Earnings Call: H1 2018

Aug 10, 2018

Ladies and gentlemen, good morning. Welcome to the Dead Villa 2018 Hope Year Results Conference Call. I'm Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode. Any conference is being recorded. After the presentation, there will be a Q and A session. You. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Dirk Langrest, CEO and Mr. Rico Belte, CFO. Please go ahead, gentlemen. My name is Derek Lamres, and I'm here together with our CFO, Rachel Beltran. I would like to start with another view of the key financial figures covering the first half of twenty eighteen. And that please refer to a slide 3 of our presentation, which is available on our website. Okay. Let's start it. Thanks to our leading positions. We have increased our net revenue year on year by 7.7% to CHF 694,000,000. Our thoughts on some of our market shoulder only moderate development. Adjusted for positive currency effects, this means an organic growth of 2.5%. The operating results have grown by 13.2 percent to CHF 90,700,000. So we have managed to increase our EBIT margin to 13.1% despite higher raw material prices, set up costs associated with growth projects as it's seeing solutions divisions and are not yet satisfactory performance of our online to subutiae Select. The net result has improved by 17.3 percent to CHF 62,500,000 earnings per share also increased by the same percentage. The ROCE has seen a significant increase to 24.1%. Now we are moving to Slide 4. Here we show our balance sheet at the end of June 2018. Compared to the end of 2017. This figure has decreased since the end of 2017 due to our investments to increase our production capacity in the Seiling Solutions positions. Our main project is a new healthcare plant in the U. S. We have access to more than 600,000,000 Swiss francs And this includes unused credit limits. So there's a sufficient liquidity to finance our profitable growth strategy. The major change between current liabilities and long term liabilities is based on the replacement of the previous bond by a new bond in the May 2018. The equity ratio is up to almost 17%. Now I would like to move to Slide 5. As all of you probably know, the debt WiLAN Group consists of 2 divisions. We have around 6 1300 employees in the production plan of the globally active Sealing Solutions divisions. Sealing Solutions can arrange 2 thirds of the group's revenues and we witnessed an increasing trend in 2018. The technical components division comprised Deb wireless distribution business of electronic components. This division focuses on euro and employees 1120s and generates 1 third of the group's revenue. Now I would like to continue to Slide 6. I will now cover ceiling solutions here. This division develops a manufacturer's customer specific ceiling components for attractive global industries. Most of our components are system critical, but accounts only for a very small percentage of the total of the 4 global market segments we serve. The health care segment is characterized by particularly high antibody years an attractive growth and margin potential. As our automotive market segment, we get on large of our revenue potential, thanks to the recent acquisitions of Oregon and parts. I move to Slide 8. Despite a partly rather moderate environment, our solutions division continued to grow profitable in the first half of twenty eighteen. This is thanks to our leading positions and operational strength. For the 6th consecutive times since the matter of the 2 former divisions, the Siemens Solutions business managed to increase its EBIT. This time to 83,800,000 Swiss rates. The EBIT margin reached 18.5%. This is despite higher raw material prices and setup costs associated with several growth projects. Our health care market segment recorded a demand clearly above the market average for high quality components from the first line production for pre filled syringes. The improved marketing activities are showing the first positive effects. The automotive market segment has also continued to expand, but with less momentum in China and in the U. S, than in the strong prior year. In Europe, demand for high quality components used in selective catalytic reduction systems continue to develop very positively. The civil engineering market segment had to be content with a revenue decrease due to some project delays. While the new contract with Nespresso creates further potential. Slide 9 It takes our new health care plans in the U. S. As you can see, the construction work is finished. We are within budget and for an example, time and cost. We will celebrate the opening during an official event together with our customers in September. The validation process with our customers will start in the coming weeks. The plan has state of the art technology, and ultra modern cleanroom environment and fully automated production cells according to Devwire's first line standards. The USA is still the world's largest and most important health care market. Our new printer will enable us to serve the growing needs of leading U. S. Healthcare companies looking for high qualitative compliment. Positive feedback from customers confirms that we have the best in class material expertise and production technologies. Together with our first line plants in Belgium and India, we can now serve our global customers through the local production of high quality components in the 3 main economic areas. The attritional production capacity will accelerate our organic growth as from 2019 onwards. New market research confirms that the global premium syringe market is expected to grow by a yearly average of 11% after the year 2025. I continue with Slide 10 and I will switch to the technical components division. This division comprises wireless electronic distribution business. The business model is based on a high service level and high availability of a broad range of components that we can easily shift to our customers on the next day basis. On the Slide 7, we summarize the 4 main market segments of our distribution business. As outlined on previous occasions, we are focusing increasingly on maintenance, automation and robotics. This is where we see the greatest potential for making profitable use of our competencies. In the market segments of electronic design, engineers, and wholesale, with customer electronics, our objective is to defend our market position. I continue to slide 12, driven by the core business to business activities, The technical components division increased its revenue in the first half year of twenty eighteen by 7.4% to 241,000,000. This equals to an organic growth of 0.8% taking positive currency effects Adjusted for trading dates, the organic growth revenue is growth is approximately 1.4%. EBIT amounts to $6,900,000 and this corresponds to an EBIT margin of 2.9%. The adjustments of customer segmentation led to a product portfolio streamline. The resulting impairment charges charges slowed to margin development. The main reason for this disappointing risk side is the distillate business. As they performed below expectations. Early indicators such that considerable customer satisfaction improvement shows that this Select is making further operational progress, but this hasn't yet translated enough into improved revenue and margin. The enterprise hub in Manchester is continuously improving of our rating performance. Licensed managed accelerate its profitable growth, thanks to its successful international expansion. To increase brand awareness, we have systematically increase our marketing activities. NEDIS is working very hard to implement this comprehensive optimization program. New common product brands will be officially launched at the end of August. First feedback from our major customers is very positive. On Slide 13, I would like to highlight the successful international expansion of Ryford. For some time now, Rytild is achieving significant growth with local workshop expansions into several European countries. Besides its own market Germany, Rysted is so far serving force, UK, the Netherlands, Belgium, Poland, Austria, and Switzerland. We write the value proposition of high quality at attractive prices, especially appeals to the large segments of Small and medium enterprises. The export business already accounts for more than 50% of Russia's revenue and is currently growing around 50%. The focus on higher margin the focus is on higher margin B2B customers. Thanks for the centralized logistics service and support functions at one location, it is possible to sustain COP's leadership despite offering online shop and tunnel phone support and local languages. The significant increase in storage capacities allows Ryerson to continuously expand its product range. The outlook for the financial year 2018. At group level, we are still aiming for a revenue between 1.35 and CHF1.4 billion. After the first half of twenty eighteen, the EBIT margin should continue to be within the target range of 12% to 15%. For the Sealing Solutions division, I'm confident that the strong order book will allow us to grow faster than the market average in the 2 important market segments, health care and automotive. Promising bolt on acquisitions project should provide additional in the second half of the year. The Technical Components division will continue to focus on accelerating profitable growth. At the same time, we are working on optimizing our cost base and we have a clear objective to further increase our efficiency. The new distillate cup in Manchester is gaining momentum and is continuously expanding operational performance. On Slide 15, you see our strategic priorities that guide our operational activities and decisions. While we continue to drive profitable growth we also want to accelerate the digitalization and increase our agility. We have started internal communication and training programs to increase awareness and understanding of our employees. Employees will only change their behavior as they understand the sense and reasons why we need to become more agile and digital. For the Sealing Solutions division, the focus in terms of digitalization and agility is on industry 4.0. Key topics are automated network and intelligent production equipment ongoing process optimization and predictive maintenance. To take advantage of these opportunities, we are implementing a uniform production system at all our plants across 3 continents. The online distribution business intends to use the possibility of big data and predictive analytics to add value for our customers. We want to analyze and use the data of online customers in a way that allow us to offer them specific packages that are tailored to the customer needs. Now I'll move to Slide 16. As I have mentioned, we will open our new first line health care plan in the U. S. In September. We have been talking about this state of the art first line production standard so many times in the recent past. For this reason, therefore, I would like to take this opportunity and invite you to Ireland and Belgium to visit our European first line plant. The visit will take place on 15th Marrero 2018. Please say the date a detailed invitation will follow. It would be great if as many as possible of you would accept our invitation. Once you have seen our sophisticated production processes, for our high quality healthcare components, you will understand our core competencies and success factors even better. I'm looking forward to seeing you all in items in November. Thank you for your attention. Now I would like to hand over to our CFO, Rato Vato, who will cover our financial threshold. Please proceed. Good morning also from my side. I'm now referring to page 18 of the presentation where you'll find the consolidated income statement for the 1st 6 months of 2018 compared to the previous year period. You realized the increase in net revenue of 7.7%, as already described by their client price. On the gross profit level, you see that this the margin has not really changed. For 2018, we realized a margin of 26% compared to 25.9% in the previous period. We also realized no big changes in the positions research and development expenses, marketing and selling expenses, general and administrative expenses and also for the 2 positions of the operating income and expenses. So we end up with an EBIT of $90,700,000 compared to $80,100,000 in the previous period For 2018, this corresponds to an EBIT margin of 13.1% compared to 12.4% in the previous period, which is an increase of 13.2%. There is also no big difference compared to the previous year if you look at the net finance result. Income tax expenses show a tax rate of 27 percent almost, which is lower than the previous year, where we were confronted with a tax rate of 30%. So at the end, at the bottom line, you realize a net result of $62,500,000 compared to $53,300,000 in the previous year. For 2018, again, this corresponds to a margin of 9% compared to a margin of I now continue on page 19 where you find the condensed balance sheet comparing to 2018 to December 2017 June 2017. I'm mainly comparing to December 2017 when I compare the actual figures with previous periods. If you look at the current assets, you realize a decrease The main change takes place in cash. We invested heavily into property plant and equipment and in our main project in the new facility in the U. S. As already described and presented beforehand. The net current assets show a similar level as in the previous year. The current liabilities show quite a decrease compared to the end of 2017. On the other hand, we see a big increase in long term liabilities. This is the bond that has switched now from a current liability as we have refinanced the existing bond in We also see the equity ratio that has already been mentioned by Dirk beforehand, which is still at the level of almost 70% compared For the previous years, this is a previous period, this is still a small increase. I now continue on Slide 20 with the condensed consolidated cash flow statement. You're realizing the line net cash from operating activities, an increase of 49% to the compared to the previous period, which is quite an interesting increase, but you also see in the next line that this monitor has been generating from generated from operating activities has almost overspent into capacity into CapEx Investments. When you further follow down, it contains consolidated cash flow statement you realize in net cash used for finance activities, the switch of the bonds that I already have explained And the last big position is the dividend paid to shareholders with an amount of fee $1,000,000 compared to only $37,000,000 in the previous period. So at the bottom, you realize again, the $222,000,000 in cash that are still available, mainly for future projects Of course, there is some projects we invest heavily still in the U. S. There is a further CapEx to come. This project is almost finished, but there is some additional cash flow that will take place in the second half of the year 2018. I conclude with the segmental reporting on Page 21. You realize the different segments. The Sealing Solutions segment shows an increase in sales as already percentage of 7.9% compared to the previous period to EUR 453,000,000. You also realize again the EBIT improvement of 6.6% compared to the half year 2017 and the slight decrease in the margin. In technical components, again, the increase in sales of 7.4% and the increase in Epic from $1,500,000 to $6,900,000. And on the EBIT margin, you also realize again this increase. For the total group, we have seen the figures already, At the end, I would just like to mention again the improvement in the reported EBIT margin from 12.4% to 13.1%. I hear you to conclude my explanations of the financial figures. Yes, thank you very much, Rachel. So, no, there are any questions from your side. You. Questions. First question comes from the line of Anders Nieder, Fed Capital. Please go ahead. Hi, gentlemen. The question on technical, it has been a discussion topic before that in case the turnarounds cannot be achieved all options. Especially outside of Esman will be on the table. Now that H1 was again not that satisfying in terms of growth and profitability, the question arises, what has to happen in the second half of the year or what has to happen in what timeframe in order for you to get to the point where all options are on the table? As I already said a lot of times, we have to consider the full year of 2018 and not only the first half year. And additionally to that, on one hand, of course, the financial figures are very important. But internally we have as well a deep look to some other figures for Nexenzo like the Net Promoter Score. Which is coming in the right direction. So we will see by end of the year how that is going forward. Yes, it is right. That is not where we perspective as well internally, that we would like to see the next couple of months. And I think we have, a direct the right actions and we are seeing internally some improvement and we will see at the end of the year what happens. And as we have showed in the past debt release that will act if there is a need and we will discuss it next year. Will you show us these other KPIs that's in last Thursday or probably at the year end at the analyst conference? Will we get some more insight in these KPIs and how they develop? No, I think that is not foreseen, but we have not, and even we do not would like to show that for our competitors. So please understand that we are not opening this point here. Okay. Thank you. Or probably the last one, if I can, if I can add. So if these KPIs wouldn't move in the right direction or not as fast as you expect how much time do you give yourself? As I said before, we will see what happens by the end of the year and then we will discuss it internally and then we will draw a lot of conclusions out of that and then we will inform you. The next question comes from the line of Michalisberg, Bank of Tobo. Please go ahead. Good morning, gentlemen. Thank you very much for taking my questions. I would have a couple of ones maybe starting again, with, with tech call. When we look or when we look at the your competitors, some of them have grown double digit and you are showing only growth organically. 0.8% or 1.4% if you take the trading days. So what are the main hurdles for the growth? Is it also your kind of conscious decision to, not take some, some sales, or is it really just you don't see this growth coming to your side? I think the point is, 1st of all, thank you for your question, Michael. I think the point is here as you know, for sure, that we are with this select mainly in the area, but in some regions like Switzerland and Scandinavia areas, even if we compare that with our competitors, the growth rate in such regions is below what they are communicating overall. And additionally, our operations, as I said, in Manchester, is test still to improve, but there is really some good going forward movements. And as I said before, we have to see for the full year, as I said, we have defined the right actions, and what I can see is that people working very hard to achieve our targets. And we have to see if we are able to be attractive enough for our customers, but please understand that I would like to give this organization some more time. By the end of the year to show that we can be able to, yes, let me see a minimum to achieve our internal target, yes? And, do you see any improvements in this market currently in Switzerland or Scandinavia? I think if we compare that in this market, are there some improvements, and we have some markets where we have to do a much better work, it comes to internalization as well for them. So I think that we have to see and to wait if what we define here as a customer value that is really understood from the customers as well that we understand the customers, right? So I think there is some work to do, but the difference over the last year, we're knowing exactly what we have to do, and that is what we are measuring internally. Okay, thanks. And maybe second question, just you mentioned in your press release this M and A projects. I understand you cannot say much, but it's, you can understand that it's pretty unusual to talk about it before it's actually finalized. So so the that poses a question how big these acquisitions are? Are they kind of really game changers or rather a bolt on acquisitions? And then how should we look at your full year guidance in terms of sales if some of these M and A potential included in this guidance or that would be on top of that? That is not included in the guidance. So I think, please understand that I cannot tell more to that. I know that is understood, but I would like to give you a little bit guidance this direction for the, for the second part of the year because I'm confident that we will come back with 12 other informations in the next couple of weeks So I'm still confident that it will be happen. And so, as I said, it will be in the Student Solutions division and there's a CapEx fit to the structure of what we have there. And please wait a couple of weeks and we'll get further information. And of course, And as we have invited you to, I think, of course, we will tell them more about that what we have done in there. Yes. Okay. Perfect. Thank you. Thank you. We have a question from Mr. Richard Fry from Societe Capital Bank. Please go ahead. Good morning, gentlemen. Thanks for taking my questions. First also, Taco, you have mentioned that, due to adjustments to customer segmentation, there was a result, triggering impairments. Maybe some more insights on probably the size of how big this impairment was and, to what it was related. Is it just customer relationship, brands, stock or whatever? Mr. Grady, it's a mixture of that ends up mainly in the stock positions, of course, the devaluation of stock positions and then it's in the lower range of 1000000 to 3000000. It's not that much of an amount, but it's, of course, the technical components is an important part. Okay. Thanks. Then I have another one concerning the ramp up in the U. S. And India and in the health care. Does that or is it possible that this might, affect the the the operational development in the second half of the health care segment? As I said, I think we are in the phase with our customers to invite them to approve the sites. And that is a typical process here. I think we will see some first sales in 2019, and that will increase over the year in 2019. So far, what we can see, and that is leading to a very high or a very good development products of the finished space as well in Belgium in our first line facility. So that is as well, very attractive for the customers already. Now that they are knowing that we will have such sites on the global scale, And but there will be no effect in 2018 in the second half. We are still covering the cost for the projects, including material price increases so far. We have not mentioned that, but just to give you an indication, The cost for raw material price increases plus projects costs is approximately 1% of the turnover of Sealing Solutions in the first half year. And so far, we are able to keep this able percentage for Silling Solutions. So I think it's quite even there as a good risk size of that. And we will benefit from that in the Westman in the next years. Okay. Then I have a last one regarding the, the taxes in the U. S. And then the fight with China. Do you see any negative impact, especially on the automotive business, I guess, health carrier now for well on track with the U. S. Plant. But then when it comes to automotive, do you expect anything to come here? Or are you globally positioned so that you can come around potential tax impact? We can, as we are globally positioned in automotive, we can come around about peak. Impacts actually at the moment, we see a positive impact as our business in the U. S. Should be able to profit from lower tax rates in the future. Well, in overall, the tax rate will not change drastically. I mean, you still have to accept the tax rate over period of 26% to 28%. And in China, we'll be profit from a specific situation. So we Actually, our tax rate there is even lower than the average. We have a we are a so called what is it that? Yes, we have a technical specialist there and that means that is leading to a tax rate of around 15% to 15% in China. Okay. Thank you. The next question comes from Sylvan Batchek, Rajmuth. Please go ahead. Thank you, gentlemen, for taking my question. I mean, most of them have been answered. Just just want to follow-up on technical components. I mean, the question is, you mentioned now several times you do not want to charge the business after 6 months. You want to look at the full year figures I mean, we are now 7.5 months, close to 7.5 months into the year. Does this mean that you're very confident that there will be a reacceleration or an improvement in the second half of the year and do business trends in the last one and a half months point to this? Please understand that we will see the full second half here and so far. We would like to know further comments to the progress in July and in August. Okay, thank you. Next question comes from the line of Raycomstaden, Parikhildia. Please go ahead. Yes, good morning. Two top first on feeling solutions. You mentioned that in the first half, you could compensate raw material effects and ramp up costs with productivity gains, how does it look like for the second half as you also open now that the U. S. Plant, maybe this will lead to some further, ramp up costs, but do you see here still you can compensate them again in the second half like in the first half? Yes, that is my expectation. So far, I think we have tied some continuous improvement and the production. And we have identified some further cost reduction programs, internal programs, which, and thereby, we should be able to compensate such costs as well in the second half. And even I have to say, as you know, if it comes to the raw materials side, The raw materials increase typically is linked with customer contracts and there's typically a delay of 3 to 6 months. So I think we should be able to cover that asphalt for the second half of twenty eighteen. Is it okay for me? Yes, thank you. Another question, in the area of dealing solution for the consumer goods segment and espresso. You actually hasn't spoken about growth in that segment. So can you give here some more indication that you have rather pointed to a good, growth potential going forward. But does it mean actually in near term you haven't grown there, but you expect to do so in future again? We cannot disclose information for that. I think the market is well known that we have done special contract with Nespresso And therefore, we would like to take that business on risk and then we fall, we are not open any information for that. Please have a look to the let's specify what they are telling about their business. We are doing from our side the best that espresso can do their best to the market from that perspective. That is what we can do again. Okay. Thank you. And the last question regarding, technical components, when we look at the 2 business units, Stitcher Lake and Natus, maybe some indication in terms of turnaround situation, where do we stand and more profitability wise? And I think are you still in indirect? And do you expect here to be breakeven again and positive in the second half? As I said, overall, I think our target is at minimum to hold the growth rate, what we have shown in the 1st 6 months, and that is our target for the second half and then what our target is and we will see what we can do about that. In terms of profitability, could be the second half twenty seventeen reference for the second half twenty eighteen or a target, let's say? As I said, let us have to look to that and we are our target is here to continuously increase, of course, the profitability and to see the internal KPIs and then we're going to report to that when we have the full year behind us and then we will give more explanation to that. Thank you. The next question comes from the line of Mark Possa, DDAG. Please go ahead. Yes. Good morning, gentlemen. I would have a couple of questions concerning TD Solutions. You maybe allude on the footprint? I mean, you you're in the US now or almost in the US, Belgium and India. And is that enough? For for the future, or do you do you think that there is a need for a further, location, you know, in geographic and political terms? Could you maybe say how much CapEx you would have to make in order to expand those new plans? To expand themselves. I mean, where is the capacity utilization right now in the U. S? For how many more years of growth will you be able to handle with the existing capacity and how much will an expansion cost? And maybe in terms of technical, the one part of the strategy is to, nourish sales with own brands. Could you maybe give us some detail there where you stand in terms of percentages of those own brands versus OEM brands and, maybe in terms of Google's spend as well. Is there an increasing rate of Google spend that you have to do in order to keep up growth or can you even reduce it due to a perception change in the markets since you mentioned the Net Promoter Score. Yeah. First of all, thank you very much for the questions. It's a lot of questions. If I understand the first question just to clarify And we spoke about a feeling solutions about Automotive International and you said that we have mainly in U. S. And Europe, if I understand that right. I have to say, the big portion of our business and automotive is already in China, we have more than 2000 people working there for us. And the automotive sector and that even we are the leading company for the product portfolio, what we have. And if it comes to the let me say to the capacity in the future, when I look the growth rate, what we see in the automotive sector. So far, we have invested in the in the Qatar City in the last couple of years. So I see not a strong need for further investments from the capacity perspective in the next 1 to 2 years to cover the growth rate. So from that perspective, we are well positioned Yeah. If it comes to Taco, of course, we have our own brand, as you know, with R&D, and we are performing with that very well. But we do not disclose the percentage of that because it could be as well very important to note for our competitors and we would like to give this information out of our company. And, all other detailed questions, what you mentioned Google Spendings and so on, we are not disclosing such figures as well. Please understand that. Can I just add a follow-up concerning the capacity in Sealy Solutions, I was more referring to the health care side of the business where you have invested heavily in China and recently in the U? S. As well. Could you allude on the capacity utilization? And is there the same 1 to 2 years additional capacity, relevant, like in the auto business, or do you have more spare capacity in order to a company more growth in the future before to have to reinvest and meet our existing capacities. Yeah. Other if it comes to the health care capacities, I think we have, a long term investment plan And one of the major topics here was to step into the U. S. Market. And of course, with this ongoing investment, around 100,000,001 110,000,000, we will be able to cover the needs for the U. S. In the next couple of years. If it comes to China, so far we do not have a plant in China, perhaps you mentioned that you would like to mention India where we are still investing in the 1st line, capacity with all the investment, what we have known so far we should be in the position to cover the market needs for the next couple of years. However, whenever we see an opportunity, to add our product portfolio that could totally lead some further investments, but I have to say that we are talking about investments which is in the single digit millions. So it's not really on a high value, which we have to communicate, especially. But I think that is our major investments are announced and that should help us to, yeah, to follow growth opportunities and as I said before, on one hand, we would like in the health care sector talk have on one hand to go with the market growth rate and on top of that to gain some market share from our competitors. Okay. So geopolitically driven investments in China for the health care business on a plan yet? China will be an important market in the near future. And I said it several times, of course, our first idea would be to do that via an acquisition. And if that is not possible, we have to think to invest there. But that will be not before, 2020. The investment perhaps we come with an decision in 2019. That depends on how far we are with our other investments and how we can manage our let me say to our people management inside of the Seating Solutions. So you can imagine that such huge investment needs a really strong attention of the management and we would like to, lose, let me say more or less the control of the costs. So that was a strong behavior in the last couple of years of Siemens Solutions. And therefore, we are doing that step by step. Okay. Thank you very much. You're welcome. We have a question coming from the line of Mr. Michael Nowan Fredwitz. Please go ahead. Yes. Good morning, everyone. Thanks. 3 main questions. Actually, one on technical performance, you said that million impairment was coming from, I would say, Natis. Can you also explain a little bit the expansion plans for, I hope, what the cost actually for this and what do you expect going forward from Ryals? That would be one question on take. And two questions on solutions, if I may. One is a bit the competitive dynamics in the health care environment. The West Pharmaceutical seems to recover here also. I think they had a huge restructuring program or still have a huge restructuring program going on. They delivered pretty good results. And I've also heard, I know, I don't know if it's exactly true like this, but I've heard that Harrisheimer has chosen them for a prefilled syringes project So it looks like they're also pushing a bit further into this market. So maybe you can give us a little closer look on what's going on there. And one on Nespresso. And it looks like Nespresso is pushing a little bit more on this virtual line. So the bigger capsules they will be launched in Switzerland. I mean, I understand this is a very small market, but I was just wondering, is it still the case that you would be producing this virtual line flows and what would you expect from this larger capsule that is mainly for the U. S. Market? Maybe these three questions. Yes, thank you very much, Michael. Very good. Would you like to start? Well, the provisions, you are right, but it's not only Navy. It's also partly concerning this to a certain extent. We do not expect further picture provisions that have to be taken into account because the project that have made this restructuring and refocusing on one brand is actually very well advanced. So there might be something in the second half year, but no further big positions to be expected. Yes. Okay. And then I'll come to the next questions that was middle linked to one of our competitors here in the market. As you said, they announced and close rate of around 9% in the 2nd quarter. But if you compare that with the 1st quarter of around 0, and the average is let me say that what we for sure have significantly above that was our plus line standards. And I assume that we will keep that momentum as well for the next couple of years because we started already earlier with the investments and with the market launch of our new operating strategy And I think we have still some yes, it's still in a good position and I'm confident that we will see some further good progress here and for sure you will understand that. And hopefully you have time to come in November to our facility in Belgium then we will inform more about that. If it comes to our business consumer goods, that means press As you know, we are as well delivering the virtual line capsules, and that is included in the contract but I can't tell too much more that whatever they are doing, we will, we will join and is it in the positive direction as well as a negative direction? So but it's a positive, then we will have the portion of that as well. And other questions should be addressed by the next vessel. Sorry for that, Michael. Yes, that's fine. But just come back on the on the on the Rykel question maybe for it or to give us a little bit of feeling what this expansion really cost And one that I forgot to ask actually on the seasonality in Seating Solutions because usually you have a bit slower, I mean, absolutely, have a bit of lower revenue number in the second half with usually a lower EBIT margin. Is that something that we can expect also in 2018? Or are there growth dynamics more would they tend to a better second half compared to the first half? First investment into the expansion of Ryzhul to probably 1% EBIT margin that we lose over period or which is invested into additional marketing activities and into additional public activities. So that's, as I said, is probably 1%. It's not that much. And then, to come back on the seasonality, actually seasonality over the last years, if you look back, it's no longer that important. 2nd half is in many cases, almost at similar levels as the first half of the year. If you go back earlier on, that's absolutely true. We have a strong seasonality, but markets have changed in the direction that over 12 months period, it's it's has become very stable. Yes. What we ask can, say additionally to Lighthouse decide is this investment, you know, that still Ryfield has a mix of B2B and B2C, and we are struggling more on the direction of B2B. And if we compare just the growth rate of B2B with Rystad, we are aligned with what we experienced from other companies in the market. So that is going very well. And on the other hand, of course, in B2C direction. We are losing some market share, but that is not our target. So overall, we are happy with the development of Ryzhik. Sorry, is it also fair to say, you know, because, Michael, before me, she referred to your competitors like example, electoral components who who usually, you know, reports very good numbers. But, I mean, if I look at your technical components business, then I would try to strip out the revenues that you deliberately let go, what would be really the growth rate? Because I think you would grow, you grow faster than 0.8%, but you just let go of, I don't know, 1% or 2% of revenues. Is that correct? So you are closer to market growth actually than it looks? No. I think the the point, as I said, let us give some time we have still the issue with a disconnect that is clear. We can't see that in the financial figures. On the top line. And that is what we are missing on the Avon line as Rato expressed. I have some things which will improve in the second half of the year. But on the top line, we have to see are we really going with the let me say doing the right actions there, but we have defined the right actions now we have to see if we can see that finally as well. In sales and that is what we are striving for. So please understand that we not would like to go during this Q and A in the detailed of these 3 branches. The next question comes from the line of Johannes Brinkman, AWP. Please go ahead. Mr. Benklin, your line is open. Can you hear me? Yes, we can hear you. Wonderful. Do you see any negative impacts of trade conflict between Donald Trump and the EU and China for your automotive business? I think the question is good. What we can't see such impacts directly because for us, from time to time, it's very difficult to judge if such products, which we are bringing to our 1st year customers and in which costs they are using such products. So if that if our first year customers will be influenced by the OEMs like BMW Audi and so on. And that could behalf an impact, but we can't see that, today. And therefore, difficult to answer that from our side. We are what we can say is that we are not losing market share in Europe. We are having some good improvements, as I mentioned in the SCR systems, there we have a very well penetration And so from that perspective, we are doing well. We have a new product line there, which will help us to grow above the market. But it's covered. So the influence, I think that is very difficult to answer. The next question comes from the line of Dominique Pajas from Societe. Please go ahead. Yes, thank you. I would just have one question or two questions regarding, again, distraulic and, navy's, I mean, the the strategy, you know, you have in Manchester seems to be quite a risky bond. And you have a lot of new people there on the ground. I think who are all new I mean, does that mean that you have, and, that you have, and you also have to let some people go in other locations. I mean, does that mean that you have lost market share at this And, the same, I think, Ryjals, you have said, I mean, B2C, you, you have lost market share. What about Netis there, also, any losses of market share? Well, 1st of all, of course, if you start an operation that the process and to bring all people together and to have all processes, the right the right behavior. I think that is still in the optimization phase, but I'm so far I see a good progress. They are talented people there and I'm sure that we will see some further improvement in the next couple of months. If it comes, to the other divisions, as I said, with Natus, very important will be now in the second half year. That we will announce our new one brand strategy by endofthemonth and that it will hopefully, and that is our plan, to lead to a better value for our customers and Zip should finally bring increases in sales. How far that will go, it's difficult to predict, but I think it's so far on a good way and we are in batches there, so that's what we expected. If it comes to Ryals, I think as I said, right here, we are striving for B2B because we see there and better opportunity for us in the long term, to grow our market share there. And that is what we are striving for. And therefore, we have already budgeted that we will lose in the B2C market. That is, let me say, a plant decrease of the market share in this direction. Okay. A product question. There are no more questions at this time. I'd now like to turn the conference back over to Mr. Lambert and Mr. Belta for any closing remarks. Yeah. Although, as we mentioned, I think we have, a good risk side overall for the debt wire lag group. And of course, there is some room for improvement, especially if it comes for take home. We will do our best to go forward and to improve step by step. And we will come then back next year with our conclusions. What we are seeing here for the full year of 2018 if it comes to Taco. And the health care sector, we are, will proceed with our plan, with our long term plans that should help us to accelerate the growth there. Automotive, we have to have a look what happens in the market, but we believe and we have the indications that we put above the market average in this area. And so far, I think we should be able to deliver figures in the range of we have delivered in the first half year. So Rachel, any comments from your side? Okay. So now then I would like to thank to all of you for the participation in this conference call. And hopefully, you will be able, and to manage to join us in our new Healthcare factory or on their 1st line Healthcare factory in Belgium, which is similar to that, what we have in the U. S. And I'm I'm sure you will be impressed and will understand why the customer in the future especially will join us in this healthcare business. Thanks a lot for your attention. I wish you a nice and Alexful weekend. Goodbye. Ladies and gentlemen, the conference is now over you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.