Earnings Call: Q3 2019

Oct 31, 2019

Good morning. I am the entity operator for this conference. Welcome to the Corporate Conference Call on the Q3 Results 2019. Please note that for the duration of the presentation, all participants will be in listen only mode as the conference is being recorded. After the presentation, there will be an opportunity to ask questions. This call may be recorded for communication or broadcast. At this time, I would like to turn the conference over to Mr. Christian Bu, CEO, the company's under surveillance, CFO and Mr. Rohit Bisscher, Head of Corporate Communications and Investor Relations. Please go ahead, sir. Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our 9 month results conference call. I will start with the Q3 key figures and then comment on 9 month development. Gerrit achieved very good results in the Q3 with a strong top line growth and an excellent profitability supported by weaker comparison basis from the Q3 last year and one additional working day this year. Sales increased by 1.3% to CHF 7 84,000,000 negatively affected by the weaker euro. In local currency, sales growth reached 5.5%. We achieved positive sales growth in local currency in all quarters. WLTP growth rates were recorded in Bedeluk with 18.7%, Middle East Africa with 17.2%, polyspecific with 16.2% and Austria with 10%. Single digit growth rates were realized in Switzerland with 7.4%, Eastern Europe with 5.1%, historic region with 4%, Germany with 2.2% France as well as the 2 countries in Germany, UK, Ireland with 2 1%, Italy with 1.3%, Airports and Insulin in the low with 1.3 percent and North America reached 0.2%. Turning now to the quota period. Installation and Flushing Systems sales increased by 8.7% in local currencies, pipe systems by 4.2%, and back consistent by 3.4% in the Q3. Let me now comment on the financial results of the 3rd quarter. EBITDA increased by 8.4% to CHF231 1,000,000. EBITDA margin increased by 190 basis points to 30.7%. This accelerated margin improvement in the 3rd quarter compared to the first half of the year was mainly driven by 3 factors. First, the operating leverage from stronger volume growth in Q3. 2nd, lower raw material prices in this year. And thirdly, easier comps from raw material prices which peaked in Q3 last year. Net income increased in Q3 by 11.6 percent to RUB171.6 compared to the adjusted previous year's level. Earnings per share reached R46.74, an increase of 12.9% compared to the adjusted PBT number. Let me now comment on our 9 month performance. Sales in local currencies grew by 3.9 percent to CHF2.4 billion. Fixed base growth in local currency was almost completely contemplated by a negative currency effect of CHF81,000,000 or minus 3.4 percent versus previous year. All markets delivered in the 1st time month positive growth rates in local currency with the exception of Italy. In Germany, sales were up by 4%, with strong growth in installation and flushing systems and piping systems. In Eastern Europe, sales were up 1.4%, negatively impacted by a 3rd decrease in Russia and Turkey. In the North region, sales increased by $2,300,000,000 with strong growth in installation and In Switzerland, sales grew by 3.8%. Sales in better books grew by 9% with similar growth rates in all three product areas. In Italy, sales declined by 0.4% in a weak market environment and due to strong comparison. Safety front increased by 1.3% with strong growth in installation and Vost Systems, but a sales decline in bathroom systems due to the exit of a low margin business in direct. In Austria, sales grew by 6.9% with growth in all product areas. Sales in the UK increased by 7 point 6% driven by strong sales from pricing systems. Sales on Medicare mini balance went up by 5% with strong growth in Portugal. In America, sales were at previous year level. If I specific, sales were up by 13.1% with strong growth in China. Sales in the Middle East and Africa region increased by 2% with strong growth in Southern Africa and a safe decline in the Gulf region. Let's now comment on the base development per product area in the 1st 3 months, again in local currencies. Installation and Flushing Systems increased by 5.8%, with strong growth with behind the wall flushing business. Piping systems grew by 5.9 percent with strong growth in both product lines, white piping and drainage piping. Not consistent sales were on previous year level, driven by a weak market environment in the Nordics, lower sales from Kerabank due to the brand sales, the exit of low margin ceramics business in France and the strong comparison from strong sales for shower toilets in the first half of twenty nineteen. And now let me update you on the 9 months financial results. EBITDA reached RMB 732,000,000 corresponding to an increase of 4.8%. The SG and A margin reached 30.8%, an increase of 130 basis points versus previous year. 50 basis points of this improvement was driven by the new accounting standard IFRS 16. The remaining operational margin improvement was achieved despite the highest average increases in 9 years and extraordinary marketing expenses for the brand conversation. The 4 main drivers for the margin improvement were, firstly, lower raw material prices secondly, a positive product mix due to soft selling of our product portfolio service increased price and forced the efficiency projects and measures combined with strong cost control and cost synergies. The currency fluctuations has no influence on operating margin due to our continued efforts to maintain a strong natural currency hedge across the entire group. The operating profit increased in the 1st 9 months by 3.3% compared to the adjusted previous year level, negative effect and the currency translation. The EBIT margin reached 76.3%, 70 basis points off the comparable 9 month 2018 level. Net income increased over proportionally by 4.1% compared to cash out to premium steel level, mainly due to positive onetime effect of the tax rate in Q3. Earnings per share increased to R14.88 or 5.5 percent versus the adjusted previous year level positively affected by the share buyback program. Free cash flow increased significantly by 19.7%, mainly driven by the strong operating performance and the positive development of the net working capital. The share buyback program has been continued according to plan. For end of September, 765,000 shares have been bought back for a total consideration of CHF 323,000,000. Let me now comment on our market view for 2019. The temperatures have not significantly changed since our competition of H1 results in Q1. The uncertainty, the volatility of the economy and building industry remaining and selected markets are slowing down driven by a weaker new residential segment. In Europe, we see overall a favorable, but it's a commercial market environment, although with a declining number of residential building permits in H1 2019. We remain confident about the construction demand in Germany, although limited qualified installation capacity might remain above. The housing industry in Switzerland remains at high levels. In the Nordic region, the market is at best stagnating, driven by a positive environment network, a slight growth in Norway, a stagnation in Finland and a decline in Italy. Italy In France, the market are in 'eighteen driven by a declining newbuild segment compensated by a more robust valuation segment. Set. This is overall a declining market environment in the UK, driven by the global expansion factor due to the Brexit uncertainty. In Austrian, the compaction market is positive with slight growth. We are also positive for Granelux, although the strong construction growth in the Netherlands over the last years led to shortages of qualified installer capacity. Construction markets in Eastern Europe remain mixed with weak environment in countries like Russia or Turkey. And finally, the building construction sector on the Iberian Peninsula is further recovering. In North America, the institutional construction, the most important market segment for people is weaker than expected in the beginning of the year. In Asia Pacific, we see a mix picture across the region with a moderate increase of the residential construction market in China and the declining environment in House Radio. The basic stock in industry in India is affected by a challenging general economic environment. Let me finalize our market review for 2019 in the Middle East and Africa region. The market environment in the Gulf region is weak with the build of strong market in South Africa segment. The markets in North Africa and the Near East region remain limited. And now a few words about the raw material price environment. The raw material markets remain uncertain and volatile due to the increased uncertainty in the global economy. After slightly decreasing raw material prices in the 3rd quarter, we expect for Q4 the mix picture with overall again slightly increasing raw material prices, mainly driven by stainless steel prices. And finally, let me briefly update you on the average outlook of 20 We expect towards the end of the year somewhat weaker sales of the revenues due to the brand phase out of further brand as of 2020. Q4 will also be negatively impacted by 1 working day left compared to Q4 2018. The daily cost of gold currency for the full year should be in the range of 3% to 4%. The EBITDA margin for the full year is expected to be around 29%. The full year tax rate should reach around 13% and CapEx is expected to be in the range of CHF 170 million to CHF118 million. Since the end of our introduction, we are now ready to answer your questions. The first question is from Armin Hecht from UBS. Your line is now open. Please go ahead. Yes. Thank you for taking my questions. My first question is on the EBITDA margin guidance of 29%. So if I calculate correctly, that would imply 23% EBITDA margin in Q4, so down 80 bps year over year despite the 50 bps benefit from IFRS 16. Isn't this too conservative? Also as of at Q2 results, you already said Q3 raw materials will be mixed. Now it's also similar working. It will be mixed, slightly higher raw materials. But it seems a bit overly conservative. Could you elaborate a bit on your Q4 EBITDA or full year guidance? First of all, keep in mind that we have a seasonal opportunity for the EBITDA margin. We have substantially lower margin levels in Q4. The implied EBITDA margin guidance for Q4 is not substantially different compared to previous years. There are 3 specific effects this year for Q4. First of all, we expect slightly lower sales growth also driven by 1 working day less that has an impact on the operating leverage, and actually the margin improvement from operating leverage. Secondly, we are expecting overall higher raw material prices, the temperature within the mix, but all in all, we expect a higher price level in Q4 compared to Q3. And the third reason, we have the full impact of the extraordinary marketing cost for the brand for monetization, but also the full impact of the increased tariff increases in Q4. That is the reason why we have a full year guidance of around 29% for CPGA margin. Okay. Then another question on the Caramag phase out. Your wholesalers, have they kind of reduced inventories upon this event? Or did you see a relatively kind of smooth Q3 here? And what are you expecting for Q4 on this phase out? We have observed that whole business reduced their inventory levels already in Q2 driven by the phase out of the Kellogg brand. And we do not expect that this reduction will be recovered in Q4 because basically at the wholesale estate, they used brand harmonization to get rid of slow moving inventory particles. That's the reason why we do not expect the rebound effect in Q4. Okay. And then the last one on APAC, which was up 16%. Of course, there was also a group base effect. But at the same time, you were saying that the market is in APAC is quite mixed. What was driving your growth specifically in this region also in the sense of China, India, operation markets? It is basically driven by China, the growth by India to a lower extent by Australia. The market environment is stored in Australia is quite challenging, but the 2 big drivers for growth are China and India. Okay. And do you expect this to be sustainable in Q4? It's very difficult in these markets to make outlooks on a quarterly basis. As you know, we have a lot of project business in these markets over sales levels also in the various countries. Therefore, quarterly outputs are very difficult in these emerging markets. Okay. Thank you very much. You're welcome. The next question is from Ms. Zheng, Credit Suisse. Your line is now open. Please go ahead. Hi, good morning. Thank you for taking the question. I've got a few, if I may, and we can perhaps go on 1 by 1. The first question is on Germany. I appreciate that we might be a bit percent here, but the wording on the market outlook seems to have been treated slightly. Previously, it was stated that it's likely to remain limited due to the capacity constraints and now it's reworded to remains limited. So I wonder if this change of wording is just because we are now towards the end of 2019. So we are seeing things happening and a bit more certainty on the capacity constraint limiting the demand there or just a change of environment there as well? Look, there is nothing changed. In our market view in Germany and also in the wording, there's nothing changed. We have still the same expectation for Germany in demand, but impacted basically by the bottleneck of installers. Nothing has changed there. Great. Thank you. The second one is on raw materials. I wonder if you could get maybe a sense on the 2020 development based on the current rate? Can you repeat the question, sorry? Yes. So on raw materials, you've guided for Q4 to be higher year on year and wonder if we could have an indication for 2020 as well just based on current rates? I understand. No, we do not give an outlook on 2020 for the raw materials due to the simple reason that we don't know. It's not far to answer. We have an announcement for the raw material prices. But it's the reason why we are only giving you a guidance for Q4 and not for 2020. That's too much question all. Okay, understood. And the third one is on marketing spend. You mentioned previously that in Q4, we are going to see the full impact of some marketing spend kicking in. And I wonder if you could give some color on like sequentially, how marketing spend is going to That statement refers to our extraordinary marketing expense for the brand harmonization this year for catalog phase out. In total, we spent CHF10 1,000,000 for the prior harmonization, but we just started at the Q2. So it didn't have a full impact in the 1st 2 very 1st 9 months. And in the last quarter, we will spend about 1 third or roughly 3,000,000,000 in strength from that planned armamentation exercise. So sequentially, Q3 should be sorry, Q4 should be of similar level to Q4? Correct. Yes. And the very last question. So you've seen very strong growth for the quarter or actually year to date in regions like Benelux, Switzerland and Austria. So I wonder if it's because Gap is taking shares in those regions or you're expanding the addressable market or because there are maybe some lumpy processing in those growth? I think you are referring to Switzerland and Austria, if I understood correctly. We believe that in both markets over the last 9 months, we have been able gain market shares, although we have already high market share in the past, as you know, very much driven by our value and upselling strategy. Great. And what about Benelux? Benelux is the same. We are doing very well in Benelux. We believe also there that we have one market share, especially in the Netherlands. The business is growing very well. We have growth in all product areas, especially bathroom systems are growing nicely, driven by a good level of tenderceramics but also an excellent growth in our shower toilet business in Netherlands. Okay. Thank you. The next question is from Rene Wortzel heading to Sibank. Your line is now open. Please go Could you potentially tell us how the growth between bathroom systems would have looked like excluding the effect from the phase out of the low margin products at the Caramac brand switch? And what the breakdown between volumes and pricing looks like in this product area? I'll start with the second one. In general, the price increase in the first line of picture for all key product areas was around 1.5%, a lot higher than in previous years. If we look into the 3 product areas, there are no substantial significant differences in terms of price increases. So also in Basel's business, the increased prices closed around 1.5%. Regarding the sales effect from the carbon phase, that's exactly do not know the figure, higher sales, of course, because that is basically a figure which we see by the wholesalers. We have just seen that we have really a slowdown of growth in Q2, but we can't quantify it. And therefore, we cannot just kind of add some roadside at the same. I'm sorry. Okay. The same is true for the low phase out of the low margin product? No, yes, because of course, because there we know it was 1 single customer, but we do not want to disclose because it's 1 single customer. And for competitive reasons, we do not want to disclose this figure. But this figure has a material impact on the growth in France, the exit of this low margin business for ceramics in France. I can't tell you that, but I can't give you the short figures. I'm sorry. Okay. Fair enough. And one more question, a bit more general one. Looking back to the whole Sanitec acquisition after a few years, in retrospect, if you're completely open with us now, in which areas have you been somewhat disappointed compared to your initial expectations? And where I mean, we know where you are happy because that is what we hear all the time. But where have you been some of the points because they're surely also matters where your original expectations were higher than the effective outcome? That is the true answer of the JAKs of you. We are happy with the acquisition. If you look at the top line, one of the main reasons for the acquisition was not the growth of ceramics. One of the main rationale was the growth, faster growth of installation and flushing systems. We have been able to accelerate the growth of behind the wall systems from 6% annual growth over the last 3, 4 years, thanks to the Synergy Speed Ceramics, that was a main rationale. Secondly, we are much stronger in shower toilet business nowadays compared to 3 years ago before starting date. You have realized that we completely renewed the portfolio for shower toilets that was also driven and strongly supported by the acquisition of SonicTech. The reason why we are not in our mid term growth range of 4% to 6% Also this year, we do not expect to be there. It's not driven by Zynix, it's driven by a market fact. The 3 largest markets where we are operating, Germany, Switzerland and the Nordics, they are not growing at normal growth levels. Germany, we have the constraints of having solace. In Switzerland, the market is doing very well on a very high level. It's not growing again like we have seen it between 20 7 2014. And in the Nordics, as you know, the building of the stock market, especially in some countries, is really starting to be in a difficult decline. Therefore, coming back to the overall answer, we are happy with the acquisition and the integration. Of course, on a detailed level of everything is perfect, but overall, it should be fine for us. Okay. And about the implementation of all these cross selling potential and synergies and so on, is how much of that is now already effective? And is there still more to come? As I said before, the main synergy for sales is on installation and flush systems. We are growing by 6%, in April 'eighteen, also the 1st 9 months this year. We are growing strongly. For example, 8.7% growth of flushing devices in Q3 was driven by double digit growth in the European expansion markets due to the synergies of ceramics. We do not expect a further acceleration of that business due to the images in ceramics. That's the level which we want to keep in terms of growth aspirations for the future in each European and Dutch market. Okay, great. Very clear. Thank you very much. You're welcome. Thank you for taking my question. The first one is on the bathroom systems. I think there's an inflection point there in terms of revenue growth. Could you maybe elaborate on what is driving that? We've talked about the bank pricing earlier, but in terms of volumes, what's driving it? And what are your initiatives behind that? And what could we potentially expect in terms of incremental initiatives into 2020? And I'll go for the second question after your answer. Thank you. If I understood your question correctly, you were asking about the acceleration of our system in the Q1 compared to the first half of the year. That was mainly driven by 2 factors. Number 1, in the first half of the year, we had still a negative base effect from strong growth of shower toilets in the previous year. And secondly, the aforementioned phase out effect of the brand harmonization in Germany, which had an active impact in the first half of the year. Thank you. And going forward to few tab growth in bathroom systems, do you have more initiatives coming? Or is it mainly going to be driven by the penetration of shower toilets? What are you working on at the moment? There is a mix of measures. 1 is shower toilet growth, which is important for that area, but it's also the continuous modernization of the ceramics portfolio and thirdly, new more fundamental innovations for Bathroom Ceramics. You might have heard or seen that we introduced a new Bathroom series this year, Geberit 1, which is the first product which we have brought to the market today on the joint development of ceramics, of our Sanitec and also installation compensations of covering gold. So it's a mix of shower toilet growth, modernization of the existing portfolio and structural new product introductions. All the suits. Thank you. The second question would be more on capital allocation in the midterm. Obviously, we know the patient direct continuation, but longer term, where do you see how do you see the expectation policy and where would you like to take the group, perhaps in terms of geography, geographies, product areas, if you could comment on that? Thank you. So our strategy is based on an organic growth strategy that means we do not foresee any considerable amount of money required for M and A. That means for capital allocation that we basically want to distribute our free cash flow to shareholders in a combination by dividend payment and share buyback programs. And the last question on tax. The full year guidance is quite low, 13%. So what do you see as a normal rate going forward? Yes. For this year, we guide around 13% and starting in 2020 and the years after that would be around 16%. The next question is from Christian Arnold with West. Also a few questions from my side. In terms of shower toilet, are we back on double digit growth again in Q3 as the comps are not that high anymore? Then you're planning to phase out 3 additional brands in 2020. What does it mean in terms of the effects we have seen now from Caramark? So are you expecting the same effect, so having some slowdown on top line on the back of that in the first half and then a normalization thereafter? And in terms of costs, do we also see a similar negative impact of €10,000,000 next year? Also timing wise, maybe from Q2 on to Q4? And the last question from my side would be on the material costs. You are guiding for slightly higher Q4 material cost versus Q3. Am I right in my assessment that year over year, Q4 material cost will be still quite lower than the Q4 material costs in 2018. Question number 1, yes, we will roll double digits again in Q3 with shower service. Question number 2, brand probably finish 2020. To remind you, we will face out 3 brands next year. The first brands will start already at the beginning of the year in Q1. And the 3rd brand will be phased out as of the second quarter. After the experiences of Keramax this year, digital effect also for next year may be similar effect on a wholesaler level, meaning that the Unisys brand harmonization to lower their inventory level, but we expect somewhat lower ceramic sales growth next year. 3rd part, costs. We expect the same marketing expense, actually, for next year, again CHF10 1,000,000 for this 3 brands. So CHF3 1,000,000 more or less roughly per gram distributed over the entire year most probably. 3rd question, the fuel costs. You're right. Although raw material prices are expected to increase sequentially after Q3, The level should be still below Q4 last year. Maybe a follow-up on the growth pattern from the 2 other product areas. We have seen insulation system and piping system. So here, we saw a clear increase of growth in the installation system versus a somewhat slowdown but still very, very, very good growth in piping system. Is this somewhat linked to, let's say, more renovation work versus new construction work? Or do we have some other things playing a role here? No. I will not put too much emphasis on that. That is really just qualitative quarter by quarter. There's nothing specific to read into that. Okay. Thank you. You're welcome. The next question is from Yorkshire Mehta, Bodega. I actually just have a few follow ups on the previously asked ones. Again, on the regions, I was a bit astonished by the strong growth in Switzerland. You the only one only region where you've changed your wording compared to the first half. It was from slight decline from high level to now remains at high level. You mentioned market share gains. Is there anything else that has changed maybe in the market here? And it's all 1 by 1. So I'll wait for you to answer that. In terms of markets, we have seen a slightly better market, but it takes a bit of maybe than what we have expected that expected at the beginning of the year. That is one effect. If you look at Q3, the strong growth of 7%, that is mainly a case effect. Effects. We have a weak Q3 last year, which was driven by the price increases of the first half year twenty eighteen. So basically, we're basically at a slightly better market than what we expected a couple of months ago. Thank you very much. Second question on the rebranding. You mentioned onethree of the remaining costs will be allocated in the Q4. So the Q3 this quarter was also onethree of the €10,000,000 Is that correct? Correct. Okay. And then last one on the order backlog in Germany. I think you mentioned in the first half results was around an increase around 13 weeks. What's the current state here? No news. That is still the same thing which we have or the backlog of its colleagues is around 13 weeks in Germany. Nothing new there. The next question is from Charlie Dunn with AWP. Your line is now open. Please go ahead. Good morning, gentlemen. Yes, my first question, I think it's right off now. There's no change in the situation about product with qualified installers in Germany, no improvement, no deterioration? And second question, maybe you could give us a figure about the growth potential in Germany. What if you wouldn't have this problem with the workforce? And the last question would be, do you see any positive developments or problematic topics coming onto you in 2020? Thank you. Question number 1, as I said before, no changes regarding topic of smaller bottleneck. The growth potential, if we would not have an smaller bottleneck in Germany, I can't give you all the figures, but I can confirm it would be higher than what we see currently. Could you repeat the third question? I think that's one for you. Are the developments problematic or positive coming up for you in the next year, 2019? In general, we do not foresee a completely different picture, although as I said in my introduction, the markets are uncertain and we observe the slowdown in selected markets mainly driven by the new construction sector. If you look, for example, on your fee level on the residential building permits, residential building permits were in the first half of the year slightly down around 2% - after having been grown over the last couple of years. So no substantial difference picture, a mixed picture, challenge picture also for 20%. Thank you very much. Next question is from Manish Veya, Societe Generale. Your line is now open. Please go ahead. So yes, good morning. Congratulations on very good results. So I will go 1 by 1. I have 3 questions. The first one is, so what was the raw material price inflation in Q3 9 months? In Q3, for the 1st 9 months, raw material prices were 1.6% below 9 months to have maybe. And for the 9 months? Sorry, that was 9 months. Sorry, I misunderstood. That was 9 months. For the 1st 9 months, raw material prices were 1.6 percent below this year and Q3 versus Q2 this year were minus 1.2%. So Y o Y, it could be like 2% maybe? Maybe even a bit more. I don't know exactly the figures. Okay. Yes, so fine. The second was on your gross margin. So it's improved by 1 50 basis points in the Q3. So you talked about the mix impact. So I understand some part is also coming from this raw material cost inflation plus you are raising the price more. So there is a net price impact there, but how much is really coming from the mix impact? And also can you elaborate, I mean, what is this mix impact? Is it because the lower margin ceramic is doing slower or maybe it was getting a higher group in? How are you talking about the high margin of the histology system? So maybe you can elaborate more how do you have this mix impact? So the product mix effect is coming from 2 kind of product mix effects. 1 is on the product several product areas, that's installation systems growing faster than platform performance, that's number 1. But secondly, also within the product areas, within the product lines, the upselling of our product portfolio is supporting the product groups positively. And how much it is in the gross margin of 160 basis points for that business, correct? It is a relevant part of it. It's a relevant sorry, it's material part of it, but we do not want to talk to you. That's too much detail. Okay. I understand. The third one is you talked about this tariff and that is not fully built in Q3. So maybe you can remind, I mean, like what was the tariff increase in the first half and how much it is in the Q3 and what do you expect for the Q4? I mean, repeat the question, sorry. The wage cost, the wage tariffs, you talked about like it is fully impacted in Q3. So maybe how much it was in the first half? How much it will be in the Q3? Maybe how much in the Q4? So you can look at some numbers. Yes, understood. In the first time, we are now at about 3% tariff increases. I don't have the figure exactly in mind, but in the Q1, the first half was a little bit lower. It was a little bit lower. I can't give you exactly a little bit lower. The reason is that the implementation of the higher tariff increases was not everywhere at 1st January. That was somewhat delayed normally delayed during the quarter. But the 3%, which we have seen now for the 1st 9 months is also what we expect now for the full year, including Q4. The next question is from Martin Citeker, Kepler Cheuvreux. Your line is now open. Please go ahead. I actually have one only one left. Looking at your EBITDA margin bridge, as was previously pointed out during the call regarding pricing, net pricing was pretty good. Just wondering if I look at the price effect, was it all just because of lower raw material prices? Or did you again in Q3 weigh some selling prices in some countries and why? No, we did not increase the sales price in Q3. In fact, you see in the presentation, it's always both. It's raw material prices. It's lower raw material prices and also increased sales prices. And no strategic sales price increase in Q3. Okay, thanks. And the next question is from Alessandro Foletti, Octavian. Your line is now open. Yes. Good morning, gentlemen. I have, as well, only one last detailed question. On the depreciation and amortization, we can give a guidance for the full year and going forward, please? There's no significant change to what we have seen now quarter by quarter. So it will remain on quarterly on more or less the same level. Okay. So we do have a brief technical issue here. Okay, so the next question is from Martin Kruger again, a follow-up. Kepler Cheuvreux, your line is now open. Mr. Flugga, your line is now open for your follow-up question. Yes, sorry. Hi. Thanks for taking my follow-up question. According to my calculation, the tax rate was 10.7% in Q3. Keith, could you elaborate what was driving that? Because that's significantly lower than what we've seen in H1. And yes, what is the expectation for Q4 and the key drivers there for the tax rate? Thanks. Your calculation is correct. It was 10.7 percent. It was a one off. It could reduce our accruals. For Q4 for the full year, we are guiding a tax rate of 13% and means Q4 will be just a little bit below that. So that means more or less in line with what we have seen last year in Q4. But it's a one off for 2019. As I said before, 2020 and the year after that, maybe also due to the change in the dispute tax, but we expect around 16%. Yes, sorry. What was the tax of exactly, this one off in taxes exactly in Q3? The ease of accruals, but we do not give any more specific news. Okay, thanks. Okay. It seems that we do not have any further questions. Thanks very much for your participation. I wish you all a great and good day. Thank you.