Earnings Call: Q3 2020

Oct 27, 2020

Thank you. Peter speaking. Welcome to all of you to our presentation of quarter 3 2020. As usual, I'm going to start off with some headlines and also covering comments on our business areas. And then Ulf Beyhult, our CFO, will take care of the financial part of the presentation. And then we, Ulf and myself, jointly then finishing off with some comments on the running quarter and also then, of course, with a Q and A session at the end. Basis for the presentation will be the PowerPoint that we released on our web this morning. So that is going to be used as the guidance through this call, and I assume all of it has it in front of you. So moving into that part and starting with agenda page, as already stated, starting with some highlights, comments on the business areas, Ulf guiding you through the financials and then we jointly finishing off with a summary and some comments on the running outlook for the running quarter and then some Q and A at the end. And then turning to Page 3. Headlines for our report, earnings and cash flow level with previous year, which we are quite happy with. I mean, sales in the quarter year on year decreased by 12%, organically by 7%, and then, of course, like several others, on top of that, some negatives coming from exchange rates. But even though with this rather substantial decrease, still maybe, of course, better than Q2, but still high numbers, we managed to keep EBIT more or less on par in absolute number compared to last year. We then pushed up the margin actually higher than the corresponding quarter last year, ending up with a 12.9% EBIT margin, let's say, neglecting the nonrecurring. Costs in the quarter, Cash flow, very strong. We are happy with, of course, the management of working capital in the quarter. We are actually under producing still under producing the quarter, which means that we released inventory in the quarter, substantially so, both within especially within Wheel Systems and Sealing Solutions and also still very good control of account receivables. And on top of that, of course, becoming more careful with the CapEx as guided earlier. So all in all, well managed cash flow, well in line with our expectations, which is then pushing up the cash conversion above 100%, 121 percent. And also, so basically from the Board and not from management, we're also confirming our earlier call that no dividend will be paid in 2020. Background to this is, of course, that we still see uncertainty, and we also see an opportunity here to in line with some legal, or should I say, legal complications still pending. We are let's say, the Board decided for no dividend, which is NOK remained. The company the money will remain in the company and, of course, strengthen our balance sheet and create more flexibility going forward. Turning to Page 4, where we comment on organic sales development biographies, starting with the positives is, of course, Asia, another market where we are growing in the quarter, very strong contribution, especially from China and also for us, good contribution actually from Australia, while we are still, like most others, suffering a little bit in Japan and India. So it's a mixed it's a mixed picture in Asia, but overall positive, driven once again primarily by China, but also supported for us with good sales in Australia. We're also starting also with some positives. We also have a good development in Central Europe. Other Europe, we are still tracking Europe in 2 parts within Treleborgs. Other Europe's strong growth coming from, let's say, from a decent development before as well, while we then continue to struggle, especially Western Europe and North America. Western Europe is performing slightly less bad than North America, which I think also is in line with the general perception in the, let's say, general industry segments. South America is very, let's say, negative for us, but we also have to note that it's a very small part of Trelleborg and its individual sales, which is kind of pushing us down in this very negative territory. So this is kind of the overall ending up and summing up with minus 8 in total or minus for 4 d and I should say highlight also, I have to make that clear. This is just a comment on the core business where we are kind of taking out the business under development. So that is why you see minus SEK 8 on this, while minus SEK 7 on the full company then where we have business Underdevelopment, which is performing good, primarily driven then by Oil and Gas, continued good Oil and Gas development in the quarter. So this is some comments on the sales. Turning to Page 5, agenda points and moving over to business areas. Turning to Page 6, finishing off starting off with some comments on Industrial Solutions. Well managed quarter. Organic sales, minus 9%, but also with EBIT well under control and actually beat on the margin compared to a year ago by 0.5 percentage point. Of course, here, a negative impact still from COVID-nineteen in most regions, and we still see the construction related parts of this business area is still very much influenced, while we then saw strong recovery in the light vehicle automotive related parts of this. And still also in this quarter also good, which is not commented here especially, but I mean also good development related to the oil and gas sales coming in this business area. EBIT, of course, down by this level of volumes. But overall, very happy with the cost control and also strong price discipline here, which is kind of once again keeping the margin or making the margin actually coming out higher than a year ago. We are still, as indicated also in end of quarter 2, we are implementing structural improvements here, and that actions are ongoing, and we are continuing to implement those actions already being decided. So we are still focusing very much on cost control in order to continue to offset the effects coming from COVID-nineteen. Sealing Solutions heading next page on Page 7, heading very tough Aerospace markets. I mean, you know, Sealing Solutions, 15%, 20% of sales related to Aerospace. And I mean, that is more or less more than half in the quarter. And that, of course, the majority of the organic sales drop is actually coming from Aerospace sales. We are down 13% in the quarter organically. And once again, half of that or more or less exactly half of that coming from the drop in Aerospace. Basically, the same trend everywhere, even though we are also very strong in China especially, but in for Asia overall offset a little bit by the negative developments we see in Japan. Already commented on Aerospace, significantly weaker, and we do not expect that really to rebound shortly. And as part of these efforts initiated following Q2, several of those efforts that we then announced is addressing Aerospace, but it will take some time to get these adjustments made. And EBIT is influenced by this lower and here also maybe not only on this kind of overall downtrend by COVID-nineteen, but also with this very quick drop in Air Space, we've created some underutilization in that part of the business, which we are, as I commented before, are addressing. But it's going to take some time to get that corrected and then get the margin up again. Moving over to Page 8, commenting on Wheel Systems. Agri, drive strong profit improvement is the heading. I mean, we had a strong development in agriculture in the quarter, continued good. It was also quite good in Q2 compared to other segments. And all in all, even though strong, let's say, organic growth in the Agri sector, we are still pushed down, while by still negative development in Material Handling and Construction. Overall, though, ending up with a positive 1% and EBIT and then strongly up based on strict cost control and price discipline and also continued benefits from earlier implemented restructurings. So doubling the EBIT margin in the quarter, which is then, of course, a strong development on the back of the overall market development. And then you also should note that a year ago, we were actually pushing down inventory, and there was some underproduction in the quarter last year. Turning to Page 9, some comments on this business under development. We have pushing down organic sales of minus 3%, but the mixed development among the areas continued very good offshore oil and gas performance, even though as we guided in the report, we do not expect this good development to continue in the next quarter. We expect a few tougher quarters for offshore oil and gas. But in this quarter, we are still benefiting from this. And we have like a down in the other printing blanket technical rubbers is down, but overall, well managed. And cost control in all operations is good. And we are also continuing to implement kind of profit improvement activities all over here, and especially so in the Czech operations, which has been a burden for quite some time, but is slowly now getting better. And we are positive that we're going to continue to move in the right directions in this part of Business Underdevelopment. So this was comments on the business areas. And now Page 9, next again, the point financials and turning over to Rune on Page 11. Thank you, Peter. So on my first slide, Page 11, sales development, you can see that the organic development in the quarter was minus 7%, which was a clear improvement versus quarter 2 with organic development of -19%. Our core business report an organic development of -8% versus quarter 2 organic development of -20 percent. Core business areas reported a sequential improvement in quarter 3 and I wanted to highlight business areas held by systems organic growth in the quarter of plus 1% versus the quarter 2 organic development of negative 18%. Business under development reported organic development of minus 3%, which also was an improvement from quarter 2. Next slide, Page 12, describes the historical performance of organic growth. On Slide 13, you will find the reported sales development per quarter as well as growing 12 months. Slide 14 presents our EBIT development. Our EBIT reached SEK 999 1,000,000 in the quarter with an EBIT margin of 12 0.9%. EBIT margin improvement shows the strength of our flexible cost base. Core business reported an EBIT margin of 13.7%. And then again, I want to highlight business areas where we have consistent EBIT margin of 13.1% in the quarter. Business under development continues to improve and reinforces better EBIT than EBIT margin versus the same period of the year, despite having a negative 3% organic growth. Currency translation impacted EBIT with a negative NOK 59,000,000. Slide 15 percent EBITDA margin on a rolling 12 month basis. A stable EBIT margin looking over the period despite having exposure to many tough market conditions during this period. Again, this slide shows how agile our cost base is. On a rolling 12 month basis, we are currently at 12.4 percent EBIT margin. Next slide presented profit and the loss statement for the Copel Group. Items affecting comparability consist of the restructuring cost and that is in line with our annual guidance. Financial net has been impacted by a positive exchange rate difference of SEK 3.6 in previous year. And this year's financial net is impacted negatively by increased liquidity buffer, which results in a somewhat higher net interest. The tax rate was 23% in the quarter. Our guidance from an underlying tax rate of 25% to 0.0 $0.06 Slide 17 percent earnings per share, adjusted to comparability items, which was down by 18% to 6.2.31 And Slide 18 describes the development of our operating cash flow. The strong focus on working capital continues to develop positively, even though the release in the quarter is lower than previous year due to a higher activity in the quarter. CapEx spending is well managed by the business areas and our full year guidance of SEK1.2 billion is still valid. Slide 19 presents the rolling 12 months operating cash flow. The business have areas have handled the cash flow very, very well. Slide 20 shows our leverage and gearing developments, strong operational cash flow, no dividend payout and no acquisitions have strengthened the Group balance sheet and readiness. Net debt was positively impacted by exchange rate movements of SEK59 1,000,000 year to date. Slide 21 describes the return on equity where the long term target is 12%, including items affecting comparability. The action outcome is impacted negatively by one off items reported in Q4 2019. And then finally, on Page 22, I want to highlight, we go through the guidance for the year and it's still then the CapEx is then the guidance is SEK1.2 billion. The restructuring cost will be around SEK700 1,000,000. There might be a slide into 2021 due to COVID-nineteen. But so far, we are aiming to charge a P and L with 700,000,000 in 2020. The underlying tax rate is 25 percent. And then amortization of intangible assets that is still around SEK 400,000,000. So that concludes the financials. So I will hand it over to Peter for the summary and outlook of the 4. Great. So Page 23, agenda. And quickly moving to Page 24, summary. Earnings and cash flow level on previous year. I mean, we have seen a sequential improvement throughout the quarter. And I mean, the best order intake for several months was actually in September. But overall, the quarter is still down organically by 7%. But as we already commented by Urs and myself, we managed to control cost and control pricing in the quarter in order to deliver a year on year improvement on margin, which we are very happy for and with absolute EBIT, excluding nonrecurring on basically on par compared to a year ago. Very strong cash flow, still underproducing in the quarter, which also was, of course, a small drag on the profit if that was not happening. But I mean, we're delivering a good cash flow, cash conversion at €121,000,000 and no dividend, which, of course, will mean that this money stays in the company and strengthening our balance sheet and creating more options going forward. So this is kind of the overall comments on the quarter. Going forward, Page 25, of course, we are still concerned about the COVID-nineteen. I mean, as already stated here, I mean, we see an improvement in Q3, substantial improvement in Q3 compared to Q2, where we are relatively confident going forward. But of course, we note that this COVID-nineteen is increasing everywhere. And I mean, we do expect some headwinds coming from that in certain areas. And that is why we are still focusing a lot on actions related to this and related to this and making sure that we are able to manage these headwinds in a good way. So that is kind of still a very high priority. We are still also now kind of getting up again on this business under development to investigate structural alternatives for those businesses. I mean, we were basically ready with this beginning of the year, but then came this COVID-nineteen development. We kind of stopped these discussions, but we also, in the quarter, picking up these discussions again. And we have, let's say, ongoing discussions in many areas at the moment to be able to create the long term best setup for this business under development. Continue to work on our portfolio management, both in a positive and negative way, in a mean that we are still moving very firmly into some areas, while we are lessened our interest in other areas, still working also on kind of bolt on acquisitions in certain areas in order to strengthen certain parts of the portfolio, continue to focus operational excellence, very strong focus on operational excellence and making sure that we continue to implement efforts to improve the operations long term. And of course, without neglecting the customers here and making sure that we are continued to be seen by the customers as the most innovative and best partner for our customers. Integration of acquisitions also always on the agenda, even though it's kind of less acquisitions made in the last few quarters. But we are still working on integration of some of the companies we have been or some of the operations we've been acquiring over the last few years. Then moving to the final page before opening up for Q and A. Outlook for Q4, we might be slightly I mean, if you look solely at the figures, it is an improvement in the quarter. As I said, let's say, a stepwise improvement month by month, and September was the best month in the quarter. But we do note, of course, we read the papers and we see what is happening with COVID-nineteen. And we do expect some further headwinds on that, which is kind of influencing our overall outlook. And that's why we're ending up, but we expect demand to be on par with 3rd quarter and not really improving, well, let's say, neglecting any further outbreaks from COVID-nineteen. We would have probably said that was going to be an improvement. But we are kind of a little bit cautious in this and considering the potential impact from these measures that will be implemented in several countries following this, say, second outbreak or whatever you want to call it of COVID-nineteen. So that is also why we're adding uncertainty is high, both from could be better, it could also be worse. And that is kind of dependent on the development of COVID-nineteen that we're going to see in the next few months. So that is really some add ons and some further comments to the outlook. With that, moving to Page 27, final bullet on the agenda, Q and A. And then moving to Page 28, where we say questions and answers. And please, now we are open, Ulp and myself, to address any questions you might have. Thank you. Our first question comes from the line of Klas Bergelind of Citi. Please go ahead. Your line is open. Yes. Hi, Peter and Ulf. It's Lars from Citi. So first on Wheel Systems. It's a solid margin given that you are underproducing in the quarter. You obviously get support from less underproduction year over year, but still solid. How much was positive price cost looking at input cost driving the results in addition to net volumes, good execution? Or will that affect even more margin to year end? Obviously, the margin will be seasonally lower in the Q4, but interested in how pricing versus input costs are developing. I will start there. No. And I mean, that's a positive. I mean, we don't really want to because it's a mix of both aftermarket sales, OE sales and, let's say, also some regional sales development as well, which is impacting that. But there is a positive pricemix, but we don't really want want to highlight that. We don't we expect that to continue to be a positive for us. But I mean, I don't really want to give any kind of numbers on what it is because it gets into a fairly complicated matrix in order to explain that. So we I want to stand, there is a positive price mix in the component, which we did expect. I mean, because we have had better aftermarket sales and also better kind of geographical split of sales as well. Yes. Okay. Fair enough. My second one is on Sealing Solutions, excluding Aerospace. And it seems like we were down around 6%, 7% year over year. Could you help us, Peter, with September year over year and perhaps even how October has started? I'm talking ex aero. It sort of feels like if September has been this strong, it almost feels like it was flattish year over year would be really helpful. And I mean, it's I mean, as I said, it is an improvement month by month, and September is the strongest month. But and I mean, we are going into Q4 with a fairly okay order book. But I mean, once again, I mean, we are taking a little bit cautious stance here because we see that in some of our key markets, we see the corona is increasing, and we do kind of expect some limitations on manufacturing and output in the quarter. We also difficulty also in this is, of course, to get the full picture on what the kind of the pent up demand coming from the closures in Q2, how much is that positively impacting us in Q3. In certain segments, we know that in Automotive, for instance, that there is, let's say, too strong development in Q3, and that is something we do not expect really to fully continue in the same way in Q4. But overall, I mean, we are fairly confident on the development of this kind of industrial part of sealing solutions, while on the downside is this kind of a little bit unknown COVID-nineteen effect in Q4 and going forward. And then, of course, Aerospace, we do not see really an improvement in the next few quarters. And that is where we are at the moment kind of addressing this by structurally lowering our cost base. But that will take some time because also here, just to highlight that, why it takes time, is of course that I mean, this requires if we are to move around products among our factories, it will require some customer approvals. And at the moment, we don't really get attention for these approvals. I guess our customers within aerospace is focusing on their own operations. And not really interesting at the moment in kind of assisting us in any moves between factories. And that is why it's going to take some time to get that more efficient. We have the plan in place, and we know what we want to do, but it will require some shift of manufacturing between factories. And that is, at the moment, not really we're not getting the approvals to get that done. My third and final is on Offshore Oil and Gas. And obviously, backlog the backlog is now getting depleted, and we're likely going to see more pressure on revenues at year end, as you say, Peter. But how are the margins looking on new orders right now? Is there a lot of price pressure? Are the order margins lower than the margins coming out of the backlog currently? Not really. And I mean, honestly, also the order book is quite okay still. And we say it, I mean, surprisingly high activity in the certain areas of oil and gas. But this is kind of a little bit delayed de acceleration in this industry, and that is why this been ongoing, and we had good in this one. So the order book is not really the major problem here. I mean, the problem is really that some of the investments have been pushed, and that is what we still have a fairly good order book. We have been successful also in our, let's say, oil and gas activities. Also, we got substantial orders in renewables, which is basically the same kind of applications, subsea applications that we use in offshore, but it will take time to push that into sales. So, we as we look at it today, it's going to be 2 or 3 quarters with flow. But still, with the then a good order book and we're looking into the 2nd part of 2021, it still looks fairly promising. And we still have a few big orders pending. And then pricing wise, it's not really it looks quite okay. It's better than a year ago, if you put like that, in the pricing in the order book. But once again, we have a softening here, a substantial softening because some of the projects been pushed forward and some of the invoicing that we were kind of expecting here for Q4 and Q1 has been pushed in the future. So it's not really a problem with the pricing. It's honestly not really a major problem either with the order book as such. It's more that it's a push in invoicing and sales for a few quarters. Thank you. Thank you. And our next question comes from the line of Hampus Please go ahead. Your line is open. Thank you very much. Two questions from me. Maybe starting off on the Wheat Systems and the Ag business. Would it be possible for you to maybe to divide the development between the OE business and the aftermarket? Were they both growing organically? Or how should we think about that if I pursue that the industrial tire part were down a lot? 2nd question is related to the group EBIT margin, very good operating leverage during the quarter. Would it put possible if you'd maybe quantify what the impact was on the production and how we should think about on the production coming to Q4? Those are my 2 questions. Thank you. It's a good development both in OE and aftermarket, but we do expect that OE in ag is a little bit pent up demand because it was really pushed down on the manufacturing in Q2, and this is kind of a little bit artificially high in Q3. And that is why we say that the aftermarket is actually even though the development is fairly the same if you look at percentage wise, but aftermarket is kind of performing stronger, once again, due to the fact that AE in the quarter was artificially high due to the pushover of manufacturing from Q2 into Q3. So that going forward, we do expect kind of aftermarket to in the short term, at least aftermarket, to outperform their way. And then, of course, we are more like everybody else. If you look at external data here, I mean, this what the index is calling Equitof Sysimann, the American Perdue Index is becoming more positive. And we do hope or expect that to turn into a better OEM market going into next year. But that is still to be seen. But I mean, that is what the indications show. But meanwhile, we do expect aftermarket continue to develop nicely. That was the first question. What was the second question? Sorry, my memory is short. No, that was on the group operating leverage. Okay. No, under absorption. I mean, we don't I mean, we are, of course, having an under absorption, and we are releasing several 100,000,000 of Swedish kronorsof of inventory. And of course, there is we shouldn't kind of exaggerate that one, but I mean, there is, of course, some, how should I say, tens of 1,000,000 or maybe SEK 100,000,000 or something. I mean, the tens of 1,000,000 of under absorption in the quarter if we would have that they can't get the inventory. So I don't know, you want to I'll add more than that. It is we are having a high focus and they are delivering well. And we had slightly delay on the sealing solution from Q3 to Q3 because they needed them to shift all the parameters. But they released a good inventory they had a good inventory releasing in quarter 3. And then we expect in Q4 then to continue that, not on the same level. But also then you need to remember that Q4 is from a seasonality point of view, it was lower activity as well. So we would naturally have an under absorption. But really to say a number on it, we don't want to do that. Okay. And just one follow-up there on the Wheat Systems business. If I remember correctly, you had a quite positive mix in the Q2. How was the mix in the Q3? And how has the mix between ag and in terms of split of sales changed between aftermarket and OE given the production changes? We are not I mean, it's not I mean, I don't want to I mean, there is a positive mix sample, but I don't want to put that as a major thing, really. So we have, let's say It was pronounced in Q2. Yes, it was more and more notable in Q2 since AOE was so low. Now we don't have the same kind of positive mix in Q3 as we had in Q2, if I put it like that. So but it's not really any major explanation on the margin improvement. The margin improvement is coming from a better underlying market overall and then also continued, let's say, improvements coming from earlier restructurings. And on top of that, also a good, let's say, price discipline in certain areas. But also, we have done. It's not only restructuring that we have. As you know, we have put a lot of investment into Serbia and that is more up and running and also then moving into Czech Republic. Czech Republic is also improving the setup there. That is kind of growing into a better operating setup in a way. Fair enough. Fair enough. Thank you. And our next question comes from the line of Erik Goran of SEB. Please go ahead. Your line is open. Thank you. Two questions. First one on Sealing Solutions. You say sorting the under absorption headwinds will take some time. Does that mean that we should expect a sequential decline in profitability into Q4 as seasonality typically dictates? And then on the second question, how much of the SEK 700,000,000 in targeted structure savings are in Q3 earnings? Okay. But the seasonality on C&E Solutions, of course, is going to be there. And as we're indicating, we do not expect any kind of major improvements coming from these Aerospace changes. And once again, it's not really due to the fact that we are slow. It's more that we're not really getting enough customer tensions to make the changes that we want to do. So that is the way it is. And we have to expect that, that they have other things on the agenda at the moment, and we need to manage this setup in the best possible way. But we do expect the same kind of pattern as we had from a year ago. And I mean, this is said, also, Eric, with some kind of cautiousness, because I mean, we need to also if we simply were looking at the figures at the moment of Solutions, it will kind of improve. But we do expect kind of the headwind from Corona kicking in and being some creating some negatives also in Q4. But that is really to be seen if that is happening. Second question was about the How much is the SEK 700,000,000? I don't know if you want to comment on that. The savings or the cost? Of the SEK 700,000,000 in savings from the accelerated cost reduction programs, how much of that is already We don't want to comment on individual amounts, but it has had an impact in quarter 4. And please remember that early quarter 3 and then please remember that we announced it in the end of quarter 2, but we have had positive impact in quarter 3. But again, we have not we don't want to comment on that because there's also other factors moving up and down. But it has had a positive impact. Tens of millions. I mean, we're not talking about 100 of millions, tens of millions. So the full impact is expected from 2022. Thank you. Thank you. Our next question comes from the line of Agnieszka Fillela of Nordea. I have a few questions on Ceiling, starting with your Aerospace exposure there, which you said was down by some 50% in the quarter. When you look at your order book and the business that you have there, do you see more pressure for this exposure for the coming quarters? And also, if you could comment maybe on your decline rates in September, specifically for Aerospace? Thanks. I mean, the decline rate is the same. I mean, we have roughly 50% in Q2, and it's roughly 50% in Q3. So it's not kind of an acceleration in any way, and we do not expect that really to change near term. But we do expect it to kick back a little bit with some from this level with, let's say, a slight growth actually going into 2021. But then coming because in this kind of 50% reduction, there is, of course, both underlying kind of production cuts, but there's also some inventory adjustments with our So we do expect this inventory adjustment to go away. And then we do expect kind of from this new basis, At the moment, our best judgment is that we will have some 10% growth year on year. But of course, with a substantially lower basis from going into at the, let's say, full year sales of Aerospace in 2020. So we do expect that to turn the corner, but of course, we'll be at a lower much lower basis going into 2021. So but it's still a lot of uncertainty in this. And I mean, we are getting kind of mixed signals from the customers on this. So it's really a moving target in a way. But we are adjusting down. We are adjusting it down to this kind of run rate of some 50% lower. And then from this 50% lower run rate, we do expect a slight growth going into 2021. Okay. Understood. And then if I understood you correctly also, you need to have this kind of acceptance by your Aerospace customers really to adjust the business and structure it and adapt it to lower volumes. Is that correct? I mean, that is part of at least we can, of course, cut in the administration and the sales and all of that. But if we are to move around production, then, of course, we will need approvals to do that. And that is but that is normal practice. It's the same as you have in automotive and certain other customers. You cannot really move it around without having customer approvals. But at the moment, of course, the attention of our Aerospace customers is not really to support us in our efforts. It's more to protect themselves. And then if we look at the exposure for sitting apart from the the also, did you see any kind of restocking impact in Q3 after the closures in Q2 by your customers? I mean, Angus, I should be honest here. I mean, it's really difficult because you get mixed and customers are acting in different ways. So it's really difficult to get kind of a really firm kind of analysis done here. But we do not really see any major restocking positives in Q3. I cannot say that. That has not really been the major, let's say, takeaway for us. We do see some pent up demand from very low production, for instance, in tractor manufacturing, automotive and all of that. But once again, that is also very difficult to get really figures on it. So I don't really it's going to be pure speculation, and I don't really we have to act on all the facts that we are watching. We are watching the weekly or sometimes the daily order intake, and then we are adjusting according to that. So we don't really run our business at the moment with kind of several months of beliefs going forward. So we need to adapt and customers are acting a different way. Some customers are more focused on cash flow, others are less. So that is really the reality what we need to work with at the moment. I think we're doing it good as well. I mean, we have good control, and we feel that we're staying very close to the operations and staying very close to the actual orders coming in. Yes. Thank you. And then the last for me. I was a bit surprised about your automotive comment going into Q4. And when we look at the, for example, IHS, the car production forecast for Q4, it expects sequential improvement. And we're hearing a lot about the restocking needs both in the U. S. And even in Europe. So I don't really understand your cautiousness about the Automotive vertical. Automotive is fairly small to us. Of course, we see some positives on that one, but we're talking about 10% of our sales. So of course, in that area, we have had some strong growth in certain areas, but I don't see that being a major impact for us. I mean, we are not really we are much more concerned or focused on the analog industry than automotive. So but of course, I mean, we if the factories are keep on running, if there are no factory closures, it will be positive in Q4. But once again, who knows what's going to happen with this COVID-nineteen and all of that, and that is probably reflecting comment a little bit. But if I, of course, be following the same figures that you do, and then I shouldn't say I'm not doubting the figures. They probably have their rationale and the calculations behind that. But it's kind of assuming that there will be no factory closures implemented in Q4. That's correct. Thank you. Thank you. Our next question comes from the line of Johan Soderberg of Danske Bank. Please go ahead. Your line is open. Thank you. I have three questions. Starting off with the Sealing Solutions, if you could say how much Sealing Solutions was down in September? Sorry. We don't want to say that. Okay. No, that's fine. And in terms of your margins in or rather you take the initiatives within the Aerospace business, what sort of margin impact should we expect from those measures? Is that something you can comment upon? No. I mean, our target is to get it above 22%, then we're going to get back there. So that's, of course, the major difference between the current margin and that one is the Aerospace adjustment. Okay. And the final thing here, when you look at you mentioned the order books here. And could you compare the different all the 3 different business areas if you look at your core operations, industrial, sealing and also wheel? How do they look relative wise there? Yes. My question has to do with the order books. You referred to saying that they were strong at the end of the quarter. And if you compare the 3 business areas within core operations, where how can you compare them relatively? First of all, we don't track really waves on orders. They don't really have an order book. And then within Sydney Solution and Industrial Solution, I would say that, that would be similar between the different exposures as they have the automotive exposure, both of them and also have an German Industries. I would say that we don't see any major difference in higher LIBOR. So it's a similar pattern. Okay. Thank you. Thank you. Our next question comes from the line of Robert Davies at Morgan Stanley. Please go ahead. Your line is open. Yes. Thanks both for taking my questions. The first one was just around the timeline for the sort of portfolio optimization strategy you had around your business within the development. I think you'd originally laid out sort of a 1 to 2 year time horizon. You mentioned that December's negotiations had restarted. Based on where we are right now, what are your current targets or expectations around that? Thank you. We have not changed our overall guidance. We still say that with 1 2 years, which means that this should be sorted here, yes, within this time frame. So I mean, we are working on it. We lost kind of a quarter or a quarter plus, but I mean so it's not really changing the overall time line in any way. And I mean also to clarify, I mean we have structured alternatives for this business. It's more a matter of valuations and other kind of conditions in an agreement with somebody. I see. Thank you. My second question was just around sorry to go back to Sealing Solutions again. Just to be clear, I guess the margin level in the quarter around 18% versus your I guess kind of close to the 22%, 23% range. How much of that was coming from the drag from aerospace versus the sort of volume growth in the rest of the business? I guess, way to sort of put it is, if aerospace was normal, would you have been close to that typical range? Or was the volume enough to call you down a bit lower than that anyway? Probably will be slightly lower, but I mean, of course, we will be seasonally lower, but we will be, let's say, fairly close to because I mean, generally, also, we have the stronger margin in the first half of the year compared to the second part of the year. But I mean, of course, we would have been a few percentage points higher in EBIT. But of course, we couldn't we have also had a downturn in industrial general industry here, as we said, with some half of this half of the overall downturn in ceilings, of course, there would have been a negative impact. But I mean, it would be, yes, very few percentage points. Understood. And then my final question was just around some of the aero and some of the end market developments into the Q4. I guess, where are you most or least concerned? I think you mentioned a couple of times, obviously, the potential uncertainty around COVID. Is that particularly more acute around automotive segments? Or where do you see the biggest risks? Is it sort of due to a regional perspective or where you've got manufacturing hubs? Where's sort of main focus I think? It's more a general comment. I mean, if we have some of the major countries, I don't see we don't see any issues in China, but we do, of course, see some potential issues in several countries in Europe. And we also a little bit I don't say U. S. Is the major problem here. But I mean, it's mainly related to potential kind of restrictions kicking in, in Europe. I guess that is where we have most of our concerns at the moment. Great. But I mean, once again, it's not coming really from any input from our customers. It's more a general view on the development in the last few weeks. And we see the sentiment is rapidly changing in several countries in Europe. And hopefully, it will not kind of create any further closures, but we see a risk of that happening. But I mean, once again, it's not related to Tralborg. It's more related to the overall development of the economy. I see. Great. Thank you very much. Thank you. Our next question comes from the line of Karl Bucharest of ABG Sundal Collier. Please go ahead. Your line is open. Yes. Hi, thank you. So my first question has to do a bit about the portfolio optimization here and the businesses under development. You mentioned that discussions have been resumed, just and the time frame and so on. Just a question here. I mean, are you still thinking about it's possible to divest just parts of certain businesses or divisions, I. E, it's not that you are looking for improving the entire sort of well, you're looking to improve a portfolio, of course. But do you would you consider just improving or divesting certain parts of the business instead of just letting it all go in a one package deal, so to say? Of course. I mean, we are open for all options. Of course, at the end, we need to have, let's say, a sustainable model, a sustainable business. But I mean, in order to get there, it could be in one potential deal, but also it could be that we're also restructuring and keeping parts of the business. So we are open to all options. And we are, at the same time, let's say, working on several options. So all options are open to but then, of course, some businesses in this portfolio is more coherent. If you talk about the printing blanket business, that is a coherent business. The most diverse business we have in this portfolio is probably the oil and gas business, where we could potentially move it in different directions because it's depending also on what kind of some is more exposed to drilling, some is more exposed to production, some is exposed to seismic, and some of the business is actually exposed also to a substantial degree to non offshore related businesses. So you could potentially split the offshore business in several parts. While I guess the other businesses we have here, the Czech operation and the printing blanket is a more coherent business, which needs to move in the same direction. All right. And then looking at turning to the gas pedal instead, I mean, where are we on progress of potential acquisitions? And if you're looking into that or is more now focusing on the existing portfolio improvement and potential divestments? I mean, as we said before, I mean, our focus here is to try to expand Sealing Solutions, and we're working there both on kind of geographical expansion and also some kind of product portfolio extension. So that is kind of activity working, but more bolt on related acquisitions. We are also with the wheel systems working more on what we call our interface, our service model there in order also to try to find opportunities to grow that one, which is then a more kind of stable business and also with a higher margin business, even though more smallish and local businesses. So that is also something where we try to grow that part of Sealy Solutions. And then also within Industrial Solutions, we have some small pockets also where we want to supplement our offering especially. So we are working in several directions. But I mean, the priority is to find, let's say, supplementary businesses for Sealing Solutions and then, once again, developing this interface model of wheel systems and then some smaller parts of the Industrial Solutions. Understood. Turning to wheels. Did you see a volume improvement in North America to your key OEMs within the more Trello board premium tires? There was a slight improvement. But I mean, U. S. Is behind Europe in that one, to say. So we are watching now what's going to happen here. And of course, we have the election coming up. We have all of that. So it's still a little bit uncertainty related to that. But I mean, our dependency is a lot more to Europe, and that is where the kind of the improved sentiment is kicking in for us more than any kind of minor changes in U. S. But with that said and done, then of course, North America was substantially better in Q3 compared to Q2. But still, it's kind of small in the total picture of improvement. Understood. And apologies. The final question here. When you mentioned the sort of production reorganization or relocation, does it also have to do with customers? For example, if Boeing when now that they have when they decide to move production from Seattle to South Carolina? Or these sorts of things that impact you as well? That is not the impact. It's more if you want to move, say, production of 1 product from 1 factory to another, you need a customer approval. And at the moment, this customer approval, it is a normal process, which kind of we do all the time with them. But at the moment, we get slow response times, and we're not really getting attention to make these changes. I mean, I shouldn't exaggerate. It might be that, that was kind of a little bit too you shouldn't exaggerate that. But that is kind of slowing the activity with, let's say, a few months. It's not really a major obstacle in that way. It's simply that we cannot do the changes solely at our own discretion that we need to also get approval from the customers to make it happen. Yes. Very sorry. But just the restructuring costs, you kept the full year guidance for SEK 700,000,000, but maybe it was a bit lower in Q3. Is it more about timing? Or is there anything else here why it was perhaps a bit Timing, for instance, I mean, we have some just to give you an example. We have, let's say, changes decided in Italy, for instance. But at the moment, the Italian government has said that you basically cannot lay people off due to the fact that they have Cata Integraccione, and you're using that. So it's basically forbidden at the moment to lay people off. So we have a list of people that we have basically agreed with and everything is done, but we cannot execute it. And as Ulf hinted on before, if we cannot execute and get it done, even though we have a deal and we cannot really account for it. So there might be a slight. So the action is defined. The action is ongoing and all of that, but there is some slow development in certain areas. It also then comes both these kind of legal complications, but also parts of these actions is also related to moving manufacturing. And at the moment, we have travel restrictions, a it's not any kind of the actions are there and the savings are there, but it's simply that we cannot really implement it. And that means also that from a, how do you say it, from an accounting point of view, we might not be able to account for all of it in Q4. We might have a rollover of some of the accounting into next year, but the actions are there. But due to these kind of limitations in several areas, it takes a little bit longer to get it done. Understood. Thank you. Thank you. And we have one further question on the line. That's from the line of Klas Bergelind of Citi. Please go ahead. Your line is open. Yes. Thanks for taking the follow-up. Just one, and I will be very brief. So on Aerospace, Peter, did you say that you expect growth in aero into 2021, I. E. Already by the Q1? Or was that a full year comment for the year? Because obviously, the comp year over year is still very tough in the Q1, just so we understand it better. No. But at the moment, honestly, Claus, we do expect, let's say, based let's say, to put it like that, I mean, based on the full year sales of 20 20, including a good sales development in Q1. And then, of course, roughly 50% down then if we simplify from Q2, Q3 and Q4. So that is kind of a strong growth in Q1, but then a drop of 50% Q2, Q3 and Q4. From that base, we do expect a slight growth in 2021. So that's a coming from. But of course, it's coming from having, let's say because the major driver on the negative in this year is going to come from the civil aircraft and the aftermarket, which is dramatically down. And the other parts, like we say, military, helicopters and space, which is the other segments for us, is actually performing quite okay this year, and we expect continued growth. So the total portfolio for us in Aerospace, we do expect, let's say, low single digit growth in 2021. And of course, from the run rate, if you say the run rate from Q2, Q3 and Q4, then that's what I referred to before, then we do expect a 10% plus growth. But the year on year growth, you understand, Claus, so it's really a little bit what you're using as the base. Yes, yes. But just to be very clear, you're talking about full year 2021. We don't talk about Q3 2021 year over year because that comp isn't No, no, no, no, no. I'm talking about Thank you. And as there are no further questions on the line at this time, I'll hand back to our speakers for the closing comments. Thank you. And thanks for the interest. And as usual, Christophe especially, very keen on any kind of follow-up questions. And also myself, we'll run into you here in the next few days when we are kind of meeting a few investors and supporting you in your efforts to talk about Rolleborg. So please do get back to us with any kind of input or questions, and we will be happy to support you. And if not, I'm sure we're going to meet and talk again in the near future. So thank you, and take care.