of organic sales growth. As you see, all across the world, basically with exception of Other Europe, but Other Europe is also impacted by some decision to actually step out of some mixing sales, compound sales, external compound sales to our operations in operation in Slovenia and also some other items. But generally, no concern about that and good growth and good markets in all regions, especially strong maybe on all China, but Ulf will get back also and comment on that a bit later. And moving to Page 5, back to the agenda and quickly moving on to the business areas and on to Page 6. Start talking about Charitable Character Systems. Organic sales down by 6%, but this is also the business area which has been impacted by this change of sales in the mixing operations in Slovenia, where we then Either to focus this mixing units in internal demand and on purpose actually stepped out of some external supply or compounds. Coated fabrics, which you know is half of this business roughly. General Industry Automotive is strong. Aerospace is Somewhat weaker in the quarter, but not really driven by underlying less underlying demand. We see this more as an inventory adjustment for one of our customers. We don't see that being really real underlying demand. Printing Blankets, lower sales in Europe and Asia, up in lower sales in Europe and Americas up in Asia, basically same development that we've seen for some time. EBIT and EBIT is up. Satisfaction here, I mean, we are still some way away from our target, but at least We are now firmly moving in the right direction with margin improvement, solid margin improvement compared to last year with the results especially on this overall Productivity, we are putting a lot of measures here to improve the underlying operations. And with some satisfaction, we see that the improvement is actually kicking in. And also in this area, an important small though, but I mean, important acquisition for us, Lancotek, which is supplementing our position within a special niche within Counterfabrics, which has been concluded here in the beginning of Q3. So that's basically the comment on Coated Systems. And then moving over to the next page, Page 7, Industrial Solutions, organic sales, for a plus 6%. Same level as previous quarters, Basically, good demand in most segments. We see some building related segments, which is more flattish, not down, which we see It's more related not related to the underlying demand, but more with some supply chain issues in certain areas of this segment, which is basically generally a commentary as Industrial Solutions. There is tight supply chain in certain areas. And if We and our customers have been able to really deliver everything we just asked for. We would have Seeing a slightly higher sales here, but that is something we're working on, something that we expect to be sorted here Going forward, we also have to know the continued tight availability, especially the quality of labor in Czech Republic here, and that is also a challenge that we have, we've been working with in order to improve going forward. But in total, we have also here a solid improvement in profit. Margin is up by almost 1 percentage point. And then we have also EBIT is up with double Basically, the double percentage compared to the sales growth. So this is also good leverage on the increased volumes and generally good managed. Moving on then to Page 8, Trolleborg Offshore Construction. Here the heading is light at the end of Tunnel, we actually see now for the first time in quite some time, we will see a solid improvement, especially in the Oil and Gas during the quarter, even though we have to highlight that it will take time before this improved market situation actually kicks into sales. I mean, we have a time lag here of some 6, 9, 12 months depending on the business that we're working with. So this would not be Immediate change in the next 1 or 2 quarters here, but definitely we see that we're starting now to build order book and We see with some confidence that we are actually turning a corner here. And we also see within the Infrastructure part of that also certain improvements. I mean, there's also some mix issues in this business, but we are Seeing here that we are actually turning the corner and we are, for the next running quarters here, Actually believing that we're going to be moving into positive territory here in terms of profit and also organic sales year on year. So this is, of course, satisfactory. On top of that, we also want to note that the closure of the U. S. Plant that has been communicated end of last year. He is fully running according to plan, and we have now manufactured the last product in this U. S. Plant, and we are now starting to move all this equipment to our facility in UK, where it will be up and running then in the next few months and thereby also kicking in. So some extra benefits related to this closure. So this is Offshore and Construction. And then moving on to Page 9, Sealing Solutions, organic sales plus 6. Could have done slightly better here. There is some tightness in the supply chain, both for us and for our customers. And this is impacting and we have also, I mean, some I shouldn't say plastics and no disappointment, it can be that. But I mean, if we would we would have been able to sell a little more if we would have been able to actually deliver exactly what What would the customer ask for and the customers would have called off what they are actually using. So this is generally good all geographical markets All geographies and most market segments developing nicely. Asia, especially strong. And EBIT and margin has been up almost a percentage point. And the same here, we see that EBIT is growing more than the sales. So we have a good a drop through also here from the extra sales. Moving on then to Wheel Systems. Organic sales Class 4, especially stronger than agrioe. Aftermarket ag is more flattish, Even though we know that we estimate that we're actually gaining share here both in the OE and aftermarket sales, and we're actually performing better in the ag and the underlying market. Of course, we also note that behind this organic sales figure, there is some impact, negative impact from this dry weather that we know about the Northern Europe, even though we should not exaggerate this, but there is probably a percentage point or something which you could blame for this. Industrial and Construction Tires continue to do very well. As communicated before, here we have also some tightness and we are actually not able to Fully satisfied the demand, but this is something that we are investing and we are building capacity. We'll be step by step here coming into full operational mood here step by step for the remainder of the year and actually going into 'nineteen. So that is being adjusted. EBIT Substantially up, 34% up, of course, benefiting from the higher sales, but also benefiting from the continued successful integration of CGS. And we see now continuation of synergies kicking in. And here also we announced after an acquisition, local, very regional acquisition, which makes us market leader in New Zealand, which is an interesting agricultural market. But so this is, I mean, solidifying our position in the Pacific areas in Australia and New Zealand by this acquisition. So that is something which we are also happy to be concluding in here in this running quarter. So then moving over to the Jundaljan Financials and then asking Ulf to guide you through. Ulf? Okay. Thank you, Peter. So let's dig a bit deeper into the financial numbers. On my first page slide, Page 12, sales development, you can see that organic growth in the quarter was plus 2%. And excluding Product related business, the organic growth was 4% coming mainly from Industrial Solutions, Sealing Solutions and Wheeled Systems. The impact from currency was plus 3%. Structural growth is 1% coming from the Dartix and White acquisition in Coated Systems and White Wheel Systems. Next slide, Page 13, describes the historical performance of our growth. As you can see, we have had growth in the last 9 quarters. Organic growth has been positive the last 6 quarters. On Slide 14, you will find a reported sales development per quarter as well as rolling 12 months, which is mostly impacted by structural growth. On Slide 15 presents our EBIT development. This was our single best quarter to date measured in absolute terms. Our EBIT reached SEK 1.293 billion, equivalent to an increase of 19%. The EBIT was positively impacted from currency translation of SEK 29,000,000 in the quarter. EBIT margin, excluding items And comparability ended up at 14.7% versus previous year of 12.3%. And year to date EBIT in absolute terms and EBIT margin are the IRIS so far. Slide 16 percent EBITDA margin on a rolling 12 months basis, a stable EBIT margin looking 4 years back. On a rolling 12 month basis, we are currently at a 13.7 percent EBIT margin. The next slide presents the profit and loss statement for the total group. Items affecting comparability was minus SEK 32,000,000 in the quarter related to restructuring cost And it's in line with our annual guidance of SEK250 1,000,000. The tax rate was 25% in the quarter. Our guidance and underlying tax rated 26% for the full year since then. On Slide 18, percent earnings per share. Adjusted for comparability items, the earnings per share was up 16% to EUR 3.40 for continuing operations. Slide 19 describes the development of our operating cash flow. The operating cash flow was mainly impacted by an improved EBITDA, but also increased CapEx spending, which is in line with our annual guidance of SEK 1,800,000,000 to SEK 2,000,000,000. On Slide 20 presents a rolling 12 months operating cash flow. Our cash conversion is on a healthy level, however, impacted by the increased CapEx activity lately. On Slide 21 shows the year on year development on leverage on continuing operations, including or excluding comparability items. Net debt is impacted by negative translation difference of SEK789 1,000,000. Slide 22 shows the leverage and net gearing development since 2010. On Slide 23 describes the return on equity with a long term target of 12% on continuous operations, including items affecting comparability. Actual outcome is 9.8% versus 12.7% a year ago. Prior year rolling 12 months was positively impacted by the capital gain from the disposal of the Czech compounding of Operations Executing in Q1 2017. Rolling 12 months 2018, this year's rolling 12 months is impacted by higher restructuring charges coming from the closure of a factory in the business area offshore and construction, which was communicated then in the end of 2017. Finally, on Page 24, I would like to finish off this part of my presentation by repeating our financial guidance for the full year 2018. As I mentioned then, the CapEx is then guidance is SEK 1,820,000,000. We are running cost and restructuring cost that will about SEK 250,000,000. The underlying tax rate, that is SEK 26,000,000. And then he has put information that we have amortization of intangible assets in the size of of about SEK 300,000,000. So Peter? Thank you, Andrew. Back to the agenda summary and then finishing our outlook. Moving on to Page 26. Said before, we continue to move. I mean, we have 21 quarters now with stable and continuous improvement in EBIT, and we continue that. Sales is up by 6% in the quarter, supported by organic sales of 2%. And also then excluding private deliveries, somewhat better, to 4%. And also note, we don't want to highlight this. We are going into Q3 with the positive momentum. I have been mentioning a few times that we have tightness in the supply Chain shouldn't be exaggerated. Really, we are working on that, but there is some limited impact from this In Sealing Solutions and Industrial Solutions and then also some lack of capacity, especially for construction related tires Within Wheel Systems, all of this is being addressed and most of it is actually related to fine tuning with the exception of this construction tire capacity in wheel systems, which is more driven by, let's say, major CapEx, especially done here in Serbia, but also supplementing a little bit step by step also in China and U. S. In order to move into that segment. So we don't feel that being a major problem, but nevertheless, it has been a smaller issue here, especially ending here of Q2. EBIT is up, as I said, 19% and then to be compared with sales up at 6%. This is a good leverage. Margin up 14.7%, even now 14.9% for the 6 months, even though all of us know that we have kind of more heavy sales in the 1st 6 months and the 2nd 6 months within Tralborg. So we shouldn't we are still some way away, even though getting close for the 6 months to our long term target of 15, but that is a full year rolling 12 figure, and that will, of course, go down now as we will have less sales in the second part of the year. Items affecting comparably relatively low in the quarter. But as you heard from Ulf, the overall guidance for the full year remains. Cash flow also somewhat lower cash Conversion, but still on a healthy level, but good control of that and really not driven by an increase in working capital. It's actually increase of CapEx, which is then used to increase efficiency further and to improve our Jagerie rig capital balance and of course also to grow capacity in the areas where we deem that being beneficial. Also satisfactory, 2 bolt on acquisitions, continue to work on acquisitions. We continue to have see possibilities in that area, even though, I mean, organic efforts always top priority and then we're using more of the bolt on acquisitions catalysts to improve in the areas where it makes sense. Moving on to Page 27. I mean, overall priorities, Same as before, adding one bullet here, manage constraints in supply chain. Once again, not to exaggerate this. This is something which is, of course, in a way a positive challenge for us that we have increasing demand in certain areas, But it's definitely becoming a priority for us going forward, being able to actually cover the demand as we have. And this, of course, also the constraints in supply chain is also somewhat pushing up the raw material pricing in in areas, but that is also something we feel that we are very well under control and don't see any problems related to that. On Page 28, so outlook for Q3 remained the same as the outlook for Q2. Q2, As you see, slightly lower organic sales compared to Q1 for us. But we see with now, let's say, Confident that maybe Q3 will be closer to Q1 than Q2 in terms of organic growth. That is what we see at the moment. So that is why we have this comments that we're going into Q3 with a more positive momentum than actually going into Q2. So that is finishing off. And then by that, quickly moving then over to Q and A on Page 30 and then opening up for questions and Our first question comes from the line of Klas Bergelind from Citi. Please go ahead. Your line is now open. Yes. Hi, Peter Nielsen, it's Klas on Citi. A couple of questions from me. First, I want to come back to Sealing Solutions and the slower growth. You talked about deliveries being pushed to the right. Is it really only bottlenecks? Are we seeing customers being more cautious in light of the trade war narrative. Others in the sector haven't seen any weakness yet, so I'm interested in terms of what you're hearing on an underlying basis. Yes, they comment on that. I mean, we actually we have a stronger order book now than we had going into. We have continued to build order book in the quarter. And I mean So we actually we don't see a softening at all. Of course, we are very well aware of this trade discussions, if you want to call it But we don't really see it in the business at the moment. And then of course, we have to be careful whether this growing order book is on the back of longer delivery times. But as we see it today, we don't really see any softening anywhere, to be only looking at Ulf. I mean, we don't really see it anywhere else. And it It's stronger in Asia. North America continuing very good. I mean, in Europe, it's, of course, a little bit softer compared to North America and And Ayesha, but still holding up on a very good level. Okay, perfect. Then on Offshore Sure. And construction, it seems like infrastructure deliveries can help you in the second half, but for oil and gas deliveries to improve in 2019. You talked about quotation activity picking up. But can you tell us about the actual orders? How much real increase have you seen so far? So how much of the lost volumes here in the near term can you recover? It would obviously be great if we get a feel for the annual run rate looking at orders. And then on the margin then, just a follow-up. You previously said that you can reach the previous peak margin in this division without seeing super cycle volumes and that it can happen pretty soon. Can you provide us an update here on where we can get to maybe low double digit margin. I mean, it's difficult to give exact guidance exactly when it happened. But we have a firm growth In the order book for the first time in 2 years, I guess, we have the 2, 2.5 years back before we can see this. So we have big orders. I mean, because the oil and gas, we've been lacking a little bit big orders, but we have a few big orders coming in now for a Banff and North America, for Brazil. For Mexico. We had 1 month. So that is actually coming. But what we are tracking is what we call orders to be placed because we know that our The customers has got into order and then I got it back to us. And that kind of orders we place has been growing a lot the last few quarters. So we see the quoting activity going up, and we expect fairly strong order intake here in the 2nd part of the year. And then we have from order to delivery, it's going to take us from basically 3 to 12 months. So that is what we say. I mean, we're probably going to get some benefit also due this year, but the major benefit will be here going into 2019. And which relates to infrastructure, Just to comment on that, that is more we have a good underlying demand in the infrastructure. We have a good order intake there. That is more phasing of individual projects where it's going to be slightly stronger we expect here in the 2nd part of the year compared to the 1st part of the year. So of course, all in all, we expect this to In Q3 to get close to breakeven or maybe moving slightly into positive and also and that relates also to organic Growth year on year, we are on the same slightly positive or 0 and then going into more positive territory in Q4 and then even more so Going into next year, that is what we see at the moment, to be very open and transparent on that. But then to comment on exact When they are kicking in, when it's Q1 or Q2 and exactly what the margin will be. But we're definitely moving in the right area. And for the First time in quite some time, we feel firmly, let's say, confident that this improvement is actually coming. Okay. That's good. The next one is on the aftermarket in ag. You say growth would have been 1 percent higher for wheels if it wasn't for the weather. So the aftermarket would have been growing maybe 2% more than if it wasn't for the weather. Is that correct? So what were the Easter market volumes have been. It is very difficult, this Claus, to give you as a guidance. We see There is a few individual percentage points on this. I mean, we're not that is more a guidance. We're not talking 10%. But whether when we talk 1% or 2% or 3%, it's really difficult for us to estimate. Of course, we see that there is, yes, underlying and we also have to Because it's Northern Europe. And of course, we are selling a lot in South. We're selling North America, selling China, selling everywhere. So of course, we shouldn't I overestimate this. There is a negative impact, yes, but whether that is 1% or 2% on sales, I honestly I don't know. Okay. Because my point I'm coming I'm looking at it like this, that it is only 1% to 2%, then I thought that the weather impact was bigger in aftermarket Because otherwise, it would signal that the underlying momentum in the aftermarket is also not great or But it's definitely big. It's definitely big in Northern Europe. And Northern Europe is not the only that is why I mean and of course we know what this could offer. We say AG in total is 60% or something or 60% of oil and out of that probably Northern Europe is, I don't know, 20% of that or something is Northern Europe. So is what has been impacted, so of course. And so that is where the impact is. So we shouldn't kind of exaggerate that, because we have to know also that the underlying Tractor registrations are normally still negative in Europe, even though we understand from their lease that they're expecting a pickup, even though turning slightly Positive in North America tractor registrations, but it's still small figures and they're hovering around 0 growth in OE segment. So that is really what we can comment about that. Yes. A quick one, finally, bottlenecks in relation to your increasing CapEx wheel system growing 4%. But what would if the bottleneck starts to ease, which will release for the growth. What can we see here into the second half, I guess? Is it the second half that you expect the bottlenecks to The bottlenecks in wheel systems is more related to our kind of following the CD acquisition, we have been pushing quite a lot into the construction segment. So that is more related to that really. That is related to a strategic effort. And still, it's a small part of wheel But nevertheless, we would have been able to. There's also 1 or 2 percentage points probably on the total of wheel systems that we've been able to sell. And that It's a little bit dependent here for the remainder of the year, but that is also something that we especially will see going into 2019 When we are pushing that, because we're a little bit reluctant. We get a lot of interest for our efforts into that Especially from OE, but we need also to balance OE compared to and I don't know also because this is also I don't know if you noticed, we had also an In our wheeler, Kansu, one of our main competitors in material handling tires, was acquired initially only a few days ago. And that is, of course, also changing a little bit the ways of that. There will be some turbulence for us in a positive way. We believe that is positive for us, There will be some turbulence in that arena going forward, which is something we are working on. We don't really know exactly the impact, We believe that's going to be positive for us. Thank you. Our next Question comes from the line of Erik Goranck from Thank you. First question on wheel systems, and you talked about your capacity there limiting growth. If you could put a number on how much better organic growth would have been had you not had the capacity constraints you talked about? I mean, once again, the capacity constraints here is not really related to the base business. It's related to our efforts into construction. And that's when we've added 1, 2, 3 percentage points. But that is something that will come and is not really related to underlying demand. It's more related to us pushing into that segment. So that is something which is not related to the underlying market. It's more related to our strategic efforts. And the efforts has been Kind of more successful than we expected. So we got a higher demand for that segment than we expected or not planned Because we planned for it, but we would been able to sell more quicker than we will. But that will come. That is simply a matter of when we have this Serbian We're up and running, we will get this capacity, and especially in the way we have, let's say, substantial interest for us to move into that arena. Okay. And the second question, if you could just repeat what you said for Offshore and Construction, if I heard you correctly there, organic growth around 0 in Q3 and then potentially positive in Q4 and margins to be around breakeven in Q3. Is that correct? Yes. I mean, Also to be fully transparent, our own estimates here show a slight positive organic growth in Q3 and a slight positive also EBIT. But then, of course, it depends on phasing on individual projects and all of that. But we look for the, let's say, the full 2nd part of the year, we firmly believe in the positive organic growth and yes, positive EBIT. Of course, let's say, not really Anyway, close to what we're aiming for long term, but definitely, let's turn in the corner and we feel that we have both Positive organic growth as a positive result for the remainder of the year. Okay. And then a follow-up on that there. Last time around or when we've seen improving demand From low starting points in that business, it's often been on extremely challenging pricing conditions. It is. How is that developing now when you're starting to see some demand coming back here? It's always the same here. Of course, the first big orders, you have to become and you need to wait. And I mean, There's always a balance. So that is what we see. The first orders will be with lower margin and then the better margin orders will be only a later end of this The first orders, once again, we talk about in a year's time or something where we're going to get, let's say, the benefits of these better orders. The first Orders as always, but that is kind of already in the order book. So that is why we see, put it on a normal Pricing, we would probably make more money than we will do in Q3. Thank you. Our next question comes from the line of Johan Schrodberg from Danske Bank. I appreciate your comments on wheel systems, also the impact from in in Q2 from the warm weather. If you were to guess now for the Q3, would you say that it would be roughly the same impact? Or is it getting worsening, I. E, I mean, you have been referring to Q2. If you were to make a guesstimate for Q3, should we with more word about Q3 than Q2. I mean, we have the seasonality here also going down. I mean, usually, the 1st part of the year is stronger in Okay. So I mean, it's going to be weather dependent here, right? And also, what's going to happen here with kind of some support or something. So it's really difficult to speculate. I mean, we don't see any change. If you look at the weekly figures at the moment, it's actually continuing on the Same path. I mean, so you not really see any major changes compared to the to what we have seen in the first 6 months, but this is going to be weather dependent going to be government support, but it's still hovering around the same kind of demand as we see now. I don't know if No, no, no, no, it's Mariano. As Peter said, the seasonality. And then the focus we have is then to building where to capture the synergies and then to have And if the market comes, it will come, let's say, and then we are prepared. And but the weather is wetter. And as you remember also, We had a very bad start at the beginning of the year with a really, really wet and long winter. And then coming into this, it's not been ideal conditions for the for Pharma. But then once again, I want to remind all of you that this is for Northern Europe. I mean, we're working globally. So this, of course, we're sitting here. Most of us is working out of the the Navian region, and we are heavily impacted by this, and we read the papers and everywhere. But it's not really the, let's say, the fact of life everywhere that this is an issue. Yes, understood. Could you maybe you can talk a little bit about the raw material costs that you saw or the headwind you saw in 2017. When you look at now the 2018 figures here, obviously, there's a dramatic improvement in underlying EBIT. Would you say that you still we should still expect some raw material costs, easy comps in Q3? Or would you say that, that has now been paid through during the first half? If you remember coming back then that we had a very kind of a headwind in the Q1 of 2017, and then we moved in then with more of a on par in Q3 and then slightly better in Q4. So we are moving into on a year on year comparison, we are more or less on the same level. So And we and then the rest of the organization, they are quite impressed with that we are proactive and we are on it. And so we are ready with If something comes, we are ready with to compensate that fully. We see now, I mean, based on this demand that we see and you're following other companies as well, you see the As well as the demand, of course, there is a renewed push upwards on raw materials in general at the moment. So we are already implemented price increases and we're working on that. So that is something we are expecting further price ups from raw materials here in the second part of the year. But We are well as Ulf said, we are well on top of that, and we don't really we are not in any way concerned about that. Now when you're moving into a slightly calmer environment in terms of organic growth in wheel systems, I mean, You've been talking about the synergy progress being kind of put on hold or at least being postponed. How is that activity going right now since underlying demand is slowing. I mean, that's well under control, and we were getting the benefits that we have. And I mean, I must say this will be having impact, as Ulf said, especially on the ag side from this late winter and now the dry summer and all of that. So there is, of course, a negative. So we still expect that we are kind of ahead of the peak in ag. I mean, we are still expecting an uptick eventually on AG OE and also for the, let's say, aftermarket demand. So we don't feel that we are in any way have the peak behind us. We actually still have the peak in front of us. And then especially when it's happening, it's difficult to say because a lot of things is in that. But we don't see that this kind of needed upgrade on agricultural equipment has not really happened yet. Great. Thanks a lot. Our next question comes from the line of Olof Sederhorn from ABG. Please go ahead. Your line is now open. It's Ulla from ABG. I have a couple of questions. First, going back to the Offshore and Construction business. Just to get a sense of 2019, would it be possible for you to share sort of current book to bill ratios or maybe what the order growth is year over year, just to get a sense of what the top line recovery can be in 2019 as it looks right now. Yes. It's really difficult, Ulf, because I mean, we are well ahead of 100, of course, book to bill at the moment. But exactly when that will kick in. And we need actually to get back and give you better guidance on that one when we have more orders. What we see now is that We are getting the first orders and we have booked some orders, but we also what we are more positive is that we say these orders to be placed. We know there is a lot of orders out in the market and we're going to get our fair share of that. But that's going to happen here in the next few months or up till the end of the year. So of Of course, I can guess in 'nineteen, but it will really be a wild guess. And then I prefer to wait with that until we have a firmer view on that ourselves. All right. That's fair. Turning a bit to Coated Systems. The internal change of mixing operation there, how long should we expect that to be a drag on? Is it basically a couple of more quarters? Or how does it look? No. It will be still a negative impact from that in Q3 and Basically gone in but little more or less than in Q2 and basically gone in Q4. So that is something we A year ago or yes, a short year ago. So that will be up and run rate here mid Q4 or something like that, and we will have no impact from that. All right. And how should we think about organic growth for this business in the longer run? I mean, you have some Printing brackets is not that exciting. Maybe the coated fabrics should be growing right now. But if we look at Q2 and take out sort of the negative internal effect, those 3 percentage points. But how is coated performing versus printing blankets right now? And how do you think about the long term growth? Kauter did is running I mean, it's taking printing is running with a good efficiency, good cash generation, but by the way, maybe shrinking with A year or something like that. And then the other part of it should be growing well within our range there, between 5% 8%. So I mean, in total, we should be, let's say, between 3 or 5 positive organic. That is really what we see for the full business area. In the individual quarter, as we hinted here also, we have been negatively impacted by some lower Aerospace orders, which is not really based on any underlying demand going down and We are not losing share. We are actually gaining share in that segment. So that is smaller and more supply chain on the manufacturing of the appliances. So we don't really see. We are little bit more negative in the quarter than it should have been, especially driven by the lower aerospace deliveries. All right, perfect. Thank you very much. Our next question comes from the line of Anders Engerdorff from Handelsbanken. Thank you very much. Two questions for me. If I look at your guidance, your repeating guidance for Q3 And also, as for 2nd, at the same time, you say that your order book is better moving into 3rd compared to moving into 2nd quarter. Is this related to the tightness in the supply chain that we should see some of that business moved into Q3? Or How should we think about that? If you could maybe talk a little bit about that. No, no. And then really, I mean, to be also, as usual, very transparent. I mean, of course, the In individual quarter, fell a little bit short of our expectations going into the quarter. So really the guidance here that is we are more firm that we're going to get closer to the organic growth that we have in Q1. And there is some benefits or offset some delay on some project orders in the Q3. But overall, we see it's basically the same As a year to date or slightly better than year to date, if you want to give an even more firmer guidance here going into Q3, that is really what we want to say, Hampus. So it's not really The change in guidance is simply that this our sales expectations in Q2 fell slightly short Due to a little bit on the tightness of supply, but also to a few individual orders being pushed into Q3. Fair enough. And on the operating leverage, very good operating leverage in wheel systems, 40%, if I'm right in my calculations. And Apart from the seasonality second half, should we expect a better operating leverage for Grid Systems going forward if you take in both the volume side and where you are on prices compared to raw material. A little bit careful here, because I mean also the benefit is also coming from It's kicking in. So I don't think we will see in an we still have some synergies that's going to be kicking in, especially here related to we have the new is up and running and we still actually have some synergies in front of us because we say the synergies we're running here going into 2020, there is some actions that are still not being implemented. So that we'll continue to get kind of synergies on top of to operating leverage. And that is also what we see in the individual quarter, but we see that kind of format continuing here for the next 1 or 2 years. All right. And the last question, still moving around Wind Systems. Could you maybe Give us an update on where you are in Spatensburg and in the U. S. And how things are going there. U. S. Is moving in a more positive now. That is where we see tractor Going up and we also see that we continue to grow and we continue to grow our share in that area. So that is still Moving and I mean, as you know, we have 2 factories, Spartanburg and one of them was the same as the city, I would say, Salt City, Iowa. So that is Both of them is moving in a positive way, but of course, always some bumpiness here as you are gearing up And you are going into more and more tire models and pushing that into the market. But overall, We firmly believe that our move into U. S. Is positive and it's going to continue to be positive. All right. Thanks so much. Our next question comes from the line of Maarten Schulz from Commerzbank. Please go ahead. Your line is now open. Good morning also from my side. Basically, two questions left. First of all, on the point you've just mentioned on the synergy, can you give or maybe quantify By which synergy you still target until 2020? And my second question would be on the organic growth. In Asia, we've only seen 5% this quarter, and you especially mentioned that China was quite good. Is there any other regions where there are some problems? I mean, to talk about the first, the China growth, Wolf, I mean, maybe you can share what growth did you had individually in China this quarter? In the for total group. Yes. We had in China, we had 14%. 14% organic there. So that's continuing and the negative is more related to some individual territories. Basically, we then we gathered China together all over the Asia together with Africa and Middle East. So basically, Asia It's growing. We had some in the quarter in rest of the world, as we say. But we had a good growth in China and in Asia. Please continue. And then, of course, about the synergies. The synergies is that we are as Peter Nielsen said earlier, then that we are building we have done some CapEx and then also moving into some into the construction tires and the building capacity. And those will then be and that is in the middle of it. Can I just add also that, Malte, you know the slide we showed in Ulf's package during the Capital Markets state? There you have the phasing and we are phasing according to plan basically. So there is There's a firm slide on that. If you go back on the Capital Market Day and that guidance still remains. Yes. Okay. Thanks. We do appear to have no further questions at this time. So I'll hand the conference back to you, sir. Okay. Excellent. Thanks to all of you for your continued interest in Tralborg. And as usual, Christophe is fully available for any kind of follow-up questions. And then following that with those of you going on to vacation, a nice vacation and then meet all of you here early autumn, I guess, in various forums. Take care and have a nice summer. Thank you. Thank you. Thank you for attending. You may now disconnect your lines. Thank you.