Earnings Call: H1 2019

Jul 16, 2019

Ladies and gentlemen, welcome to the DKSH Presentation Full Year Results 2019 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. It's my pleasure to hand over to Till Leissner, Head of Investor Relations. Please go ahead, sir. Thank you, Sandra, and good morning, everybody. It's a pleasure to welcome you to the 2019 half year results conference call of DKSH. As Sandra said, I'm Till. And for those of you on the call, I have with me Stefan, our CEO and Bernard, our CFO. Before we start, as usual, please have a look at the disclaimer of our presentation regarding forward looking statements. For those who do not have the presentation in front of them, you will find them on our web page, www.dksh.com in the Investor Relations section. Let me give you a quick overview of today's agenda. First, Stefan will present you with the highlights of the first half and then give you an update on the business units. And then Bernard will walk you through the financials and provide you with an outlook statement. Before we go to the Q and A session, I kindly ask you to tell us your name when you have a question and the company that you're working for. And with that, I would like to hand over to Stefan. Please go ahead. Good morning, ladies and gentlemen. I'm very pleased to welcome you to DKSH Half Year Conference 2019. We appreciate that you have taken time for us. Please let me go straight into the most important events of the first half of the year. We have further developed our strategy, The three growth drivers that strengthen our business, the continuously growing middle class in Asia, the increased inner Asian trade and the trend towards outsourcing are still intact and our business model is resilient. In order to drive strategic market expansion, we have accelerated our acquisition activities since 2017. We position ourselves in attractive segments and acquire profitable and complementary businesses. In the 1st few months of this year alone, we have made 4 earnings accretive acquisitions and we have a good M and A pipeline. We have stepped up our digital business and will place a special focus on the topic of digitizing our processes and business activities. We will also focus more on big data and analytics in the future. We are continuously streamlining our organization to become more agile. We are also further developing our corporate culture with teamwork, empowerment, entrepreneurship and sustainability are essential values for us. We place customers and employees at the heart of our activities. In doing so, we are increasing the appeal of DKSH for the next generation. Let me now elaborate on the 4 business units. We have further expanded our leading position in the 3 business units Healthcare, Performance Materials and Technology. Business Unit Performance Materials, in particular, performed very well with double digit EBIT growth. And the Healthcare division improved with adjusted EBIT growth of 8.6%. In sum, Business Unit Healthcare, Performance Materials and Technology grew adjusted EBIT by more than 8%. This is a significant increase compared to last year. In Business Unit Consumer Goods, we have intensified the restructuring, which is currently at a well advanced stage. Net sales increased by 3.4%. Additionally, we opened up attractive business areas with 2 earning accretive acquisitions. Despite the challenges in the consumer goods market and the necessary restructuring, we grew underlying sales by 5.8% at group level. This growth is adjusted for the Healthcare business in China and includes organic growth, acquisitions and a slightly positive exchange rate effect. We are confident that we will continue to deliver organic growth in the future and complement it with value accretive acquisitions. With the generational change at the beginning of the year, we focused on setting the pace even better for DKL Sage future. Let me briefly present the most important events to you. The Board of Directors has been renewed with 3 new members, Jack Clements, Wolfgang Baier and Marco Gardola, who is starting in January 2020. These new members bring valuable expertise on Asia, health care, consumer goods and supply chain management, and perhaps most importantly, they help us to make better use of the opportunities in the field of digitalization. We have also strengthened our management team with Terri Derry Meetings. I'm pleased to have an experienced consumable specialist on board, who will take over the leadership of business unit consumer goods early August. The appointment of Laurent Mondi, our General Counsel to the Executive Committee, underlines our continued commitment to good corporate governance. Together with our anchor shareholders, the DTM Keller Holdings, these renewals ensure continuity and stability. Let us now move on to an essential pillar of our growth strategy, acquisitions. Here, you see an overview of the acquisitions we have made in 2019. The acquisition of Orec Pacific's consumables business in Malaysia and Singapore, completed in April 2019, is the largest transaction since the merger of DKSH in 2000 and 2 with annual net sales of €185,000,000 DKSH has positioned itself in the attractive high margin foodservice and so called Hurrica sector and took over one of our largest competitors in Malaysia and Singapore. Also in April, Business Unit Technology completed the acquisition of the distributor, SPC. With this transaction, we became the market leader for analytical instruments in Thailand. In Business Unit Performance Materials, we strengthened our local presence in Benelux through the acquisition of Dolce International, a specialty chemicals distributor based in the Netherlands. Up until then, we have had little presence there, and this means we have expanded our market coverage in Western Europe, also offering more regional solutions for our clients. In Australia, DKSH made another acquisition in the consumer goods sector with CTD in July. With that transaction, we accelerated our expansion in the Pacific region. In total, with these 4 acquisitions, we have already added almost €300,000,000 of high margin sales at attractive multiples. The integration of the companies is going well and these acquisitions will further strengthen our business. Let us now move from the acquisitions to our key figures for the first half of twenty nineteen. As you might remember, we withdrew from the Healthcare business in China last year. This effect alone reduces sales in the first half by around CHF360 1,000,000 compared to the same period of the previous year. Excluding this effect, we recorded a solid growth rate of 5.8%, a combination of organic and equivatory growth as well as a small positive currency translation effect. The adjusted operating profit, excluding the Healthcare business in China and excluding one off restructuring costs in business unit consumer goods amounted to CHF124 1,000,000 in the first half of the year. This is higher than in the previous year. The adjusted profit after tax of CHF79,300,000 was below the previous year due to currency fluctuations, the initial application of IFRS 16 and financing costs for acquisitions. Let me now please give you an overview of the business units, starting with Healthcare. As I just mentioned, we withdrew from the Healthcare business in China last year. Adjusted for this effect, net sales grew by 7.7%. In all other markets, the business unit was able to increase sales. The adjusted operating profit grew by 8.6% to €68,000,000 which led to a margin increase. We have strengthened our medical device business further and further developed our own brands, making it possible to enter the Philippines in this business line. In 2018, we have partially automated the distribution center in Hong Kong. Towards the end of this year, we also planned upgrade of our healthcare distribution center in Singapore. Let me now proceed with the business unit consumables. The entire consumables industry is facing challenges, as you know, and we have recorded declining results in this sector in recent years. That is why we intensified the overview restructuring and are pleased with the underlying progress. Despite all this, we increased sales by 3.4 percent to around €2,000,000,000 in the first half of the year. The restructuring initiated at the end of 2018 is well advanced. Organizational adjustments, impairments and the closure of unprofitable business segments resulted in one off cost of CHF 13,300,000 in the first half of twenty nineteen. The adjusted EBIT that is excluding these restructuring costs is 7.9% below the previous year level. Already in the first half year, we reduced the EBIT decline of the previous year. 6 months ago, I explained to you the 3 main initiatives we are driving forward in the business unit Consumer Goods. 1st, through investments, we are positioning ourselves better for the future. 2nd, through acquisitions, we are developing additional and attractive segments. And 3rd, we have intensified the restructuring in the business unit after a few years of declining profits. By investments, we mean the expansion of our distribution network, the introduction of the transport management system and the extension of our customer relationship management system, Eko Plus. We also opened new markets such as Indonesia and in the digital as well as in the e commerce sector. These initiatives have already helped us to improve the performance in recent quarters. All in all, these investments are on track. Take for example the new transport management system that we introduced in Thailand, Singapore, Hong Kong and Malaysia. Thanks to an improved interactive planning, deliveries and transport routes are optimized and fewer resources are therefore tied up. The system is currently being implemented as planned. Our acquisition strategy is crucial since it gives us access to attractive business segments such as the Hurrica, Hotels, Restaurants and Cafe sector. With Orec Pacific and CTD, we have made complementary and accretive acquisitions. In the long term, they will consolidate and expand DKSH consumables sector and market position. As a third initiative, we have intensified the restructuring of the consumables business in the first half. This project is associated with increased expenses that have affected the half year results. However, the restructuring also forms the basis for improved future efficiency. Furthermore, as mentioned already with Terry Saramidis, we have found an established new head of the business unit. With all these steps, we will sustainably set up our business unit consumer goods for a successful future. Let me give you more details on the restructuring in the next slide. We have put in place programs on the larger DKSH market to sustainably increase the operating profit of our consumables business. In Hong Kong and Malaysia, the projects initiated end of last year have already shown 1st success. In Thailand, the most complex BKSH market, we set the course for a turnaround in the second half of the year. The programs are based on 3 main pillars. 1st, we are improving sales. We have optimized our brand portfolio and renegotiated the contract terms with individual manufacturers or even terminated contracts. We have separated from products, so called SKUs and closed unprofitable business in individual markets. 2nd, we have analyzed and changed the process in the supply chain in our distribution network as well as in the distribution centers. I mentioned our new transport management system before. Inventories, for example, were also scrutinized. The progress we are making here is a central part. 3rd, we are increasing the efficiency of our organizational structure and internal processes. We need to be leaner, more agile and reduce costs. Additionally, we are nurturing a stronger performance culture with concrete KPIs, and we are focusing more on individual accountability. As I mentioned, the different markets are at different stages in the implementation of this program. In Hong Kong, we are seeing the first encouraging results. And in Malaysia, the onetime restructuring costs should already be covered by the savings this year. Let me summarize the development of the business unit consumer goods once again. We increased net sales and on the top opened up attractive business segments with 2 earnings accretive acquisitions. Even if the operating result of the business is still behind the previous year, we reduced the scope of the decline already in the first half year. Overall, we have launched targeted measures in the first half of twenty nineteen. We see that these effects and are therefore confident that they will have a positive impact in the future. Now to the business unit Performance Materials. This business unit was able to build on its strong growth in the first half of twenty nineteen. In concrete terms, we achieved net sales of CHF 504.2 million, which is 6% more than in the previous year. Operating profit grew double digits by 12.3 percent to €44,600,000 which is passed to the positive earnings operating leverage. I would also like to highlight the strong growth in Asia. We have expanded existing contracts with international manufacturers and gained new business. Among them are well known names such as Tate and Lyle, Evonik or Huntsman. By acquiring the specialty chemicals distributor Dolls in the Netherlands, we have also expanded our market coverage in Western Europe. Due to the increased demand for our services, we have expanded our global network of innovation centers by 5, for example, in Malaysia, China or Myanmar. We now have 40 4 of these innovation centers worldwide, which differentiates us. All this and our position in the relatively resistant areas of personal care, pharmaceuticals and the food industry gives us confidence for further positive development of the business unit. Finally, I come to the business unit technology. Here as well, the focus in the first half of the year was on the expansion of the business. We recorded good growth in China and Korea in particular. At CHF 198,700,000 net sales was 3.4% higher than in the previous year. The operating profit of CHF7.4 million was below previous year's level. We realized fewer projects in the first half, and the majority of the ongoing projects will materialize in the second half of the year. We are pleased that the acquisition of SPC has made us the leading provider of analytical instruments in Thailand. In this area, we offer laboratory technology and industry specific services in the fields of pharmaceuticals, cosmetics as well as oil and gas. And this segment is particularly attractive for DKSH because more inner Asian trade increases quality requirements for local manufacturers. DKSH supports them with on-site analysis equipment or services in DKSH's own laboratories. Before I give the floor to Bernhard, I would like to conclude by saying that something about our further development. You have seen that our employees are very focused and that we are working on the right levers. Therefore, we expect a stronger second half term. In sum, first, we are well positioned in the business unit Healthcare, Performance Materials and Technology. In the first half of the year, we recorded an EBIT growth of more than 8% and we expect a solid performance in all three areas in the second half as well. 2nd, the effect from the Healthcare business in China will decrease in the second half. Our Healthcare business grew in all markets in the first half, and we continue to see good growth opportunities here. 3rd, the well advanced restructuring in consumer goods will lead to more and more efficiency gains. 4th, Business Unit Performance Materials continue to develop positively due to the expansion of existing contracts and new businesses. And 5th, we expect more project completions in the business unit technology in the second half of the year. Last but not least, the 4 acquisitions will provide additional earning contributions, and our pipeline of other acquisition candidates is looking promising. Based on all these developments and assuming stable market conditions, we expect a better second half of the year and an increase in operating profit for 2019 on group level from today's perspective. I'm now handing over to Bernhard, who will familiarize you with the details of the financial figures for the first half of the year. Thank you very much for your attention. Thank you, Stefan. Here, ladies and gentlemen, I would also like to welcome you to our presentation of the half year results 2019. Net sales in the 1st 6 months 2019 matched last year's level at CHF 5,600,000,000. The adjusted operating profit in short EBIT of CHF 124,000,000 was above previous year's level, and the adjusted profit after tax was below last year at €79,300,000 Our free cash flow and drawn off were below last year's level. More about that in a minute. Now let's first take a closer look at the development of our net sales. As already communicated, we exited our Healthcare business in China in 2018. Because of this, €361,200,000 or 6.4 percent of net sales were missing compared to the last year's period. The organic growth rate in the first half of twenty nineteen was 3.1%. We consolidated the acquisition of Orec Pacific, SPC and Doze International for the first time in the Q2 of 2019. These three acquisitions added 1.2% to net sales growth. Exchange rate effects added an additional 1.2% to sales. In sum, net sales in the first half year of twenty nineteen matched last year's level at CHF5.6 billion. Several one time effects have led us to adjust our operating profit, the EBIT. This will make our numbers more comparable. We have adjusted the EBIT for the first half of twenty eighteen by the China effect. In sum, these are SEK 17,100,000 resulting in an adjusted EBIT of SEK 122,400,000 for the first half year of twenty eighteen. The EBIT of the first half year of twenty nineteen was adjusted for restructuring costs in consumer goods. Organizational changes, impairments and the closing of unprofitable businesses resulted in onetime cost of CHF 13,300,000. The adjusted EBIT of CHF 124 €124,000,000 therefore was 1.3% higher than last year. For the profit after tax, use the same logic for the adjustments. We adjusted the profit after tax for the first half of twenty eighteen by the China effect. In sum, this corresponds to €11,100,000 As a result, the adjusted profit after tax for the first half of 2018 was 86,400,000. The profit after tax in the first half of twenty nineteen was adjusted for restructuring costs in consumer goods amounting to €11,000,000 The adjusted profit amounted to €79,300,000 and was below last year's level because of currency effects, first time application of IFRS 16 and financing costs for the acquisitions. For profit after tax, the first time application of IFRS 16 had a negative influence of 1,700,000. Let me quickly explain the IFRS 16 effect. As mentioned before, IFRS 16 as of 1st January 2019, a positive impact on EBIT of around €2,500,000 For profit after tax, we started a negative impact of €1,700,000 Assuming no larger changes until year end, we expect the effect from IFRS 16 to most likely double for the full year 2019. Next to our operating performance. 3 events impacted our balance sheet. Firstly, and like in the past years, we distributed our dividend in March, this time in some around €120,300,000 which in turn reduced our cash position. Secondly, we paid €175,100,000 for the acquisitions of Orec Pacific, SPC and Gold. We have financed the acquisition of Orec at our listed entity in Malaysia, primarily with debt. And thirdly, the application of IFRS 16 extended the balance sheet by roughly 240,000,000 We capitalized our operating leases, which resulted in integration of our right of use assets and lease liabilities. In sum, our balance sheet was extended by 8.1 percent to €5,300,000,000 The free cash flow, that's operating cash flow less capital expenditures, declined compared to previous years and amounted to CHF 32,100,000. The two main factors for the decreases were: 1st, the reported profit after tax was lower And secondly, in the first half of twenty nineteen, we increased capital expenditures for our infrastructure such as the new distribution center in Singapore, which will open in last the late autumn. The main investments occurred already in the first half of the year. For the full year 2019, we expect investments of about €40,000,000 which is similar to previous years. Please note that IFRS 16 had almost no impact on the free cash flow. Rental costs were relocated in 2018 from the operating activities to repayment of lease liabilities of CHF 42,600,000 in 2019. For the Roanoke, the return on net operating capital, there were several effects that distorted year on year comparisons. The reported RONOG decreased from 22.1% to 16.4 percent. Adjusted for the Healthcare business in China, the ROANOG was 3.1% lower in the first half of 2018. Our Healthcare business has generally a significantly higher RONOG than the rest of our business. In the first half of twenty nineteen, the restructuring cost at Business Unit Consumer Goods lowered the RO NOx. This effect alone affected the figure by 2 percentage points. Here again, the acquisition had a reducing effect. Net assets increased with the takeover, but the corresponding profit from the units were only booked for 3 months. Orec Pacific, SBC and Dole's were fully consolidated for the first time in the Q2. This corresponded to 0.3 percentage points. Adjusted for these effects, loan orig was 18.7% and on last year's level. Let's now move on to the outlook that Stefan had briefly mentioned before. On group level, assuming stable markets, DKKH expects a higher operating result in 2019. We plan a tax rate of 27% to 29%, assuming there are no larger corporate tax changes in the countries we're operating in. As mentioned before, we expect capital expenditures of around €40,000,000 Including the sums are a couple of 1,000,000 for further automation of our distribution centers, for example, in Singapore. With that, I conclude my speech and now I'll switch to the Q and A session. Thank you very much. And can we please have the 3rd question from the operator? We will now begin the question and answer session. The first question comes from Poulain Aynerg, Kepler. Please go ahead. Yes. Good morning. I've got 3 questions, if I may. The first one is on the central cost. There's quite a jump in the first half. So just wondered what this was related to and if that half year central costs should be extrapolated for the second half. The second question is on the restructuring of consumer goods. You mentioned the confidence in the payback of your initiative. And yet at the moment on the organic growth of the business, there's no real evidence of benefit of especially the sales push initiatives. So could you give us a bit more color on the specific reason why the organic growth has been dragged? Are there some restructuring effect? You mentioned termination of like. So that would be helpful to have some more color on that on these moving parts. And then a third question is on the interest cost. There's a clear jump, but that may also reflect some aging effects, which may have also flattered the margin of the Performance Materials business. So could you give us a bit more breakdown of the interest cost line pre IFRS 16 just to understand what's driving this jump? Thank you. Okay. Let me answer central cost and interest first, and then I'll hand over to Stefan to answer the restructuring and organic growth question on CG. So central cost last year included some subsidies from in China, which have not recurred this year. That's the main reason for the jump. And beside that, we had the normal cost increases from salary increases over the region. On the interest side, the biggest increase there was financing of our acquisitions in Malaysia. That was the big piece of the Orec acquisition. Orec was in 2 countries, Singapore and Malaysia. The Malaysia pit is financed through our listed entity, which we only owe to 70%. And we therefore decided to do it to finance it in Malaysia in the listed entity with loans. That increased our interest cost by about SEK 2,500,000. The other big jump in there, of course, is IFRS 16, which added roughly €5,000,000,000 a little bit less into the interest cost, which will, of course, continue also for the rest of the year. Does that answer your question on interest? Just curious if there was any aging cost that obviously on the other side of it, we would have a margin boost in one of the trading related yes, so because it seems that the margin performance of Performance Materials was very strong, but it may be related to a currency swing that you see at the interest line. And obviously, I'm just curious if there was any movement of that nature in the interest line. There were some movements on the hedging costs, yes, a couple of 1,000,000 worse than last year. Okay. Thank you. Omerik, please let me answer your second question regarding the restructuring. Yes, you're right. We are very confident in our program. We reduced the run rate in EBIT already, and we also expect higher results for H2. In terms of the top line growth, you're right, the organic growth is slightly negative. And this is primarily driven by the fact that we are cleaning up our portfolio. As I mentioned before in my speech, we are canceling some contracts or part of contracts with some clients. We are reducing some SKUs and we are closing some sub business lines in several countries. And all of this, obviously, has a negative effect on the organic growth rate. On top of that, the market in Thailand, if you look at the retail sales and private consumption is not very high, That is also slightly depressing the organic growth rate despite the fact that we are seeing some very good growth, for example, in Indochina or in Indonesia. Okay. Thank you. Thank you. Next question please. The next question comes from Oberhuber Allan, MainFirst. Please go ahead. Good morning, Stefan, Bernhard and Peter Allan, Oberhuber, MainFirst. I have also three questions. First regarding the guidance you gave, do I understand that correctly that the base 2018 is around €264,000,000 and that's the base you guide now for 2019, which will be higher than this €260 4,000,000 EBIT? The second question is regarding working capital. Is there a risk that they will see an increase in working capital because we see a deterioration of the consumer goods business? Or Bernard, could you guide us how much we could expect by year end working capital to be up, I. E. Negative on cash flows? The third question is regarding the consumer goods business. And Stefan, when do you think that we will see again positive organic growth? Could we expect that in consumer goods, each one next year? And maybe just a word on Morris Lock, where do we stand there regarding profitability? Thank you. Okay. So let me try to answer the first two questions. For the guidance, the reported EBIT last year was €264,000,000 We would the guidance is against the same logic as we have used in our press release. So that would be again €255,000,000 which is corrected by the China effect last year and the restructuring we had in Consumer Goods last year. For the working capital, for the cash flow guidance, I don't see a major change compared to the first half year. As I explained in my speech, the health care typically have a much better RONOG. That means less working capital. And by not having China in there, of course, that has an effect. But that is already also covered in the first half year. The cash flow will be primarily driven by our profit after tax development, not so much. I don't expect a big impact on working capital. So Alan, sorry, go ahead. Excuse me, Stefan. Werner, just to follow-up regarding the guidance. So you say that you expect in the current year a higher EBIT than the €255,000,000 adjusted EBIT we saw last year. That's correct? Yes. Okay. Thank you very much. Okay. Alan, then I would like to come to your CG question. When do we expect positive organic growth in consumables? So for this year, driven by the effects I just mentioned in the other question, We expect that sales are more or less on last year's level and less than in 2020, driven by our restructuring program and sales initiatives, we will see again positive organic growth rates in CG. And this should already start in H1. And the second part of your question was regarding Maurice Lacroix. I guided at full year results announcement in Q1 that we do expect a black zero in Morris Lacroix, and I can reconfirm that. The new collection of the Icon is in very good demand. I mean, we have a very solid order book. And also, the restructuring we have done in 2018, which reduced the cost base overall and streamlined some distribution channels and so on and so forth, will deliver a positive effect. So yes, objective is to close with the Black Zero and Morris Lacroix for this year. The next question comes from Rory McKenzie, UBS. Please go ahead. Hello, it's Rory here. Maybe first 2 on consumer, please. You, of course, made some very big changes to that business with some exits, some acquisitions and some new services or changing the mix probably. Can you talk about where you think the new division can get to in terms of the margins? And then related to that, when do you think you'll see a full payback on your investments in terms of the time line of when you'll get to that maybe new margin? And then secondly, I just want to ask about Esuites. You took an impairment there. So just kind of what's happened and how much has it deteriorated? Thank you. Okay. In terms of consumer goods, I mean, we do expect that the business unit is coming back to historic margins. Until all the effects come into play in 2020, it might not happen in 2020, but we at 2020 or in 2022, we do expect that we come back to historic margin levels. And the question regarding Esuites, Baermar, Yes. We bought Esuites in China. That was an e commerce business where we were trying to get into the market for sweets, as the name says, and we have been quite successful initially. We are selling there chocolate truffles and some other brands directly in the net channel only. Lately, the sales have dropped there a bit, which then led us to the assumption or the conclusion that we cannot keep the current valuation up. We are still working on coming back to previous levels, but this will take a little time. So to be prudent, we took an impairment on that investment. We are not giving it up. We are continuing to grow if we can't. Okay. Maybe 2 follow ups, if I may. What do you see as the historic margins? Obviously, the whole gifting market changed a lot within your Luxury and Lifestyle business. I take it the margins of over 4% that you had in 2012, 2015 probably are unattainable, but would you be seeing 3.5% as a kind of fair average margin in consumer? And on E Suite, sorry, what exactly changed? Just do you feel your proposition stopped being in the right place of the market? And why did it suddenly seem to get worse? Okay. In terms of the margin, yes, historically, in a few years, the margin was inflated by very high margin in the Luxury and Lifestyle business, which is at this point of time a significantly lower part of the portfolio as well as the collapse of the watch market in the most recent years, I mean, never really came back. So when I talk about historic margins, the focus is on the core business, and that margin range is somewhere between 2.5% and 3%. Regarding our value proposition, as I was saying before, if you look into our investments, what we invest into our route to market, so expanding our capillary distribution, I think we deliver a unique value proposition to our client. We are continuously expanding that footprint that gives them access to more stores than most of our competitors, especially if you look at it from a regional perspective. So that's the reason why we believe in our value proposition, which will be completely rebuilt then over the next one and a half years as I was indicating before. That's great. That's very helpful. Thank you. Thanks, Laurie. Next question please. The next question comes from Sun Cade, Credit Suisse. Please go ahead. Hello. It's Dan Hobden from Credit Suisse. Just two questions, if I may, on the Consumer division. So picking up maybe what people have said. So when you speak about €13,000,000 worth of restructuring charges and heavily H1 weighted, I was wondering, could you give some guidance as to how many or how much more restructuring charges you feel will be required in 2019? And then with the new head of the business unit starting in August, is there a chance that he comes in and has an adjustment to this and therefore makes further strategic changes to run that division? Okay. Thank you very much, Dan, for your question. As we were saying before, we consider the restructuring as very well advanced. And the restructuring charges in H1 are more or less on the level what we indicated in Q1 after the full year presentation. We do not expect at this point of time any major further restructuring in H2. Maybe there is low single digit, which partly may be driven also by Terry Zaremitis, who is coming in. But I can calm you down since Terry knows our business very well, and we have also already been in exchange. So he's very well informed. So we are very confident that MAX, there's a very low single digit number, which might come in into H2 since we are since we progressed so well already. Perfect. Thank you. You're welcome. Operator, are there any further questions? We have now a question from Pascal Forter, von Tobel. Please go ahead. Good morning. First question on Thailand. So here, just doing a small calculation that you write a negative organic growth of around 3.5%. Is this possible? And could you give us here, please, some more color on the performance in Thailand by division? And then maybe a more general question on the lifestyle segment. I know you do not communicate on individual contracts. But here, for instance, Levi's was warning for a softer second half of the year. And also, they try to basically more cut out the middlemans and directly sell their clothes to the customers. So my question is here at the Lifestyle segment, is this something which you see more challenges coming up? And what's the data that we see basically more customers which try to cut you out in this regard? Okay. Thank you very much, Pascal, for your questions. So let's start with lifestyle first. Levi's is a long term very well established partner for us. And yes, some of the sales are based also on Chinese tourists coming especially into Levi's. But I can share with you that we are still seeing some very good growth in our Levi's numbers in Thailand and also driven and supported by the new openings in Cambodia and Myanmar where we opened just new markets for them. So we are very positive that especially this account is developing nicely for us. In terms of Thailand, overall, I mean, in total, we are still seeing growth in Thailand, which is driven by good development in Performance Materials, in Technology and some lower growth in Healthcare. In consumer goods, and I think if you look into the same if you look into consumer confidence in Thailand as well as same store sales of the major retailers, you see that the sales are kind of depressed in the CG market, and that's also reflected in our numbers. But if I put all of this together, we are still seeing some growth in Thailand, but we are a little bit cautious looking at the most recent developments there. Long term, we are very positive for Thailand as well. There's no follow-up. Next question please. The next question comes from Marco Strytmater, ZKB. Please go ahead. Yes, hello. I just have to reconcile how you if you take the EBIT of €255,000,000 you mentioned as a target or as the base to improve. Does this mean that in the second half of the year, you expect a negative China effect of around €10,000,000 Am I implying this correctly? And how much was it in the second half year of 'eighteen, the China effect on EBIT? Okay. The total China effect for the second half of the year will be lower than in the first half of the year, twenty nineteen. The adjustment in 2018 would be a China effect of a little bit short of €30,000,000 and a restructuring charge we took last year as well in consumer goods. And that off in total nets out to about €10,000,000 that's why we got to €255,000,000 Okay. Thank you. All right. Thanks. Now we have a follow-up question from Alain Oberhuber, MainFirst. Please go ahead. Yes. Just to come back on that regarding the adjustments. So in H1, we have seen €30,000,000,000 of adjustments. Now if we go then into the full year, my question is we could expect €2,000,000 to €3,000,000 incremental restructuring, that's what you guide now. And how much will be then in the second half the Healthcare China impact, I. E, on an annual basis? How much will be then the adjustments? Let me ask the second question answer the second question first. The sales impact will be around €500,000,000 to €550,000,000 and total EBIT impact would be around €25,000,000 for full year. For full year, yes, full year. First question was? The restructuring costs. Restructuring costs second half. That will be quite low, yes. There will not be a major we don't expect a major post in there again. Okay. So to add that together. So Healthcare China will be on a full year basis, dollars 25,000,000 adjustments. And then probably for the full year, the restructuring, consumer goods will be and not will be in total €15,000,000 €60,000,000 So we are going for more than €40,000,000 adjustments restructuring in Healthcare China. That's correct? Yes. If I get it right, yes. That's good. Thank you very much. Very helpful. Thank you. Thank you. Gentlemen, so far there are no more questions. Okay, perfect. Then thank you very much for your time. And yes, we look forward to meeting most of you then during the rest of the week. Thank you very much, and have a great day. Thanks a lot. Ladies and gentlemen, the conference call is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.