Earnings Call: H1 2020

Aug 11, 2020

Good morning and welcome to today's call. I have here with me on the call for the first time. Our CFO, Walter Shares. I will directly move to the today's agenda after our explanation, Walter and myself, we'll be happy to answer your questions. I will start with a business review. This year's figures are impacted by several significant factors besides the impact of the COVID-nineteen pandemic and the strong Swiss francs we also have the divestment of 3 businesses. Despite the COVID-nineteen pandemic challenges, we did implement the announced strategic focus on system critical elastomeric components. We therefore solve the 2 distribution companies, dislike and Natus, at the end of February and the civil engineering business at the end of April. On this slide, you can see the key financial figures the old debt by law group, including this select and Natus for 2 months and the civil engineering business for 4 months. With regard to our revenue, we are short of some CHF 16,000,000 compared with the previous year. This is due to the only partial consolidation of the 3 companies sold. The EBIT and EBIT margin are adjusted for the loss on sale of the subsidiaries and for the startup costs for the new U. S. Healthcare plant. The net risk side is adjusted for the loss on sale of subsidiaries only. The COVID-nineteen pandemic has led to a massive decline in the automotive and oil markets and to a stronger Swiss franc despite the negative impact we have managed to deliver a solid operational performance. Walter will come back with more details during his presentation. As announced in February, we reorganized our company to strengthen our market focus and our core competencies. The new organization has been implemented successfully and has already proven itself during the COVID 19 pandemic. The increased focus of the respective markets helped Dettweiler to respond quickly in agile to changing market developments and customer needs. This slide gives an overview of the key financial figures of the continuing operations or the new debt weiler consisting of the business areas Healthcare solution, Industrial Solutions and the remaining online to a CIBUTOR Righthold. The divested businesses, these select natives and civil engineering, have been excluded for both periods. On this base, we were able to limit the organic sales decline to 5.2%. This is thanks to strong demand in the healthcare food and beverage and the Rykel business. Due to the strong Swiss francs, the reported revenue declined by 10 point 3%. The COVID-nineteen pandemic led to a sharp sales drop for Industrial Solutions and additional costs for Healthcare Solutions. Reported EBIT came in at 64,500,000 Swiss francs. This corresponds 213.2 EBIT margin adjusted for the startup cost of around $8,100,000 for the new U. S. Care Healthcare plant, EBIT more was at a CHF72.6 million and the EBIT margin reached a solid 14.9 percent. Some 3,500,000 of the year on year decline in EBIT was due to the The high resilience of our business was supported by early cost saving measures and the effect plans of the Mobility General Industry And Oil And Gas Business Units. Our diversification into several market segments has proven itself in difficult times such as the COVID-nineteen pandemic. With the healthcare food and beverage businesses, and the online distributor record, we generated more than 70% of our sales in low cyclical and following the growing markets. I would now like to comment on the performance of our business areas. We will start with Healthcare Solutions. This business area offers high quality system critical components for containers and delivery systems for injectable for the pharmaceutical and medical markets. During the COVID-nineteen pandemic, the first half of the year, we proved that we can make an important contribution to our pharma customer business contingency. This is thanks to our presence with standardized high quality plants on 3 continents. Thanks to our leading market position. We see strong demand in the health care business. The COVID-nineteen pandemic has further stimulated demand. I will talk more about this in the outlook. Currency adjusted, we managed to grow our revenue by 5.7% as the strongest Swiss franc compensated for some 12000000 or more than 6%. Therefore, the reported revenue is more or less in the strong prior year level. The fact that we are not able to show more growth is for life due to the negative impact of the COVID 19 pandemic Although all debt filer healthcare plans were considered as essential manufacturing activities government measures could use the manufacturing capacity for several weeks. Our plants in Northern Italy and India were close to hot spots of the corona pandemic. Due to government restrictions, our plan in India, for example, was limited tipped to 50% of its capital city for several weeks. However, since the end of flow, productivity has been rising steadily and sales growth is accelerating accordingly. In parallel, the product mix is changing protiviti with the proportion of higher margin coated components, increasing cyclicality. The COVID-nineteen pandemic has also led to higher cost to overcome the negative effects. Additional costs came from of measures at the plants, additional logistic efforts and even accommodation for our employees near the plants. In addition to the one time COVID 19 costs, there were higher amortization and startup costs for the new healthcare plant in the U. S. Adjusted for the startup cost of $8,100,000, the EBIT margin reached 21.7%. That reported EBIT margin was 17.7%. I will now switch to the Business Area Industrial Solutions. This business area offers customized system critical components for demanding applications in the mobility, food and beverage, oil and gas and general industry markets. Contrary to the Healthcare business, our business area industrial solutions was set with full force by the negative economic impact of the COVID 19 and 3 out of our 4 business units. Automotive And General Industry customers had to close their plants around the globe for several weeks. The number of oil rigs also fell dramatically within a very short time. The business unit for the beverage benefit from Corona effects as a result of the worldwide regulation to work from home. Revenue growth accelerated compared with the previous year. Overall, the business areas revenue declined to 208,700,000 This represents an organic cost savings measures at the affected sites, we were able to adapt our cost structures to the changed demand situation. Adjusted for the non cash loss on the sale of Civil Engineering Business, the EBIT margin of the business area reached 10% Considering the harsh market condition 3 out of 4 business units, this is a very respectable result. We have adjusted our cost structures and investments due to the lower demand caused by Corona. However, we will proceed carefully and continue to invest in the development Besides the two business areas of the core business, the remaining online distribution Rygals reports directly to me. Ricoid has always distinguished itself by a lean organization in a low cost base. This has proven itself during the corona pandemic. Thanks to its attractive price performance proposition, Rycald was able to profit from the accelerated trend towards online purchasing due to the Corona pandemic. The introduction of working from home and online schooling led to an increased demand for electronic devices and assess routes. The strong growth in the business to consumer segment more than compensated the decline in the business to business segment. In an overall shrinking market, Ryghood achieved an organic growth of 10.8% and increased its sales to $89,600,000. Operating profit rose by 15.8% to $7,500,000 and the EBIT margin improved to 8.3%. With this, I conclude my review and hand over to our CFO, Walter. Hello, everyone, and I'm very pleased to have you here. My name is Walter, and I'm presenting the financial results half year twenty for that Wylie Group. Thank you for your interest in that tweeter. When we start with the first slide with innate sales, you can see that divestments and original market developments led to decreasing turnover. Half year 2019 turnover for that value group or $706,300,000. That's the first column. Excluding the divested businesses, distillate, Canadian And Civil Engineering in 2019, and this is actually for 6 months. The 2019 continuing operations turnover was NOK 544,700,000 This is the 3rd pillar from the left. The reorganization now shows the 3 pillars, helped 3 business pillars, Healthcare Solutions, Industrial Solutions And Ryhield, and their respective development. I'll dive into that now. Health Care Solutions organically grew by +5.7percentor11.6000000. By the high yield also organically grew by 10.8 percent or $9,200,000, actually benefiting from the Corona prices and the demand for home office supplies. Industrial Solutions organically lost minus 18.4 percent or 51,700,000. While food and beverage held the line and increased their sales, business units, mobility, oil and gas and general industries suffered from the Corona impacts as some customers even ceased their operations. Given the relative pre crisis position of Industrial Solutions, All those effects led to an organic decline of minus 5.2 percent overall. That's the first arrow. The Swiss franc further strengthens relative to all currencies that is exposed off in a continuing operations which contributed another minus 5.1 percent decline in the amount of some SEK 25,000,000. This leads to the half year twenty twenty revenue for continuing operations of 488.6 1,000,000, which is the 3rd pillar from the right. Adding the revenue of distillate canadis for 2 and 7 engineering for 4 months leads to the total revenue for the whole debt filing group in the amount of 400 $45,700,000. If we continue to the next slide to the earnings before interest and taxes, You will have noticed that the reported EBIT is heavily impacted by the Westman's as communicated earlier. The sale of distillate canadis also affected the 2019 results with an impairment charge in the amount of SEK 169,000,000 so that these non operational effects have been excluded on this overview to compare the actual operational performance. That dealer showed the resilient performance in a challenging environment. The EBIT for the whole debt by the group in this year of change before the loss of sale of subsidiaries reached 11.9 percent or $65,100,000. Continuing operations alone delivered an EBIT margin of 13.2 percent. Taking into account the start up costs within Healthcare Solutions for the new site in Middletown, Delaware, the adjusted EBIT stands at 13.4 percent or $73,200,000. As you can see in our APM document on the debt line away side half year twenty nineteen had not yet seen impacts from the divestments. That only came end of 2019 with the announcement of the sale of District and ADIS. Healthcare Solutions reported an EBIT margin of 17.7% or $35,500,000. Adjusted by ramp up cost in Middletown, this resulted in 21.7% or $43,600,000 despite various Corona related costs and production constraints, for example, in India. Industrial Solutions reported EBIT margin includes the divestment of civil Engineering, thus the 6.2 percent or $13,200,000. The adjusted 10 percent or $21,200,000 do not represent great, but still a reasonable result in our view, given the massive top line decline in some businesses, as explained by Derek before. On the bottom right, you see Ryals and Ryals increased their EBIT to 8.3% or 7.4 $1,000,000 compared to half year twenty nineteen. We actually expect this trend to continue until year end, and Dirk will talk about that in a minute. If you continue to the next slide, the balance sheet, you see that the balance sheet overall has shortened due to the divestments. However, please be reminded again that this year like Canadian's balances already have been impaired at year end 2019 year in amount in the amount of EUR 169,000,000. This actually means that the development you see here on the balance sheet is a little less pronounced as you might have expected at first sight. We were able to increase the equity ratio to above 60% again, It stands at 61.1% compared to the 58.1% at year end 2019. We shortened the current liability positions, mainly by repaying interest bearing debt in the amount of $26,700,000. This further reduced net debt and our gearing. The gearing ratio currently stands at 0.13. Our strong balance sheet allows us to pursue further strategic opportunities during these Corona times, especially in Healthcare Solutions, as Dirk has mentioned before. Our liquidity and liquidity planning actually allows these investments especially since he focused on cash conversion, particularly during the last few months during those Corona times. End of July, not June, end of July. So it's actually last month we showed or we had cash balances in the amount of around 200,000,000 again. If we move on, we see that the average capital employed only slightly decreased. While the absolute EBIT decreased compared to the last years. The ROCE therefore is driven by lower absolute EBIT more or less constant capital employed. This results in a ROCE of 14.7% which is below our expectations For 2020, we see an increase by endoftheyear, but only by end of 2021, we expect pre crisis levels on the road scene. This is an area where we definitely will First off, 2020, showed that our strategic investments in 1st line and others come to their end and reach more or less the level of the depreciation. However, due to the investment opportunities based on additional orders, and demand in health care solutions, but also food and beverage in the coming years, we are ready to invest further. We see opportunities in these areas and can further support our customers only be slightly less than in 2019. However, and this is important, that will allocate its capital into low cyclical but growing markets where we see future potential. Midterm, the range of capital expenditures should come back to some $60,000,000 to $70,000,000 as communicated earlier. On this slide, you basically have the consolidated income statement, and this is a is a functional income statement, as you can see, I have 3 new arcs there too. 1st, the general administration expenses increased due to some reallocations of position during the reorganization that we had and also due to IT services to the divested businesses. These costs are recharged to third parties now, not internally charged, thus resulting in higher other operating income. These actual costs are recharged externally and not internally as before when the position G And A was shown net. So it's a gross consideration here. Second remark is that the finance result includes the development of the unhedged currencies such as Indian rupee, Brazilian Reais and Czech Crohn. During the Corona time, they depreciated quite strongly against the Swiss franc. The valuation of open derivatives and thus unrealized hedge results are included as well. 3rd, The EBIT decline led to less tax expense. However, there are various tax jurisdictions that still levy based taxes so that the decline is actually under proportion. When we move on to the convinced consolidated balance sheet, just two remarks to make here, the equity ratio increased to 61.1% and the increase of the net cash surplus is due to the repayment of interest bearing debt in the amount of 26,700,000. That leads me to the condensed consolidated cash flow statement. Net change in cash and cash equivalents is minus 19,200,000 mainly influenced by financing activities. Net cash flow from operating activities is positive by $79,100,000,000. Net cash used in investing activities reduced to 6% to 18.5 1,000,000, mainly helped by less CapEx, as you can see, and obviously, the cash inflow of sold subsidiaries. Net cash used in financing activities increased to minus EUR 79,800,000, mainly due to repayment of debt whereas 2019 actually saw loan increases. What you can see in the cash flow statement is that operationally, purely operationally, that's why they already earned or generated, let's say, the normal dividends in the first half twenty twenty. What is also remarkable is that the large portion of the investing cash flow is in Westminster. With that, I hand over to Dirk for his outlook into that future. Yes, Baeta. Thanks very much. For this financial insights. And now I would like to continue with the outlook. The COVID-nineteen crisis will continue to our company as of the coming months and therefore the uncertainties for the second half we can and meeting our customers' needs. Due to the reduced demand at our mobility, oil and gas and general industry units, we will continue to adjust capacity and cost structures. This is likely to result in 1 off restructuring costs in the mid single digit million range. Irrespective of the mentioned uncertainties, we also see 1st signs of improvement in this business units. This indicates a first sign of a global economic and market recovery. In China, for an example, we are experiencing a rebound of this market in the last month on previous year's level. This also shows how well we are positioned in the markets we serve. We see a very positive picture for our farmer and food and beverage business units and our brand Ryphold. The first two in particular have high order backlogs, this will lead to accelerated revenue growth in the second half of the year twenty twenty in the coming years. Overall, we expect a continuous improvement of the business in the second half of the year. This should be at least on the level of the first part. More than 70% of our sales come from low cyclical and solid growing markets. As mentioned, sales growth in the business area Healthcare solution is accelerating since the end of April. This is already a direct effect of the global efforts to develop therapies and vaccines against the COVID-nineteen virus. Due to payments from foundations and government authorities as well as market potential, some pharmaceutical companies plan to produce therapies and vaccines to combat the COVID 19 virus at their own risk before they receive regulatory approval. With this unique case of the COVID 19 virus, all people around the world need therapies and vaccines. Therefore, once the drug will be developed and approved, there could be bottlenecks in the glass vials or wrapperstoppers as international media has been reporting. We will support the health care industry in its fights against COVID-nineteen. With our new additional production capacities in the main regions, we are an attractive partner for the pharma industry. To be able to handle the additional volume quickly enough in 2020 and for the coming years, we will invest in additional capacity expansion of our existing healthcare facilities. Our strong balance sheet with an ratio over 60% in high liquidity allow us to size profitable growth opportunities at any time and move emerged stronger from the COVID-nineteen crisis. At that while we are all proud to be able to contribute COVID-nineteen therapies and vaccines that will save hundreds of thousands of lives. We will continue to work with pharmaceutical companies packaging, suppliers and other health care industries experts to develop multiple proven systems, system solutions. To conclude my presentation, I would like to draw your attention to Devon as strategic priorities. With our focus on increasing agility and accelerating digitization, we have been preparing ourselves for unforeseen events in the book awards since 2017. With this corona pandemic, we are benefiting from this groundwork. The progress achieved has shown us that we can react even faster and better to exogenous impacts. I'm very confident convinced that debt WiLAN is well positioned for the challenges and opportunities in the future. With our strong market positions, our focused capital allocation in our particularly priorities, we will profit from the long term structural growth trends in our core markets, and we create value for our customers. How we will do this. We would like to show and present this during our next Capital Market Day. If the Corona situation allows we will invite you to visit our Swiss plant and shutoff on Wednesday 4th November. Please say the date more detailed invitation will follow. Now, thank you very much for your attention. And now Water and myself are now available to answer your questions. The first question comes from Michael Frode from Fontobel. Please go ahead. Yes, good morning, gentlemen. My question would be regarding the investments in your house capabilities business going forward. And how you manage the potential volatility in demand, going forward. I mean, I would expect that currently we have, sort of high levels of order intake in preparation for ramp ups, but it's very unclear how the demand will really be in the next 12 to 24 months? And is there a risk on your behalf to overinvest in capacity and then to be stuck there with that capacity if the demand is delayed. Can you make a comment on that, please? Yes. Maybe let me add some comments to that. As you know, many companies around the world are working on the vaccine for the coronavirus. As a president, it's hard to say which vaccine is going to work What we know is that we face on the global sale close to 20,000,000 confirmed cases and more than several or 30,000 deaths. The researchers around the world are developing more than 165 vaccines and 30 vaccines are in human trials. Vaccines typically require years of research and testing before reaching the clinic. Buses scientists are racing to produce a safe and effective vaccine by the next year. That's what I was working with couple of pharma companies to support them in their development. All of them, which we are working with reserve capacities at DictELA for the coming years. That's the reason why we will invest, for all that in the next at minimum in the next one and a half years. Independent of the COVID 19 crisis, the demand what we are facing, especially for our high value products is constantly increasing. So that is linked to our concept with the first line. And therefore, we see, of course, an additional boost, was related to COVID, but beyond that, whatever we are installing as an additional capacity for this, COVID 19 crisis, we can use it later on for the higher demand, for other applications in the future. So I'm still confident that we are not over investing in additional capacity. And maybe just a second follow-up on that, in terms of the startup costs that you mentioned, are you expecting similar startup costs now in future periods related to those additional capacities? No, no, I that is what we are now doing is in our existing facilities in Westing, further equipment, but that is not leading to additional costs because we will accordingly when we have the exipment and start, we can start to produce. The next question comes from Charlie Ferenberg from AWP. Please go ahead, sir. You initially initiated cost cutting measures already last year, and you now say you want to increase these measures because of the situation of industrial solutions. Could you may give us some more light about that? Some more details about what does this mean? Agreed in in increasing this measure. And can you tell us how many employees, you, had to let go from the company already or how many for how much you will reduce the workforce in the near future? Thank you. Thank you very much for this question. I think, as you know, the adjustment of our customer actually at the various locations is an ongoing process. And that is aligned with the constantly changing customer demands, especially in the mobility sector. It's quite difficult to say today what that means, finally, because of, as you know, we said that we beliefs that we are facing a U-turn in this mobility sector. What we will do after all these cost measures and cost reductions, what we did already in the couple of years. We will have a close look to that what the market is doing in the next couple of months. And of course, We still have opportunities to further reduce the cost. But what we would like to see first of all, how the markets are developing. And therefore, it's not a fixed value of what we are talking about. It's more about what is coming up in the next couple of weeks months. And we are talking about the reduction of people, if I remember right, while I may, you can help me. I think it's around 700 people when we compare that for the year, 2000 19. Meanwhile, and this year is around 300, let me say. So from that perspective, we already reacted very fast. And currently, we have not foreseen further huge changes here. Depends on the market development, as I said, in the next couple of weeks. May I repeat you reduced workforce 2019 around about 700 people and in the first half of twenty twenty, around 300 people. Is this correct? Reduction of 350, 350 jobs in Business Area Industrial Solutions worldwide since the beginning of 2020. We have a question you're saying that. Voluntary Leaders and of redundancies and as their pension since June 2019. So year to year result is 700. And the adjustment of the cost structure at the various locations is actually an ongoing pro So it's ongoing also these, these minutes, these weights, whatever, with the constantly changing customer demand also, depending on the regions. Okay. Do you have to figure out also for Switzerland maybe? Let me say in Switzerland is more balanced out because we have in quite very fast improving business with our food and beverage sector. And therefore, let me say it's more or less not on the for the our employees not really a huge influence So that will move some people from the mobility to the food and beverage sector. The next question comes from Richard Frey from Ted Katy. Please go ahead, sir. Yes, good morning. Scott two questions. First of all, may you give us some insights how the mobility business in China is is doing. And secondly, regarding food and beverage, the growth outlook, is that closely tied to the announcements we we heard from one of your main customers? Or are there new projects already, let's say, driving growth? Thank you, Richard, for the questions. In China, what I can tell you is if I'm looking to the last 3 months, that means included in including July, we are back to the previous year level so that you can see already there, even slightly above that. But it's unclear whether this will be, sustainable for the next couple of months. But what we are facing there that is it's back to this level what we had before and we have to look further down the road, what will happens in the next couple of weeks months, but it's quite good I have to say and that it's helping us that we have new product lines, which is starting there. If we have a look to, for them, beverage, here we have We have invested and will invest in source capacity based on the alignment with our customers. So, I expect that we will see a significant growth in the next couple of years, which should be above our average of the last years. And of course, that is not only related to one customer as we have won, we won another customer but I can't disclose the count as close the name today. Just a quick follow-up. Your comment on China, is it generally China industrial business or But, focus mobility. Mobility business, yes. And of course, in China, we have as well a business for the health care sector. But that is more what we are delivering from our regions in Europe and India to China, but that is increasing as well. But China overall is currently a market which is supporting us and our strategy. Okay. Thank you. The next question comes from sir Robert from Credit Suisse. Please go ahead. Yes. Good morning, gentlemen. I have three questions, if I may. First one is you mentioned that you have a high demand or backlog in health care. So I'm wondering given the new capacity in the U. S. Where you said in the past that it takes 2 to 4 years for for a full capacity utilization, whether this is going faster? And with that, more top line and mainly more margin. What we can expect here? Yes, I think with the demand, you have to understand what we are doing with this COVID-nineteen. Of course, we are talking about product lines, which we already half in place today. So what we are doing is here that we are using existing processes and we are just adapting this with further equipment in our locations, for example, in the US and as well in India and in Belgium. So that is much more easier to do that in such a way than compare if you would have with a new ramp up of a complete new site is a complete different approach here. It's more, as I said, in my outlook, it's more investment in equipment And so that is not so difficult to bring a direct to the market. Okay, got it. Thank you. You mentioned this, increasing capacity in food and beverage. So, annually, when I take the 1st 6 months, you make about 120,000,000 sales. So, How big is the capacity increase? Is it another $20,000,000 to $30,000,000 additional sales or what can we expect here on top line? Sorry, you mean for the health care business? Sorry. No. Food and beverage. Food and beverage. Food and beverage. Yes, this gives about 120,000,000 annual sales when I take 1st 6 months when I double this and know the capacity utilization utilization, the increase in capacities, how much of incremental sales can we expect from these investments? I do not would like to, disclose that in detail. What I can tell you that it will be above the other first half year level And we are starting with this new customer with the formalization of the new lines in October. And together with the contracts, what we have in play that will lead to withdrawals in the second half year, but it will be more visible and on a higher level in 2021. Okay. Got it. And then probably the last one, you made guidance that you said that second half will be on same level like first half. Do you mean on sales or on EBIT and what level on what numbers or continuing numbers, I guess? Yes, I think that what we are talking about is on the sales and the absolute and the absolute EBIT. And, as I said, it's quite difficult to predict how especially this volatile markets, like in the mobility and general industry are now performing. I think we have What I can tell you, as I said, with the backlog in health care and with Nespresso, there's a backlog what we have there is that means we have we have to fully utilize all our capacities and especially in healthcare, what is very important to understand is that we see additional positive change in the product mix to a high value products in the second half of the year, which is really addicted to currently increasing and that will help us to increase the margin by endoftheyear. And then we'll see what happens with the mobility sector. Yeah. Okay. And this is including or excluding the restructuring costs, your guidance? That is here. Let me say it's a mix. It's a running movement. Currently, I have that more or less included in the outlook. Okay, got it. Thank you so much. Depends a little bit on the size of this, yeah, okay. Yes, yes. Yes, yes. It's a volatile number still. The next question comes from Daniel Kurnig from Reelbow Securities. Please go ahead. Yes. Hello. I have actually, two questions. First, I I was wondering on the record. I remember you were looking for value enhanced options. What is the latest in terms of value enhanced the options that in this investment. And then I was wondering, what do you see statement in terms of gross margin, what can we expect for the second half? Thanks. That means as well related to Rytford, the gross margin? Yes. I think with Rykield, as I said, well, the Rykield is performing very well. And we have no pressure to divide divest this business. We have, installed enough capacity in the last couple of years and even we are using let me say different opportunities to further improve that. So from that perspective, there is no pressure as long as Rygeland as we see is moving in the right direction. And we will evaluate the options year by year how to proceed. But currently, we have no process in place and there is not a fixed timing for a divestment. For the gross profit margin, I think right here, as I said before, it's a they have a very lean, very lean production there. They are able to have the cost under control. And even with this higher turnover, they were able to reduce the cost, compared to the first half year of twenty twenty. So overall, they did a very good job And typically, from the seasonal effects, they will see a better second half of the year if it comes to the gross profit. Can I ask you on the gross profit for the full company? What what will you, what do you foresee in terms of margins for the whole debt by the company? For the continued business, of course, as I said, due to the fact that we are expecting in the health care business, at more that we are bringing more valued products to the market that we should be able to improve as well our gross profit in this direction. Additionally, what we will see and there we have some lacking effects is that it was material prices. Currently, We are mostly worked in the 1st 6 months based on the oil price, what significant liquidity was used in the second quarter, that this effect those effects we will see in the second half of the year, which will help us to slightly increase the gross profit here. On the other hand depends on how fast now, the mobility sector is growing is that due to the fact that they have a lower gross profit that could be that would be what is difficult to say today. The next question comes from Ralph Verender from Helvea. Please go ahead. Yes, good morning, gentlemen. Thanks for a few questions. 1, just to understand on your presentation, Page 9, on Industrial Solutions. There is a total revenue figure of 212, but I think you also mentioned 208.7. I'm not sure if I got that correctly, but if that's correct, what's the difference between the two numbers? Well, the 212 point 0, as you can see in the half year report or the interim report to $212,000,000 is actually the externally reported sale. However, what Dirk mentioned is actually when you go to page number and just flipping through it, Page number 10, you have the 208.7, which is net sales with 3rd. And then, obviously, we have Shopdorf, a tooling and molding shop that is actually selling out from Shop Offshore for the whole world, which is also a turnover between the segments because you know Shop Industrial Solutions is also selling tools to health care solutions. That's another $3,300,000, which results to a total net result of 212.00. Okay. Thank you for that. Yeah. Welcome. And then on page 17, I think, yes, on your CapEx figure. You mentioned, of course, you see the after the big ramp up, it's coming down. Now you indicated it to go up again, but I'm not sure if I got the right numbers for that. So for the full year. Is that then more like 70 or more like 100,000,000, what you mentioned? Well, it will be higher than the mid range figure of between EUR 60,000,000 $70,000,000. We want to support in the health care market as they're mentioned in its fight against COVID-nineteen. And the additional investment is to cover additional demand for COVID-nineteen therapies and vaccines that Dirk mentioned before the exact amount we do not want to disclose due to competition. And then partly all that additionally is for the ramp up further production line for the food and beverage sector. So overall, that's what we are doing here will lead to some further investments, which are was not expected before. However, that is direct linked with orders that means that will help us in the mid and long term. Okay. Thank you. So that is not it's not that you now already foresee a shortage in, capacity for health care. That's not what I should understand. It's more into the food and beverage. I think what we are facing, as I said before, that in the future, there will be a 1,000,000,000 of products maybe needed for the health care sector and the market is driving to get the capabilities. Capacities. We are doing our best to bring the products to the market. However, overall, we believe there could be a shortage for such products. And that's the reason why we investing further. And it's quite difficult to say how much the amount will be exactly in the near future. But we are, as I said, we are quite confident, that we are able to fulfill the customer's demand. Okay, that's great. And if you make those extra CapEx then, what kind of return do you expect to make on the CapEx? Overall, there's a return of investments will be below 3 years. Sure I could understand. I was more thinking of a percentage number. Yes, the CapEx, that is around studies 30% of what we are expecting here. So next, what we have for food and beverage and for the health care. Okay. And if you look at, external, capital allocation, What is your hurdle there? David. Rod, can you actually elaborate on your question? Yes. So So for this internal organic growth, you expect to make 30% return. That's how I understand it. And if you now look at external growth, so, you find a fitting, company, which could add to your group. What kind of return do you expect to make on those acquisitions? Think Derek, you will, yeah, so I think that is, as we said in the past row of, I think when we are looking for further acquisitions and what that is what we are doing. Of course, that should be above at minimum. Let me say on the average level of what we have with debt wire. However, And as you know, that is always depends on what is an opportunity in the market. And if we see a company which has a full strategic fit maybe is a little bit lower than what we are facing today, but that is too early to say what is exact the rules for that. I think 1st of all, we have a look as a cultural fit given as a strategy given and then we are discussing internally would it make sense to go forward based on the DCF calculation, of course. Alright. Thank you. And then maybe final question on Barco that used to be always very profitable also when you acquired it. Now with this rapid change in the market, to which degree were you able to hold up hold up the profitability? SparkO is still going to raise, very positive EBIT margin despite a significant decrease in revenue. So that shows how robust their business model is. And so with that, what we are facing there, that is sometimes where it declined more than 50 sentences business in the second quarter, but we are still generating a good margin and they are acting acted very accordingly. They know how the how this business is running and they have several influence in the last couple of years. And even as you know, we have considered a downturn like what we are facing now, we have considered that of course for the future. I'm not for this year, but they are doing a very good job there. We have experienced people, so we are quite happy with that what they are doing. And then if that is a recovering, then of course, it will help us dramatically. Yes. All right. Thank you and good luck for the second half. Yes, thank you very much for all, yes. Here, at the same time, I see some, some chat messages coming in from Stifangeshte from MainFirst. He asks when you see better margins in healthcare in the second half of product mix, were you referring to adjusted margins Actually, we did was referring to the reported margins of 17.7%. So that obviously will will increase due to the product mix because the 21.7 margin that was mentioned as well is actually including the ramp up cost in Middletown. And then I also see from Michalis, from MainFirst, First question, Espresso, will increase capacity for work to align due to strong growth, any comment here what we can say in on Nespresso is basically, that that we manufactured a traditional Espresso capsules, Starbucks and also the virtual line capsules. Therefore, we actually grow in line with Nespresso's growth in these markets. What we don't produce is actually the path All the other ones we are in. Yes, the other ones we are in. Then the second one also for me, Karina, and does the COVID situation help that liner to win market share in health care as multi sourcing away from West Pharma? Yes, I think that is, that is not only due to the COVID. Of course, that is our target to increase our market share over the time. We expect, especially in the year 2021 2022, that we should have, a higher share of products compared to our share today. For the future for this COVID-nineteen products. So, I think I'm looking quite confident into the future that we can benefit from that which will help us to accelerate our growth and then to that we are able to increase our market share over the time. And then last but not least, also from MainFirst, how do you currently see interest for your high yield asset as it is for sale? Well, as Dirk just mentioned, you know, Rygipe is performing well. There is no pressure to divest the business. The options for Rygipe are actually evaluated by by the company every every year, so to speak. But nevertheless, right? Their interest is there. And in case of an attractive offer, we are at obviously analyze the offer and then decide how to proceed. But as we said, there's no pressure for us. The next question from the phone comes from Sebastian Swogo from UBS. Please go ahead. Hello and good morning. I have questions and both are related to health care. The first one is with the traditional capacity you're planning. Yeah. Could you sorry, could you start again? That was not loud enough here. Okay. Can you hear me now? Yeah. No, it's great. Yeah. Thank you. Perfect. I've got two questions both related to health care. The first one is, how much of additional revenues do you think you can cater see additional capacity you are installing over the second half of this year? And the second question is with regard to the $8,000,000 ramp up costs in the U. S. Facility, Is it now the end of these ramp up costs or should we expect a decision to see again in the second half of this year or next year as well? So I think with, starting with this, turnover for health care for the COVID-nineteen in the second part, please understand that we would not like to disclose these figures, yeah, due to competition. And if we're having a look to the ramp up costs, I think what we are facing currently that, we believe that we can accelerate, let me say, the ramp up due to the COVID nineteen situation that should help us in 2021. And of course, as I said before, our clear target is to achieve the breakeven with this facility and the second half of 2021. Yeah. And I expect that if it comes to the one time cost for Healthcare and the second half of this year, should be lower than the first half year. The next question comes from Mark Poser from BVAG. Please go ahead. Yes, good morning, gentlemen. I would have a couple of questions around mobility. You have the claim that every second car has parked of you, so I would wonder if you could distinguish between the content that you have within conventional cars hybrid cars and totally electrified cars, with a price attack so that we can kind of get a feel for what the content looks like. And maybe you could also talk a bit about the project you said that you would carefully watch the next couple of once you said weeks and another time you said months, in order to assess the recuperation of the mobility sector, but the projects are longer lasting. So can you maybe describe the nature of the projects where you designed in or participating already, in order for us to assess the turnaround of the mobility sector a bit more. And maybe as a third question, I would wonder about M and A, Historically, you've grown successfully with the central acquisitions. Can you maybe give us a feel for the next couple of quarters. I mean, there is opportunities. I assume, especially in the mobility sector, how do you assess the situation there? Yes. Mark, thank you very much for your couple of questions. 1st of all, you said, I said sometimes weeks and sometime months. When I'm talking about that, I'm not talking about projects. And when I'm talking about weeks and months, what we have to facing. Yes, of course, I'm talking always about what was the market development within existing product lines, what we have in place. In which we have already placed at our customer side. As you know, I'm sure in the mobility sector, if we are talking about projects that typically that needs somewhere between, let me say, 2 4 years before a project is comes to the market. And therefore, of course, we will see in 2020 what we have what we did in 20 16 or 2018. So from that perspective, I think we are working in different directions. We have let me say, a long list of projects in different applications related to the type of, engine in the car if we are talking about the combustion engines or the full electric vehicles, battery electric vehicles and hybrids, where we are working on all levels quite successfully. What we are facing here is that the content in a car with an electrical vehicle is approximately the same value, what we are facing today within a traditional car is less the quantity is not on the same level, but the value of the such products are higher. So overall, it's good. And of course, If we are looking to the hybrid versions that is helpful because then, of course, the content by car is higher for us. That is, how we see that. I'll say that means we are working very close with different institution, even on, the fuel cell development because there's a couple of companies who still believe in the long term that fuel cell could be the engine for the future. If we are having a look to the M and A sector, of course, that is always an important topic for us. We are not looking so deep into M and A for the mobility order for, let me say, more size for the automotive sector. I think we are good positioned, especially with the last moves in Brazil and especially with our company, former company Otte in Germany, which is now a debt brand where we have the 2 components products of LSR and plastics, for example, there's a high demand of such types of products in the future. So from that perspective, I think we are well positioned in the mobility sector. We are focusing our M and A targets more on the direction of general industry into a new technologies and markets and as well in the direction of health care. We have some, discussions, but it's that during this call, the times you can imagine, it's quite difficult even if you would be willing to go into due diligence, it's not possible in the physical one. So therefore, We are working on projects, but it's too early to say something more in this direction. If I missed something, Lars? Yeah, if you maybe you could the content per car, and you don't have to mention the hybrid content, but in the conventional and e costs, you said the content is approximately at the same level. What is it about? Is it, is it in the range of, 15 to 20 francs or is it rather more towards 50? Slightly below the figures which you mentioned first. Okay. Okay. Thank you. From Serge Rotter from Credit Suisse. Please go ahead. Yes, good morning. A quick follow-up on the high backlog you mentioned on health cares and on food and beverages to new customer. I'm wondering how firm is this backlog or these orders lasting into next year point 1 and point 2 and to what quality to which margin level BBB have to expect that or how does this work? Can you elaborate on that, please? I do not like to disclose everything because that's the only thing what I what I can tell you, that this copper what we are investing is partly going in this year in the last quarter. And of course, it will be more visible in the year 2021. However, what we are doing here, we tried out to let me say to play more driving as a volume, of course, it will maybe lead to a lower that will lead to a lower margin. However, overall absolute we see in the next couple of year and an increasing value here. Okay, got it. Thank you. Gentlemen, this was the last question. Okay. Then, thank you very much. For all your great questions. And I wish you, a good, a good second half year and stay healthy I'm looking forward to see you, as I mentioned, to our Capital Market Day and latest, let me say to our yearly results Thank you very much for your attention as well from my colleague, Walthak. Thank you very much. Have a good afternoon.