Earnings Call: Q1 2021

Apr 22, 2021

Thank you. Peter speaking. Welcome all of you for joining our call here for results of the Q1 for us in 2021. Turning to Page 2 in the presentation, which I assume all of you have in front of you, which has been shared on our web page for those of you not having it in front of you. Turning to Page 2 in this presentation pack, talk about the agenda. As usual, we start off by giving some general highlights by myself and then also some comments on the 3 business areas. And then followed up with Fredrik, then is giving his input on the financial slides and then summing up with a brief summary and some comments on the outlook for the running quarter. And then as usual, also finishing off with the Q and A session. Turning to Page 3. We have a heading for this report, strong start of the year. We have to say that we've been kind of surprise throughout the quarter for the strong demand, which accelerated throughout the quarter with a stronger ending the finishing the quarter. Sales for the full quarter though ended up, let's say, a little bit north of SEK 8,000,000,000, which is comparison to a year ago, a decrease with 3%. Organic sales though increased by 5%. And then of course, we have a substantial negative ForEx on the figures of 8%, which is then once again summing up to the actual numbers being 3% down year on year. EBIT, strong, SEK 1,350,000,000 corresponding to a margin of 16.4%, which is both in absolute number and in terms of margin, our best ever quarter or best quarter so far in the history of Trale Born. Items affecting comparability, this quarter is actually positive coming from, let's say, restructuring expenses linked to previously announced restructurings of some SEK 45,000,000, but we also have a capital gain related to some sale of real estate in the quarter, which Jen gave us kind of a net profit of 1.44 in the quarter, which was booked in the quarter, which is then turning up to a positive items affecting comparability of Jastray of SEK 100,000,000. Cash flow actually quite strong. Even though we were, of course, building working throughout the quarter. Cash flow nevertheless ended up stronger than last year at 9.60 Q2. It's always the case, of course, that we're building working capital in Q1 compared to ending of the year. But once again, we are happy with the cash flow coming from a well managed working capital and also which continued kind of broader low CapEx in the quarter. We've made that the cash conversion for the last 12 months is up 128%, which we then see very strong, of course, impossible to keep, very long term, but nevertheless a good result for the ending of this quarter. So this was kind of the overall, let's say, highlights. Turning to Page 4, a few more comments on the sales development. As you see, very strong sales in Asia and other markets as we define it, 30% up, but of course, good organic growth and good underlying market, but of course also quite impacted by the pandemic last year. We started in China, which closed down China. But also in this, even considering that a very strong development, especially in China, but also throughout Asia and Europe came in at 4% plus, which is then a solid improvement compared to a year ago, but also generally good. We are a little bit behind in North America, even though we see it's getting better in North America. But in the quarter, we were down by 10% and then also having a very strong development in South and other Americas, which is although all of you have to probably is aware, it's a small market for us, but nevertheless, a very good development. It's in total then ending up to 5% organically on the totality. So this is kind of the sales development in the quarter. Turning to Page 5 and agenda, business areas and quickly then turning to Page number 6. A few more comments on Industrial Solutions. A solid quarter for Industrial Solutions. Organic growth is back. Then with a good cost control and good overall price discipline is then turning into a strong increase in the margins. Organic sales in figures up by 3%, strong growth in or yes, strong growth in Europe and Asia, but the declining sales in North America in the quarter. Most segments actually developed well. We still have the negative impact, of course, year on year on aerospace. And we also note fairly low sales in intertrain manufacturers in the quarter. This, of course, especially the train business is a project related business, so that could vary in between the quarters. But nevertheless, in this quarter, it was a firm positive a firm negative, sorry, for us. All in all, then of course, EBIT is up substantially, margin is up substantially, well managed on the higher volumes, a good drop through on the higher volumes that's based on continued good overall cost control. Turning to Page 7, Sealing Solutions. Higher volumes and margin recovery is the heading strong organic sales at 6%, good industrial growth in Europe and Asia, but also here a declining organic development in North America. Light Vehicles, very strong. Healthcare and Medical also strong, both in Europe and Asia. Aerospace, of course, still pushing down this dramatically with some 50% down year on year comparison. Expected to improve with the comment. We see here on even though from a lower level, we do expect it to improve year on year in the next quarters throughout 2021. Overall, strong development, higher volumes kicking in, pushing up the EBIT and pushing up the margin to levels to very good levels also in historic comparison. Turning down to Page 8. And Wheel Systems have a heading here, strong increase in demand for agritires. For those of you following us or let's say following the market segment. In total, know that agri is kicking back and we see that also in our figures. Overall organic sales for the full business area, 6%, but behind that is a mix, a strong mix difference between agriculture and material handling construction. Very rapid increase in demand for agri tires and we have been struggling to keep up with this demand. We are still in a few of our entities impacted by COVID, giving us both, let's say, high staff entities, absenteeism and some difficulties in actually recruiting new people. And also on top of this, we have also been faced with some freight challenges on especially on incoming materials, which has been a little bit it's not unmanageable. It's actually quite manageable, but nevertheless, this has created kind of an extra burden on our production units as we are trying to gear up. Also noted in this, I know there have been a lot of focus, let's say, naturally on the agriculture development, but also have to note that Material Handling Construction, although, let's say, a firm improvement quarter on quarter is still very much negative year on year comparison. We do expect it to get better going forward, but in this quarter that was a strong negative. So strong positive in agriculture and fairly strong negative on Materials and Construction created although it is mix of plus 6. Also here we see a strong improvement in EBIT and margin. Volume, of course, kicking in, assisting us, but continued good cost control and also price discipline. And also worthwhile mentioning also we see continued improvements coming from earlier investments in the structural improvements in this business area. So this I guess was the comments on my comments on the Business Areas. So turning to Page 9, Agenda Next Agenda Point Financial and then quickly turning to Page 10 and ask Fredrik to guide us through the next few pages here. Thank you, Peter. Let's go to Page 10 and look at the sales development. We had organic sales increase of 5% in the quarter. We had organic growth in all three business areas. And the reported net sales declined by 3% due to negative translation effects. Sequentially, we have strong growth in both Sealing Solution and Wheel Systems. Moving to Page 10 11, showing the historical organic growth. The sales quarter was a good quarter in historical context. Moving to Page 12, showing the quarterly sales of around 12 months. Continuing to Page 13. We have a strong EBIT and EBIT margin improvement in the quarter. EBIT in the quarter increased by 15% to 1,350,000,000 in the result, there was a negative FX effect from translation of foreign subsidiaries by €100,000,000 compared to the corresponding quarter last year. EBIT margin, as Peter said, improved from 13.8% to 16.4%. As we said, this was the best quarter to date for both EBIT and EBIT margin. Going to Page 2014, looking at EBIT to EBIT margin around a 12 month basis. We see a positive trend, and increased margin is also confirming our good cost control in all 3 business areas. Moving to Page 15, profit and loss statement. Looking into items affecting comparability for the quarter, it was plus €99,000,000 in the quarter. We have restructuring cost of €45,000,000 any capital gains linked to sales of property of SEK 144,000,000, so net plus SEK 99,000,000. Financial net declined from $56,000,000 to $32,000,000 in the quarter. The lower financial expenses are due to reduced net debt and some nonrecurring costs related to strengthen the group's liquidity last year. Tax rate for the quarter was down to 22%, which was favorable due to limited withholding taxes or internal dividends from subsidiaries. Our earlier guidance of 75% in tax rate for the full year still stands. Moving to Page 16, earnings per share. We have a really strong improvement year on year, up 24% to SEK3.77 per share excluding items affecting comparability. Moving to Page 2017. Cash flow. As Peter said, we have a strong operating cash flow amounted to SEK 962,000,000, which was positively impacted by the higher earnings generation, lower investments than last year. This was partly offset by increased working capital due to the higher sales. Going into next page, Page 18, cash flow conversion. We managed to keep the cash conversion ratio on a rolling 12 month basis at 128%, which is strong due to the higher activity level. Going to Page 19, gearing and leverage development. The debt to equity ratio continued down during the quarter and ended at 32%. Net debt in relation to EBITDA was 1.6%. Finish off this section by Page 20, which our financial guidelines for 2021. We estimate our CapEx to be around 1,400,000,000 restructuring costs of around $500,000,000 Then we have the real estate gain of $144,000,000 So net, we estimate it to be around $350,000,000 Underlying tax rate, as I said earlier, 25% still stands. And finally, amortization of intangible assets of around SEK 400,000,000. By that, I would like to hand back the microphone to Peter. Great Patrick. Thanks. Turning to Page 21, next agenda point and summary and some comments on the outlook for the running quarter. Turning quickly to Page 22. Strong start of the year. Let's say, good as you saw in your Fredrik slides, good organic sales, 5%, which is on, let's say, the best we have had for a long time. Negative ForEx kicking in, which is then resulting in 3% net on the sales. EBIT and EBIT margin Hyatt so far for in the history of Trelleborg. Items come in fact, incrementally as a plus 100 or plus 99 in this quarter, where, let's say, earlier restructuring cost is kicking in by 45%, and then we have a real estate gain turning it positive. Cash flow strong, well managed working capital, low CapEx and better earnings, created excellent cash conversion, I say more good actually an excellent cash conversion in 128% for the last 12 months. 23 Page. So some comments on the overall priorities. We have a heading and balancing challenges and opportunities. We're going in with a strong order book and a good momentum, but we also recognize that COVID and the pandemic is still impacting us. And this kind of strong uptick in demand, strong uptick in sales with, of course, push our supply chain and well now and also logistics challenges. And we do expect also inflation to kick in here more, especially in raw materials. Although we are not that concerned about this high raw material. We feel that we have a good position in the market and a good opportunity to actually push this forward to the market. Of course, there could be some time lag in it, but we feel we are on top of that and we are already working a lot with getting this compensation done. COVID-nineteen is still going to have still, of course, a lot of uncertainties. We cannot rule out that there will be new lockdowns and new regulations and guidelines impacting us. We have some challenges in some areas to recruit people. I don't know whether it's directly linked to the COVID, but COVID is definitely not making it easier. Then overall on the strategy, of course, we will continue to work on our portfolio. We have at we already commented. We didn't comment that much about it here in the call, but of course, we still have this Business Underdevelopment to manage and we have some processes there where we do expect that to be concluded here within this year. And but it needs to be executed, although I feel confident that that's going to be done as we are guided for already before. Continued focus, of course, on excellence and making sure that we continue to get more efficient and to work on our footprint, also to invest more in innovation and also this customer integration, which has been the way we call it, a lot of digital tools and a lot of ways of making it easier for the customers to do business with us is still very high on the agenda. And we also continue to scout and integrate acquisitions, which is also still going to be kind of an important tool in building a better Telebond going forward. Turning to Page 24, outlook for the running quarter. A slight uptick in our guidance. We feel confident throughout the quarter that the underlying kind of environment has been improving and we are here guiding that we believe that the demand in this quarter will be slightly better or better even than the Q1 of 2021. But also this is said with some cautiousness links to the pandemic impact. I mean, we can rule out that things are happening and there will be new things happening, which have the which might impact operations in various ways and thereby also could impact the underlying demand and the sales that we're going to get in this quarter. Leaving this, turning to Page 5 Q and A and then quickly turning to Page 26 and opening up for questions and answers. So please go ahead, those of you interested in asking a question or giving up some comments on the report. Please go ahead. We have a question from the line of Klas Bergelind from Citi. Please go ahead. Your line is open. Yes. Hi, Peter and Frederik Klasek. So a couple of questions, please. The first one It's on wind system. So when I look at March, it seems like a very good margin. I calculate this to around 17%, considering that you had bottlenecks in the beginning of the quarter. You probably had Throughout. I'm just interested in that March margin because it really feels like a reflection of the new higher level when demand is strong for wheel systems. So if we can start in terms of the margin at exit, Peter. Yes, and this is a I mean, not a difficult question to tell you. But of course, to put it in relation to others, because March was a very long month with a lot of working days. And of course, it was better in March than other months, but I cannot see that, that is kind of a guidance for going forward. So we feel reasonably happy with 15, and we don't really want to comment on individual months because individual months is impacted by the number of working days. And course, March should be better than January. So I mean, otherwise, it's strange. So of course, it's better in March, but that is not really a guidance for going forward. So and the challenge, I mean, the challenge going forward here on wheel is that the bond is good. We are probably if we had a capacity, we have it in stock, we could have sold more, but we still also know that maybe manageable, but still something that needs to be managed. So I trust you have to be happy with that reply, Thassel. Yes. No, sure. No, what I mean is, I totally know that March is always a higher margin than beginning of the year, but you had bottlenecks from Sigve and so on. Did they at the exit of the quarter, did the bottleneck sort of get that? Not really. I mean, not really to be honest. I mean, it's not changed in the COVID. And I mean, we still had issues in Czech Republic. It's still difficulties in some parts of U. S. To recruit. And I mean, it's not really any difference in that. Of course, the underwear, we have been recruiting people and we are getting more people on board. But I cannot see it's getting easier really in these aspects end of the quarter compared to the beginning of the quarter. And of course, we were anticipating that tick in agriculture already last year, let's say, in from the beginning of even into Q3 last year and beginning into Q4. But we were surprised, as you say, with the very strong uptick kicking in here in quarter 1 and that we were not able to supply everything that the customer asked for, which is not only the case for us, which is also the case for our competitors. It's not like we are feeling that we're losing market share in any way. It's more that this very strong uptick. It is a challenge for us and others in this industry in the agriculture. But once again, looking at wheel systems, I, of course, following some other general comments. And I mean, I think sometimes it's forgotten that we still have this year on year strong negative for managerial handling and construction. So of course, it's a mix, which means that agriculture was up even more than this 6%. Yes. No, very clear. Thank you. My second one is on it's for you, Frederik. So at your previous job, you were involved in a lot of M and A. And TrelloWorks balance sheet is now solid, I delivered a lot of the CGS. And on Slide 23, it says that you're scouting for M and A. So how do you think Frederic, you can help drive the M and A agenda at Trelebor Going forward, those in terms of scope, complementary technologies and biographies, obviously, not only your decision, but I'm just interested in how you look at things since you joined. No, but for sure, it's a very good question, Klas. And we have a strong team here Central East. We have a strong focus out in the business area, scouting for M and A opportunities. So it's very high on our agenda both out in the BAs and Central East. So we clearly have the ambition here to continue the M and A journey with Trelleborg. And maybe just add on here, Klas, I mean, the challenge at the moment there is getting quite a lot of assets for sale at the moment, and we're looking into processes, but the balancing also the price expectations is very high. That is also something that we need to be balancing and we need to be clever what we buy and what we're looking for. I mean, it was a very big deal done, I don't know, in our kind of industry led was sold by Advent to DuPont. And of course, if you're looking at the multiples on that, I don't know, DuPont probably have their calculations and now the synergies and everything of that. But nevertheless, it was a very high valuation, and we need to balance that as well and see that we really can make great long term value for our shareholders by engaging into clever M and As. Okay. Thank you. Our next question comes from the line of Hampus Inglau from Hampus Weikkinen. Thank you very much. Two questions from me. I'm sorry for going back on the March issue, but maybe to discuss on how March developed in terms of how much it weighed in the quarter compared to average because picking up from different places that seems to have been the acceleration of demand in March. And I guess that has probably been based for your upping your outlook side since That's my first question. Yes. And of course, we saw it was an acceleration in demand throughout the quarter. But once again, I think everybody should have had a strong March because March was, I think, if I remember correct, 2 more working days than a year ago. So I mean, all that is kind of impacting some 10% extra working time in March. And then if you had good sales on this, then of course, it's a good leverage. But I mean, I don't see that we were building order book in March. It was a good order intake and that is why we are more confident going into the running quarter. But I mean give you some further guidance on that. Then we have to normalize the working days and all of that, which is not really so we don't see March as kind of an overall guideline for the performance going forward. It was strong, as you said, like everybody else selling was a long, long month, a lot of working days. So but once again, it's we cannot, let's say we don't want to comment anymore on that and it was stronger. Yes. And also then, of course, is also when you're looking at March isolate that. That is also when the comps started to get a little bit easier because then we saw the first impact from the pandemic a year ago. So that is also why of course, we are happy for it, but we shouldn't put too much into that on a year on year set comparisons. And in terms of upinger outfit, is that kind of more what we saw in Q4 in terms of how the end markets are performing for Or is there any new end market that has suddenly come to light? I know you have commented on Aerospace bottoming out and maybe gradually improving from very low levels. Or how should we think about that? I mean, it's all over. I mean, as you say, it was a better we are going into, let's say, Q2 with a better order book than we went into Q1 also from kind of a benchmark compared to earlier years. But then of course and that's the difficulty here is that are we really is this due to there have been some lack of supply? Are people preordering? Are they prebuying in order to safeguard themselves. We also know cost inflation is coming. I mean, we are seeing steel is going up, polymers is going up. And I mean, that is also pushing sales a little bit forward. But putting everything in one bag and try to yatch and interpret, we still feel confidence going into Q2 than we were going into Q1. And also, finally for me, On the operating leverage and fee in solutions. I mean, you're back on 2019 levels in terms of profitability. And still, as you highlighted during the quarter, there are Related to distancing and problems related to the pandemic. Should we think of seeing maybe slightly higher operating leverage in Sealing Solutions compared to 'nineteen going forward when we kind of have gone through these restrictions and then things are opening up in a normal way. Now it's not a different gross profit, it's not kind of any changes in that. I mean, also to note when commenting on this, of course, we do also believe that in Q1 and also going into Q2, there is some inventory buildup kicking in as well, which is, let's say, another positive in this one. I mean, I think we and others see a very strong uptick in automotive, for instance, which is, let's say, above the underlying production levels, which indicates there has to be some inventory build so all but once again, Hampus, we need to mix everything and make a judgment on everything. And that is why we're ending up and see that we are more confident on the demand in Q2 when we're going into Q1. But of course, it's not a dramatic change. But once again, all in all, everything considered, it is kind of we are slightly more positive going into Q1 than we're going going into Q2 than we were going into Q1. Fair enough. Thank you very much. Our next question comes from the line of Douglas Ellindon from Kepler Cheuvreux. Please go ahead. Your line is open. Hello, Peter and Frederic. Two questions from my side. Coming back to the bottleneck in wheels there, I appreciate the comments so far. But just to understand, for how long do you expect these issues to remain? And then sort of will it basically entail that volumes will even out over the coming quarters rather than seeing hockey stick given that you say that Your competitors are seeing a similar situation or just a comment on that would be appreciated. Thanks. It's a tricky question because I mean that's we don't really know, Douglas. But I mean we feel that underlying demand is good. AEs is asking for tires aftermarket is improving. But so we feel confident it's going to get better, but it's not really hockey stick up, but I don't see that. Of course, it's and I mean, you also have to know, it's quite, let's say, big CapEx in order to really dramatically change the output here, and we don't really feel confident that this is kind of a new level. We will see continued good, and we're working on the fine tuning, adding extra shifts wherever we can. But then we need to recruit people and we also have the cautiousness linked, I mean, some of the, let's say, tractor original equipment of course exposed to the symbol. Here in Sweden at least, we have said this Volvo comments on semiconductors and all of that and they are exposed to the same kind of limitations. So we have to also assume if there is kind of some problems in manufacturing other kinds of big capital equipment. And of course, they will also have some challenges. So once again, we need to make the judgment on everything. And we are slowly trying to gear up our pace and make a few extra tires in order to do with that. But on Wheel Systems, I think that the major potential improvements going forward is an uptick in Material Handling Construction, which is still strong negative. And we see, I think we saw this morning, Keon coming in with a very strong Jungheinrich, it was Jungheinrich coming in with a very strong order book. And of course, we see that we just kind of in conflict what we see in our sales. But I mean, for it will improve. And then, of course, we need to adapt, and we will definitely do our best to flex our capacity upwards without kind of building too much fixed cost into the structure. No, I appreciate you can't comment on demand, which is not seen yet. But I was more on your staffing issues and how you address that. I guess you do that in the best way you can. So no possibility to No, you're working on it daily, of course. It's a daily challenge. You have customers asking for tires and then, of course, you want to keep them happy. So of course, that is a daily struggle at the moment. Okay. And my second question is for Fredrik. It's more on the restructuring costs. We have SEK 455,000,000 left for the year. Is it possible to give some sort of visibility on when we can expect this timing wise. No. I think there will be quite the line here over the remaining quarters for the year. So that will not be like in hockey stick. That's what that should you not expect for the coming 3 quarters. Okay. Thank you. That's it for me. Our next question comes from the line of Agnieszka Villala from Nordea. Please go ahead. Your line is open. Thank you. I wonder if you can share your opinion what will happen with the agricultural market in a bit longer term, say, In the next 1, 2 years, what do you think will happen with the demand for tires when you speak to your customers? And also, do you see The same or increased or a bit abated competition from the import tires in Europe. Thanks. And I will now, we still believe that we have commented actually for many years that the industrialization and mechanization of agriculture will continue. I mean, the need to get more efficient, let's say, farming is still there. And I mean, we you know, we've been following it for some time. And JSK, you know that, that is kind of been subdued for quite some time. So we see good prospects for that continuing on a good level. And I mean, we are not even though with this strong increase in demand, we still feel that this index, this per view index still very positive. And of course, that is expectation indexes, which is on the I guess, the bulk of them on the highest level ever, more or less. So highest level for 10 years, Christoph has asked. I mean, they are still positive. And of course, that is not an immediate one for the next month. That is kind of the overall sentiment in industry. So we feel positive about that one. And so we believe it's the kind of underinvested for the last few years. We think there is definitely room for this continuing for some time. Imports, yes, I mean, imports is around, but also they have also strong home markets and priorities on that one and Freight Challengers as also they're exposed to that. We're, of course, watching it varies between different segments, but we don't see it really as a head on competition. Our head on competitors is more the some other companies than Indians and the Chinese. So we are not really of course, we were always, let's say, try to hit each other when we can. But I mean, we're not really it's not the main concern for us in this growing segments. And then on a group level, when I think about your profitability and kind of drivers for the future, could you just help us with understanding what both tailwinds and headwinds you see for the coming quarters, thinking about the, obviously, demand, which is improving. On the other hand, some raw material prices increasing, maybe hurting you a bit. What do you think about your discretionary Spending, which was probably subdued during the COVID crisis, will it come back or not? So just help us a bit with your thinking about what will happen with the profitability for Strelleborg. Yes. No, of course, you're touching on what I'm working on daily. I mean, that's always the balancing about the about the demand and sales. And the raw materials for sure is up. I mean, it shouldn't be high. We are pushing through price increases. We are doing whatever we can. We feel confident in our positions that we will be able to compensate ourselves. Might be a time lag in a few cases, but we don't we are not concerned on the kind of profitability impact for raw materials. This question is spendings, yes. I mean, it's below. It still is slow. I mean, we have no traveling and it's low activity level in general. We're learning from this way new way of working. And of course, we are implementing new tools and new ways of interacting with our customers. We believe it's going to be lower than before the pandemic, but I think it's not going to be as low as it was in this quarter. But we feel confident also as the volumes kick in, we get more kind of efficiency into our operations. So we feel that we are moving on a good level. So our ambition is still to continue to improve our margin. Of course, we know the seasonality. We know that Q1 and Q2 usually is kind of the stronger quarters. So but we feel that we're running on a good level at the moment and now priority is to maintain on this and hopefully be able to absorb some more sales into this existing structure. So that is kind of the short term priority. Longer term. Of course, we're still working on our mix and our portfolio in order to drive sales in the more profitable segments and trying to maintain and improve in the less profitable segments. So that is kind of the overall guidelines, the overall drivers going forward. So I don't know, it's difficult to give you more kind of detail also than this, Anurje. Understand. Thank you, Peter. Our next question comes from the line of Erik Goljan from SEB. Please go ahead. Your line is open. Thank you. I have three questions. First one on wheel systems. Could you Indicate in any way how much demand you were not able to deliver on, I. E. What would organic growth have been without constraints? It's difficult to say, Eric. We could have sold more, I know, of course, but we're not talking about 10% more, probably talking about 1 percentage points or 2 percentage points more that we should, let's say, been doing. Then of course, if we would have had capacity, then maybe we could have sold even more. But I mean, with the existing order book, we talk about 2 percentage points or something like that, give or take. But I mean, it's a lot it's a little bit theoretical question. So but for sure, the demand is higher than output, not only from us, but also from others. But I mean given how much you addressed this point, the constraints in the report and the presentation now, 2 percentage point doesn't seem like I mean that's within the margin of error any quarter, right? Yes. But I mean then of course, you would have had the capacity I mean that depends. If we would have had this capacity, only we could have more aggressive and maybe it could have been even higher. The demand is higher, but it's always it's a theoretical question since nobody had the capacity to do it. We can't do all this. Okay. Second question, if you could give some more. I mean, guidance of better demand. We see we have a comparison that is very different now for the Q2 versus Q1. You had a peer that related demand to the Q2 of 2019. Is that a comparison that would be relevant for you as well, you think, organic Sales here in Q2 sort of online with a word for Q2 2019. Honestly, I don't really have the figures in front of me and I don't want comment on it. I cannot comment on it here, Eric, on the fly. I mean, I think we have to get back on that question, but I don't know, Christophe is assisting here. So we had an organic growth in Q2 of 2019. We were flat fish. I mean, you are referring to absolute numbers here, Reger? Yes. I was sort of I mean, To get some bearing on what better demand means here in terms of absolute sales. But what you say is, let's say, a sequential growth, of course. That is what we're talking about. Yes. So we are not really referring a year year on year comparisons gets very strange here, especially in Q2. So we are more guiding on sequential. Okay. Final question on you talked about M and A, scouting for targets and so on. What's the I mean, we know that particularly within Sealing, there's been a few larger geys at very high multiples. Would you likely have opted out on what's the situation there given that you said you're gearing M and A Towards Sealing Solutions. That typically means higher quality assets. So are you do you see relative opportunities even with those multiples? Yes, but I mean, I think we need to go to slightly smaller targets. I mean, that is what we do and then do more of them instead. What will be then what the synergies is. But then we are not going to be exposed to this very, very high multiples paid on this last bigger deals. So our, let's say, target there, which we think we have plenty of those, is more smaller targets where we then synergies is the biggest share of the valuation for us. Okay. Thank you. That's it for me. Our next question comes from the line of Robert Davies from Morgan Stanley. Please go ahead. Thanks for taking my questions. My first question is just around some of the trends you're seeing in North America. I know you noticed that region was quite weak in the quarter. Just wondered across the different end markets, if you could give us still color a little more color, I guess, what's going on in North America specifically. Thank you. Yes, I mean, I should say overall, I mean, Medical and Healthcare is doing quite okay. If you say that, it's doing good. But more or less other all industrial segments is a little bit down. Automotive is slightly better, but most of the core industrial segments is a little bit slow in Q1. I mean, I don't know if it's lagging Europe within a few months. I mean, that is our Best Guess at the moment. So that's I mean, we feel good order intake. We feel it's improving in North America. It's difficult really to point out that there is kind of an extraordinary development anywhere. Is more that is a few months behind. Automotive, little bit stronger, all the kind of core industrial segments, little bit slow. Aerospace. Of course, it's the same as in Europe. I mean, it's been very it was a very strong Q1 last year in North America for Aerospace and a very strong drop in Q2. So we feel also in Aerospace that in the year on year in Q2 is going to get better also in North America, in aerospace even though from very low levels. Thank you. And then the other 2, if I may be, I'll ask them at the same time. Just you mentioned on the inventory restock that's underway. I guess just historically when you look back, How long have you typically seen those inventory cycles persist for? And then my second question was around or last question, I guess, was around material handling. How do you explain the disconnect that you highlighted between the pre release from Jungheinrich, for example, today and what you're hearing from your customers. What's your best guess and explanation for that? Thank you. This is all on the on the young English one is because orders. I mean, this is orders versus sales. So I don't see the number. I don't having a numbers in front of me. But I saw that a very strong uptick was in order intake. And of course, if they get orders, it takes a few months or something before it really kicks into us. So that is natural. That is always the way it is. So Hall Waters is also getting better, and that is why we are confident it's going to get improvements. So we see it in order books is getting better for us as well. So we see it's getting better, but we have not yet, let's say, started to ship. Okay. The second question sorry, Robert, what's the second question? The duration of the inventory restock cycle. Just wanted to sort of on average, how long do you typically see those going for? It varies. So usually, automotive is quick and then the industrial a bit longer. So it's a few quarters impact on that one. Okay. Cannot give any more details. But generally, I mean, if I out of my experience, then automotive is very quick in filling up, while the industrial is easily get slower. Thank you. That was all my questions. Thanks. Our next question comes Sanddernijn of Karl Buchtress from ABD Sanddern Collier. Please go ahead. Yes. Thank you. So my first one is on margins and seasonality. Do you think that we are approaching a kind of market situation where we can start to talk about normal seasonality patterns for the divisions on margins, for example. The general, yes. So but otherwise, I mean, we still once again, we are still into this uncertainty about the pandemic impact and all of that. But if nothing happens, then of course it will be similar, which means a little bit stronger beginning of the year ending. So that is normal pattern if you go back and look on the more normal years for Trellipo. I think Karl you can discuss it more in detail with Christophe if you want to, but generally general yes on the question. All right. Thank you. And then if Maybe you disclosed it, but is there any way of sort of separating everything out if you are still seeing tailwinds from any kind of temporary savings effects compared to the kind of more structural savings that programs that you have initiated. If you talk about, let's say, pandemic support or COVID support is neglectable in the quarter. So it's really nothing behind on that. Of course, we are still we are in the mood now going from, call it, dramatic downsizing a year ago and now it's up SAES. But I mean, we don't see any, when you call it, temporary effects on that. That is normal kind of adjustment to demand. All right. Thank you. And then I understand that this might be a difficult one to answer, but just looking at your SG and A Development. It's been we're going through a kind of close to 20% of sales levels in 2016, and then it's Steadily declining into the pandemic and now continue to decline in Q1 as well. And now we're below 17%. Just your view here. What do you think is a kind of if possible a more normalized long term level where you would like to be? It's probably on a slightly lower level than it should be long term. I mean, once again, we are no traveling. It's a lot of, projects being delayed at the moment. But I mean, of course, we see we are not getting back to 20% again. So of course, but I mean, you're probably on slightly lower percentage points than normal. But of course, at the same time, we expect to sell a little bit more, which gets good leverage on transformation cost and everything. So it's not necessarily going to be nagging on the underlying EBIT margin, but Ito is on the low side. Okay. Thank you. And finally, we've been talking about M and A and maybe more about acquisitions. But could you please provide an update on where things are standing now with the remaining parts of what was formerly called Budd? Yes, we have 3 units there and all of them is engaged in what we call advanced process stages. And of course, you need to be concluded. We need to agree on the SPAs, but we have takers interested in all business and we have ongoing discussions in all businesses, which is in this division. So we feel confident that that's going to be concluded and done, let's say, before year end. I mean, that is what we said before and we are sitting here today being kind of even more confident than we was when we commented on this a few months ago. Understood. Thank you. There are no further audio questions registered. So I hand back to the speakers. Okay, great. Thanks to all of you for showing interest in quarter 1 for Fertralerborg. As always, I'm available for follow ups and so are Christophe and Frederik. So please reach out if you have any further questions or if you feel that we were unclear on anything and then get back to primarily Christophe then and then for sure Christophe will involve me and Frederic if there is any need for that. So thanks Igor. Thanks again for showing interest. Take care and yes, hope to see you sooner.