Earnings Call: Q1 2018

Apr 25, 2018

Ladies and gentlemen, welcome to Vitrela Verk Q1 Report 2018. Today, I'm pleased to present Peter Nielsen, President and CEO and Ulf Burkhold, 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. I will now hand over to the speakers. Please begin. Thank you. Peter Nielsen speaking. Welcome to all of you to the presentation of our Trelewerk's interim report for January, March 2018. I will start and then later on the call, Ulf Bergholt, our CFO, will support me And guide us through the financials. And then at the end of the call, I will get back to sum it up and also then opening up for a Q and A session. But then jumping on to the presentation of our report. I'm going to use, let's say, the Our presentation, which has been presented on our web, which I guess All of you also have in front of you. So that is what I'm going to use as my while guiding you through the presentation. So starting then turning over to Page 2 In this presentation, the agenda, as usual, when we present our report, we start with some highlights and guide you through the business areas individually, Ulf then guide you through the financials more in detail and then some summary and some comments on the running quarter and then finishing off with the Q and A. So then moving on to the highlights. In Page 3 in this presentation, we have the headline, good earnings improvement. Sales is increasing in the quarter by 3% for us, which then equates to organic sales by 4% 5%, if you exclude our product deliveries, Which we usually do as they are kind of bumpy in normally bumpy. EBIT is up 12%, which then indicated good leverage if you compare to the increase of sales, and that is then corresponding to a margin of 13.1%, which makes this quarter the highest ever for Treleberg both in terms of EBIT and in terms of margin. Items affecting comparatives slightly minus 18% in the quarter, slightly lower than the average. But also Ulf will get back to the Guidance for the full year remains the same and nothing strange in these items from our point of view. Operating cash flow, Slightly ahead of SEK 400,000,000 roughly in line with last year. Still Going with we say it's efficient management of working capital, but of course, somewhat influenced by the growing Sales and also maybe more so influenced by the somewhat higher CapEx in this quarter compared to the corresponding quarter Last year, but all in all, continued as we see it's a very solid cash conversion running after the last 12 months at 87% of EBIT. So that is kind of the summary. And then moving over to Page 4, also part of this, with some further Light on the organic sales. As you see here, we have basically fairly stable organic growth all across the globe, but For what we call other Europe, which is basically former Central and Eastern Europe for us, where we are down, while other areas have been up between 6% 9%. On the positive highlights, I said the bigger economies in Europe doing fine, U. S. Is still doing fine, Asia, then all over, basically doing fine with China as a driver, but also good development coming from And in India, in this quarter for us. And in the other Europe, I mean, partly of this downturn in Central Eastern Europe, it's been through Some, like, cleansing portfolio cleansing of some of our sales, some of the local sales here From some of our factories here, we have been stopped selling some external compounding, for instance, which is low profitability, but nevertheless, So that is basically, as expected, and a fairly global Evenly growth for us. Page 5, then back to the agenda slide and moving on to the business areas. Turning to Page 6, where we continue where we look at Total Systems. Organic sales down by 4%, Better productivity and better control of the operation is pushing up to the profit anyway. And as you see, then the margin is up by 1 point A few more comments on the sales. Coated Fabrics, relatively strong development in North America, but Somewhat weaker in Europe and Asia, although not that big differences. Printing blankets, somewhat lower sales in most regions across the globe. And also the sales here, I mean, get back to the comment I had before, was slightly lower sales in Central Eastern Europe. I mean, here, we have had In one unit, we decided basically to downsize our mixing operations. It will align it more with internal demands, which has been putting down the Somewhat but not really influenced the profit since this has been used more as fixed cost coverage and now we are adjusting the fixed cost In order to get a better leverage of this, all in all, EBIT is up and also, let's say, 1.5 percentage points up On the EBIT margin, also note in the quarter, we made an interesting add on acquisition called Dattex, which is then Strengthening in one particular niche within coated fabric, which means kind of medical Coatfabric, you can say, which is used in health care applications. Nice add on for us Supplementing our already existing business within that segment. Moving on to Page 7, Treleberg Industrial Solutions, solid or very solid, even you can say organic sales growth of 8%. And here we can say we have improvement more or less all over, especially in all kind of industrial general industry related sales. We also see that most geographical regions actually improved here and also specifically Asia, developing very nicely. And This extra good growth is also having a good, good drop through in EBIT, which means also that we increase in the margin From 10.611. Also to note, but maybe here not as a bullet, but also this is the Q1 where we include Parts of this Rubenasavatek that came into the CDS acquisition being added to this This is the area. More comments about that in the report where you can read more in detail exactly what has been moved to get to these figures that you see on this slide. Moving on to the next Page 8. Still challenging market position is heading here where we continue to see a dramatic drop in organic sales in the quarter 18%, And the market situation remains challenging in offshore oil and gas. However, we have to note what we call the order Tunnels is increasing and we see that activity level is increasing in the oil and gas activity, but the major Impact on that is actual sales. We still have to wait for some 6 months before we will see that as Showing an uptick in sales. So we still will struggle if you say that with our onshore activity for the next Few quarters. Also in the quarter, we are still, let's say, a good market development, if you say, the infrastructure part of this business area. I think the quarter was somewhat lower sales and on top of that, there was also some unfavorable product mix. And as we call it, which means actually that Some of the projects being delivered in the infrastructure area in the quarter were shown a somewhat lower margin than they will do long term. This is, of course, it continues to be challenging, and we continue to address overall, especially offshore related activity, Turning to Page 9. Sealing Solutions, a fairly plain quarter to be I mean, good organic sales, good all over the place With Asia being especially strong and a good drop through in this extra sales, which is pushing the margin to the All time high in the quarter for this business area and all term EBIT, all term EBIT percentage as well. So good development for sealing Basically, all across the business. Turning on to Page 10, Trelewerk Wheel Systems heading strong improvement to profitability. As you see, we're growing sales by 8%, but EBIT is up by 30%. Good overall, good development. Even though organic Sales is up by 4%. We have good growth in agri. We are not in our construction tires is also increasing. We had aftermarket So especially for the ag side, has been impacted by this rather harsh winter conditions in the Northern Hemisphere, which made Basically, both North America and Europe has been impacted by this. Even though it's difficult for us really to fully estimate the impact, but we note that we have a somewhat delayed sales start up in some of those areas. However, all in all, as I already stated, good drop through and good profit improvement, and we're pushing the margin then up to 14 point which is the highest ever for wheel systems as well on the back of, of course, higher sales, stable raw material, but also that We continue to see the benefits of the kind of the synergies coming from the integration of CGS or METAS As to the brand for the tires is called, even though, I mean, same as before, we have, let's say, a major part of the synergies In front of us, as we are now investing in a new manufacturing platform, which then will create long term benefits as we move into this New setup in the next year or so. Also a comment here, even though, I mean, we also note that this sales mix Sales channel mix that we have with the growing OE sales and a little bit lower in the aftermarket has Let's say, adverse sales channel mix, if you look at the margin even though it should not be interpreted as being major, But we note that there is some impact from this sales mix channel. It takes me to change in the quarter. Turning to Page 11, back to agenda, financials and then leaving to Ulrik to move on from Page 12. Okay. You, Peter. Okay. Let me get straight into the consolidated group numbers then. On my first slide, Page 12, the sales development. Sales development, you can see that The organic growth in the quarter was plus 3%, coming mainly from a better demand from several segments. However, the organic growth is still Our lower project deliveries to the oil and gas segment. If we exclude the project related business, which mainly consists of our oil and gas operations, our organic growth in the quarter was plus 5%. Moreover, we believe that unusually prolonged winter conditions in the Northern Hemisphere hampered some of our business areas organic growth potential in the quarter. The impact from currency was minus 1%. Next slide, Page 13, describes the historical performance of our organic growth. As you can see on the bottom end of the chart, we have had 5 quarters in a row of positive organic growth. Remember though that our organic growth has been hampered by we reported sales development per quarter as well as rolling 12 months. The organic growth accounts for the improvement in the last quarters. Slide 15 presents our EBIT development. Our EBIT reached SEK 1,291,000,000, equivalent to an increase by 12%. Good market development and cost control improved the quarter as the quarterly EBIT to highest level to date. EBIT margin of 15.1% versus the 13.9% a year ago, it's also the highest to date. The EBIT was positively impacted by currency translation of 6,000,000. Slide 16 percent EBITDA margin on a rolling 12 month basis. A stable EBIT margin looking over the period that despite having exposure to many Capital markets during this period. On a rolling 12 month basis, we are currently at 13.3% EBIT margin. The next slide presents the profit and loss statement for the total group. Items affecting comparability consist of the restructuring cost and is in line with our annual guidelines. The tax rate was 25% in the quarter. Our guidance of an underlying tax rate of 26% for the full year still stands. Slide 18 percent earnings per share. Adjusted for comparability item, which was up by 9% to SEK 3.41 By an improved EBITDA, EBITDA but offset by a high working capital coming from the higher activity. CapEx is in line with our annual guidance of SEK 1,820,000,000. Slide 20 percent rolling 12 months operating cash flow. Slide 21 shows the net debt to EBITDA ratio and Netgear in development. Our leverage level is currently at 1.8 times and our net debt to equity ratio is at 34%. Net debt is impacted negatively by SEK 360,000,000 from rate movements. And Slide 22 shows our leverage development on continuing operations excluding comparability items. Slide 23 describes the return on equity where the long term target is 12% on continuous operations, including items affecting comparability. The actual outcome in the quarter is 10.8% compared with the 12.1 Year on year development is impacted by the one off U. S. Tax charge in quarter 4 2017 But also by the capital gain from the divestment of Trelevoibacuspi, that is a larger equity base. And finally, on Page 24, I want to finish off this part of the presentation by repeating our financial guidelines for the full year 2018. And as I mentioned, the CapEx is then for the full year, €1,820,000,000 We are going back to previously year's restructuring That is about EUR 250,000,000. We have an underlying tax rate that is 26%. And we have amortization Assets mainly then the PPA impact from acquisition that is above the EUR 300,000,000 on an annual basis. So that concludes the financials. So I will hand it over to Peter again. Thank you. Moving then quickly to Page 25, where we have agenda slide again summary in Q2. Outlook, Page 26. As I said, sales in the quarter up by 3%, organic 4% and 5% is excluded prior to deliveries. EBIT on an all time high level for us and also with the margin all time high at 15.1%. Items affecting comparability is slightly low, but the guidance for the full year remains the same. Cash flow At slightly north of €400,000,000 which is a slight decrease a year ago, but behind this is continued actually an improvement in efficiency Working capital management is influenced by a slight CapEx, which is also perfectly in line with our guidance. And All in all, the cash conversion remains at very comfortable levels at 87% of EBIT. On Page 27, about Priorities, no change here really. We continue to focus on growth and excellence and try to balance these two items. Market conditions remain good in vast majority of geographies and vast majority of industries. We still have a few industries, as we have been talking about, the oil and gas, where we have to Continue to adjust our cost base and continue to adjust for slightly lower sales. But even in these segments, I mean, we see Basically, an improved activity all over the place with exception probably of the Mexican Gulf. We see the North Sea is improving. We see West Africa improving. We see Brazil improving. We see also Asia improving. So we expect that to be better in the future even though, And let's say, the timing here between increased activity and increased sales will be A few quarters. So we will not see any kind of improvement in our figures until the end of the year. And in all We continue to work heavy with our market positioning, continue to invest in operational excellence in all aspects. And of course, also by using new technology, we continue to launch new initiatives and new products to improve our customer integration in various aspects. We also note here on bullet number 3, continued portfolio management. We continue To make clear priorities on where to invest and where not to invest and also, of course, continue to scout for Acquisitions to supplement our organic drives to get to this improvement. Integration of CGS, Still very high on the agenda. I mean the structural changes has been done. The new organization is now fully launched from this quarter. The tire operations has been integrated within wheel systems for some time. And now in the quarter, we're integrating the Rubenasavatek activities into Industrial Solutions and Into Industrial Solutions and Coated Systems, but we also have some other acquisitions, which we also have been successfully integrated. But also noting, which I already commented before, some of the synergies, especially from CTS acquisition, is still in front of us As they are linked to some changes in the manufacturing footprint and that requires some CapEx, which is ongoing and that is also why As one major explanation of why the CapEx for this year is going to be slightly higher than our average CapEx, and that is in order to prepare These new factories for absorbing some or absorbing or to change the overall setup for manufacturing, especially of some of the tires. This is really the priorities we have for 2018. And then moving over to Page 28 on the outlook. I mean, we believe or we expect It's running quarter to be on the same level as the quarter we just left, which means that the activity level will remain high In most of our businesses and then also in most of the geographies, so we expect the overall demand to be in line or to be on par We'll wait for the quarter we just left. Then Page 29, before we move on to Q and A, I want just to highlight that we also during the quarter sent out an invitation to our Capital Markets Day for 2018, which will be held at June 5th At Mernsey in Central Stockholm. So very welcome to all of you to register for to participate here and listen to a run through of the full And our strategies and our plans going forward. Then next agenda points to Page Turning to the moving on to Q and A and quickly to Page 31 and then opening up for Q and A. So please go ahead. Thank you. Thank you. Our first question comes from Hampus Enghler from Handelsbanken. Please go ahead. Your line is open. Thank you very much. I have three questions. Starting off with Seating Solutions, very nice to see a really good drop through on the organic growth. I think that you previously downplayed the operating leverage and Seating Solutions going forward and more talking about prioritizing growth. I guess my question is, should we think of this type of operating leverage going forward Given that's where organic growth is trending, that's the first question. The second question is on Wheel Systems. If you would dare to maybe discuss what Type of growth organic growth you had in aftermarket, if that was negative during the quarter or maybe how we should think of that for the rest of the year? And then last, more general comments on Offshore, with the price of the organic sales drop. Do you feel that you are have ended all restructuring there? Or given this drop, do you see that you might need to do something Those are my few questions. Thank you. Yes. When I talk about TSS, we continue to invest a lot To grow the business, as we said before, it seems anything stays the same. And we are more interested actually in growing the business at These similar modules going forward, which continue to invest in any such small individual variations. So as I can say That the same drop through will remain. Honestly, I hope not. I hope that we will be able to grow the business and grow the EBIT. That will be more and more important for us than really push the margin up, but with that said and done, I mean, we'll be running the fairly high gross profits in this. And of course, increasing sales We'll create a drop through, but I don't really want to give a firm guidance on the drop through. So don't take this as a guidance going forward, we expect the EBITDA to continue to grow, of course, as organic growth is growing, but we also would like to continue to invest In certain segments, I mean, we are investing to strengthen our position, for instance, in aerospace. We are investing quite a lot also in Medical and Healthcare to grow that area And also within this, what we call electrification, not only about automotive industry, but electrification of a lot Of industries, we are today using combustion engines or hydraulics and then moving We're driving a completely new demand on certain seals and all of that. So we continue to invest in those areas to strengthen our position. About wheel systems aftermarket was negative, but Some of that being that we kind of decided to face yes, but still, I think It was a bit better than the underlying market. I think we're growing market share. But I mean, it's difficult really to estimate this, but definitely there was a winter impact As the farmers couldn't use the tractor since there was snow in the fields, then of course they didn't buy tires. So we don't expect that to last. We expect it to bounce back, but we can say that everything in our office is bouncing back. But the mix effect is substantial in the quarter going from Growth in OE and a slight decline in the aftermarket. With our offshore in Construction, I mean, I would say, I was also we were also a little bit negatively kind of surprised by the actual outcome here. There is some Slight delay in some projects. And also, as I hinted on the call, you shouldn't read this as being solely Offshore related. I mean, we had also in the quarter slightly low sales of the infrastructure part of it, but that's more Kind of a quarterly one off impact. If you look at the full year, it will get better. But I mean, I cannot say really Next quarter or next quarter's thought will be continue to be challenging, and then we will hopefully see a slight improvement by the end of the year. We expect the infrastructure part to actually get better as the year develops. Thank you very much, Randy. Thank you. Our next question comes from Jeffrey Seaton, Private Investor. Please go ahead. Your line is open. Yes. Good afternoon, gentlemen. I hope you can hear me clearly. Yes. Good. My It concerns the innovation center, which you are creating in Germany and that you open in the summer Of this year, I presume. Yes, correct. Opening at the end of September, yes. My questions are as follows. Where is it located? And how many employees will it have? And Will there be any production facilities attached to that location? The location is Stuttgart, and it will be combined then with our Fine then with our headquarters for our Sealing Solutions activity. Number of employees, it depends because it's a mix, both with sales, R and D and all of that. There is Different kinds of R and D centers. Indeed, that is kind of basic R and D, like that, material R and D, but it's also comprehensive testing because a lot of this Innovation that we do here is very much linked to applying new materials into new products. So it's kind of a combination of that. But We don't really want to announce exactly how many it is. And it's also kind of innovation center supporting our 30 over plants around the world. So that is also not really interesting really to talk about the number of people. But I mean, we are investing a lot in this, Especially what we call application innovation in applications, we put it like that. So it's a lot of testing, a lot of facilities, which is kind of assisting Our customers to develop a better and better products. So this innovation center will Support the whole of the Trelever Group and not just sealing solutions? Primarily sealing solutions, but of course, we'll also give you some benefits here. Senior Solutions is very good, for instance, in friction and how to minimize friction, how to avoid heat Build up in inflections and some of these innovations will benefit us in other parts of Trelleborg. But the major focus on this, the primary This is an opportunity to support Trelewerk's Heliosolutions. It's a good location. Stuttgart to do that. We firmly believe that we've been there forever and forever, I shouldn't say, we've been there for very long. And what we have is that it's a Highly kind of innovative area of Germany. But with that said and done, of course, we have similar innovation Although a lot smaller, both in Asia and in Americas. Okay. Thank you. Thank you. Our next question comes from Erik Ora from SEB. Please go ahead. Your line is open. Thank you. I have a few questions. Following up on what was said on wheel systems, I'm just Struggling a bit to square the organic growth there given your end markets. I mean Construction Equipment and Materials Handling, at least on the OE side, should be up Well into double digit if you look at the industry, at least in the Q1. And then if ag OE is up as well, then the aftermarket part should be Really weak. Could you give some kind of indication of what the construction and material handling parts are growing? And then secondly, on your guidance, given what you said about The tough winter impacting aftermarket demand for ag, it doesn't seem as you're really comfortable that, that will come In the Q2, is that correct? And then thirdly, on your specific growth initiatives in Seating Solutions, Spring is the new segment you talked about, online initiatives. Can you give some update on how those are developing? On the aftermarket, I mean, we are I mean, I should be honest to say that we are also struggling a little bit to get the full picture of that. And we don't know We cannot really read how much of this is kind of linked to the harsh winter. But I mean, for sure, There have been, let's say, a substantial, let's say, push down on the aftermarket, but also in that area, I mean, we are also doing our Positioning and we are phasing out a few, let's say, accounts in order to get this higher margin to get the right mix Going forward, I mean, we have a substantial increase in but also now we I don't know where you get the figures, but the tractor registrations is actually down in Europe and in North America. And we are growing in that. So we are actually gaining market share. So I think we're outperforming, Yes, substantially, as I say, in OE, and that is being then pushed down a little bit with aftermarket. Correct, you So also construction is doing good. But also on that, we are relatively small. Even though that is part of our ambition here as we invest, especially In Serbia, we invest in the factory in Yuma in order to grow our capacity for construction equipment, which we believe, Let's say we will assist us in growing that part of the business going forward. I'm sorry, we don't really want to give any further guidance on this. This is also a little bit The kind of competitive intelligence that we don't really want to share openly. About going back, Yes. I mean coming back here in the summer of it, some of these that they're coming to the half from the harsh winter, most likely will be Bounce back here in the running quarter, but honestly, we don't really know. We know that part of these farmers today are kind of having the money in their pocket and they're So we are a little bit concerned that some of this which we lost in the Q1 that we not gain it back fully in the running quarter. What was the final question was about The growth initiatives in Sealing and Tuborg. I mean, we are pushing that all across. I mean, the springs is improving, but still a low base. It is online support. Online sales is growing, but it's also small figures, all of them in totality. So They are progressing in a good way, but they are not really impacting the overall sales growth yet. Thank you. Thank you. Our next question comes from Johan Helberg from Danske Bank. Please go ahead. Your line is open. Thank you. Returning to the drop through in Sealing Solutions. I remember in Q4, it was a little bit of a Because the drop was quite you explained it highlighted that there were some negative impact from acquisition but also high SG and A cost. But now we bounce back really in Q1. I just want to make sure here, I know you have got the question earlier, but what Should we view as a normal quarter this quarter or the Q4, would you say? Yes, probably. I mean, I'd say also The acquisitions is improving as we have them. Of course, we have them and they integrate in more and more into our model. It gets better and better. I don't know if you want to my answer then, basically, we are running with the same cost base on a quarterly basis. In quarter 1 and quarter 2, it's much, much larger in sales than quarter 3 and quarter 4. So of course, you have a larger The drop through, you have a larger base and then we then get organic growth on top of that, then we have a nice drop through. Okay. Yes, that makes sense. But there's not okay. Yes, fine. There's not really any major change. It's simply that we had a few bigger projects in Q4, I mean, we're talking here about the individual 1,000,000 of euros, which is not really a major impact on the yes, All in total. Okay. And also just coming to the calendar effect in Q1 also, the Easter What would you say you have what's the impact from that in the quarter? Mathematically, I think it's one less working day. But then, of course, you have Easter, some holidays, it could be more. That is so that is saying something between 1 2 days, which is then what is that 60 days or something, then we talk about, yes, What is that? That is 1 or 2 percentage points or something like that. I mean, it's not really any major, but there is, of course, a negative. Okay, cool. And also coming back to Wheel Systems here. Could you explain a little bit about the bridge here? I mean, if you look at the Q1 last It was I think you had a negative impact from raw material cost of SEK 200,000,000 in the first half. I'd make it simple for myself to say that it's SEK 1 €100,000,000 all things equal in Q1. I look at also at the organic growth year over year, it's 4%. It's I still see that the underlying EBIT is up less than €100,000,000 Is there some other effect here which is we are missing here? Or what was it that in Q1 last year, you had a good sale Of the aftermarket tires and yes. We have some. We already hinted on that. There is some seismic impact on this one, of course, which is pushing it down. But all in all, of course, we're moving into and it's not being kind of fully compensated yet, and we are moving into a better reality. So we I mean, it's difficult really to give the bridge, but I mean, we are to give the bridge in detail, but we, of course, we are moving we feel Definitely moving in the right direction. And we are more or less compensating ourselves for the raw materials. And then on top of that, we'll be having some impact on this negative mix Coming from kind of higher share of OE and lower sales, lower share of OE. It's a big margin difference there between aftermarket and OE? Yes. Immediate, it is. But I mean, long term, it's the same basically. We said because To sell the products for the OE is substantially the selling cost for that is substantially less than the aftermarket. So if you look at the total EBIT Drop 2 is basically the same. But of course, if you have these swings from 1 quarter to another, you cannot really adjust it. But if this remains, Then of course, we will adjust it and we'll get better on the totality. And also my final question about your cost capping program in Houston, which I Could you say how looking into I mean Q1 was slightly weaker than Obviously, here in Q2, it doesn't seem to be great either. But if you look at into the second half here and just looking at your own cost initiatives, do you Offshore and Construction to be running with black figures as of Q3 or is that too early? I don't really want to comment on that, Johan. We have to wait and see a little bit. But course, as we move into a better reality, it will get better. But I mean, whether we go into black in Q3 That's going to be depend a little bit on the sales and the margin, of course, also we'll be getting on the projects we are going to ship in that individual quarter. But I mean, it will definitely be better. We will move into a more efficient Thank you. Our next question comes from Agnieszka Vilela from Nordea. Please go ahead. Your line is open. Hi. I have Two questions. Firstly, I want the results of the net pricing in Q1 and what we should expect in the near term. So if you could just Elaborate about the current balance between your pricing and the raw materials fluctuations. And secondly, in the report, you write a couple of times that you had very good cost control during the quarter, and I can also see that you have relatively low research and Development and Administrative Expenses. Is it sustainable? Or what do you expect for the coming quarters? Starting with on the cost side. I mean, of course, we have always looking at the cost. We're all Of course, cautious. And I mean, we don't see it any kind of abnormal in the quarter. It's more that it's more stable, and we don't really have a lot of One off incentives in the quarter, which is somehow like marketing campaigns or exhibitions or whatever, we are fairly low on that, which means that The quarter is, let's say, on a good level in terms of total cost. But once again, I mean, it's not really any Extraordinary. Simply, it's good cost control across most areas. We talk about raw material and pricing. I mean, the raw materials has been stable For some time, and we are constantly adjusting, of course, to adjust. I mean, we are In some, let's say, smaller raw materials, not maybe on the bigger entities, but some smaller raw materials, there is some bottleneck situations. Of course, we are working with still with price increases, but it is going to be only in very specific segments and with very specific materials. I We have a few like silicones. We have some PTFE. We have some in bronze. There is a few materials with which the supply is getting very tight, but it's not really Major for Treleborg, but in those areas where we're influenced by that, of course, we are still we continue to adjust the pricing. Thank you. Thank you. Our next question comes from Malte Hulte from Commerzbank. Please go ahead. Your line is open. Yes. Hi. Good afternoon also from my side. A couple of questions. And the first one is On the wheel systems, can you elaborate a little bit on the position in the U. S. On your market check ins and on the ramp up process and where you are now and Maybe applying for the next coming quarters. My second question will be again on offshore and construction, particularly on the oil and gas. Some other companies have reported relatively optimistic statements on oil and gas recently. And also, for example, Alfa Booked several orders in offshore oil and gas. So my question is here, do you already have booked orders yet For the later part of H2, is it still that you would expect orders coming in there? And my final question would be on the M and A, It was relatively quiet from your side during the past months. Should we expect anything in the near future? Yes. I mean, to talk about the ramp up U. S, it continues according to plan. I mean, we're growing our market share in U. S, and we are getting what you call tire And we are getting a fair attention or interest strong interest, especially from the OE part of it. So that we are I know we still believe that at the close this year, our running kind of EBIT in U. S, We will turn in positive probably at the later part of the year and not in the earlier part of the year. So we are definitely moving in the right direction there. With us offshore, we are also slightly we are also very positive in a way on the changes in offshore. We are following what we Orders to be placed, which is basically we know that our customers has been getting the order, and we know that they need to award the order. And that kind of, I should say that activity, it has increased a lot. So that we know that we're going to get orders, but The orders there are starting to get in, but the major chunk of that is something we expect to see an uptick in the next, Let's say 1 or 2 quarters, and then it will take another 1 or 2 quarters before we actually invoice. So don't misunderstand us there, Martin. We also feel that This is moving very much in the right direction. Even though, I mean, the first one which is coming here is this MNO Business, Maintenance Modification Operations. Well, we don't have a lot of that because our exposure is mainly into capital equipment for the offshore, and that is coming slightly later. But overall, the activity level within the oil and gas activity is substantially higher than it was before. And if you're looking on the onshore activity, Then that is definitely already up and running, while the North Shore activity is basically higher activity everywhere. But I should say, but for the Mexican Gulf probably, We don't really see an uptick in the Mexican Gulf, but the North Sea is good, Brazil is good, West Africa good and also Asia It's turning also positive. So we are becoming more positive in the offshore, but we also need to be fully aware of that It's going to take a few quarters before we see it in sales. The final question was then about The M and A, we will continue to scout M and A. We still have a high activity level in M and A, but that is coming in bulk or You cannot really control the timing, but we still have plenty of M and A opportunities, and we're still working Several opportunities there. And it was really difficult to You gave any kind of guidance when they actually will materialize, but for sure, there is a lot of activity in that area still. Okay. Thank you. Thank you. The next question comes from Erik Paulson from Pareto Securities. Please go ahead. Your line is open. Yes. Hello. So you mentioned bottlenecks among your sub suppliers, some of them earlier on the call. You're talking about silicon, etcetera. Do you only have this among your own sub suppliers? Or do you see bottlenecks in your own production system as well? And where is that in that case? We do also have water legs in our operations here. Delivery times in certain areas is getting long. I mean, we have very strong increases in demand In certain segments, so we are struggling, but of course, it's a more it always has Some bottlenecks in the production, otherwise you have too much capacity. So that's, of course, a problem that we are used of working with. But nothing really, really major at the moment. I mean, we are struggling in certain sealing We're definitely struggling, for instance, with Construction Tires. Certain segments also in the house industrial house side is also certain which is being under pressure. So I mean, there is some bottlenecks, but it's nothing really Major in a way and nothing extraordinary. We're working, of course, to get the delivery times To be quick at delivering adjusting our capacity where we can, but that is Once again, I shouldn't exaggerate it. It is a challenge which we are used to work with. And once again, if we Did not have this kind of challenges, then we would have too much manufacturing capacity. Okay. Thanks. And just to follow-up, is the situation now More difficult or less difficult compared to last quarter? In what respect? In terms of the bottlenecks? Probably increasing somewhat because I mean there is in certain segments, the segments Growing is growing even more. So if there is any change, it's probably slightly more challenges in this quarter compared to Q4. But Once again, nothing really major and nothing really which is stopping us in a major way to get the sales done. Okay. Thank you very much. Thank you. There appear to be no further questions. I return the conference back to you. Okay. Thank you and thanks to all of you. Now we are going to rush here. We have AGM in Treleborg today as well. And it meets, let's say, a major part of our Shareholders with lives around Treleborg, so that's going to be nice. And beyond that, of course, I I hope that we're going to talk to some of you. And if I'm not talking to them, of course, you have full access to Christoffer. We're going to guide you through and give you more flavor about the results. And then later on, I hope that I will see most of you or if not all of you at our Capital Markets Day here in Ewen in Stockholm. So take Thank you. Ladies and gentlemen, this does conclude today's conference call. Thank you very much for attending. You may now disconnect your lines.