Earnings Call: H1 2021

Aug 17, 2021

Good morning, and welcome, ladies and gentlemen, to the presentation of our half year results 2021. A very warm welcome to the attendees here at the SIX Convention Point. I can tell you that it's always much nicer to have some faces in front of us that we can talk to and not just talk to the camera. We will share with you in the first section an overview of the half year results of HUBOSUNNER 2021, followed by a deep dive into the financial results presented by our CFO, Ivo Wechsler. And I will then share an outlook for the remainder of the year with you together. We will then have a Q and A session on the financial results before we dive into the focus topics. This is something we do always at the half year presentation. I will share with you a special insight into our new organization, which is operational since beginning of this year. And we will share with you also some highlights of our first full fledged sustainability report, which we have just issued beginning of July this year, covering 2020. We can say that our company stands at a completely different point compared to a year ago. A year ago, we had to present figures, which were heavily impacted by the COVID pandemic. And also the outlook was scattered as we didn't know how the economy would develop over the next few months. It was with certain concerns that we shared the outlook, and it was a fact that still the second half of twenty twenty was affected by COVID-nineteen measures across the globe. I can share with you that since beginning of this year and with very short notice, the pattern in most of our markets have changed completely. And so after the 1st 6 months in 2021, we can present now very strong figures to the public. In particular, order intake developed very strongly and consistently on a very high level throughout all the 6 months of the first half year and also sales followed. All three market segments have contributed to the significant increase, so it is a very broad based upswing in most of our markets. Following the strong development on the top line, also profitability has markedly increased, and we can report after 6 months EBIT and also net income, which have doubled in absolute terms compared to a year ago. I mentioned that we will have a closer look at our new organization. We have a community that follows Hupesunden very closely since many years, and they are familiar with our technology organization of the past. And I would like to explain in a few words why and how we have changed the organization from a technology oriented organization into a market segment oriented organization. This has been implemented 1st January, and we can say that it came together with the sharp uptick of our business volumes, which is not always the easiest thing. And if you had an idea what's coming in the future, obviously, such changes would not implement that when the market is booming to the extent that we have experienced it in the last 6 months. But I have to say that our organization was extremely flexible, and people have adopted extremely well to the new organization, to the new functions and processes. And we have been able to master the upswing in the market quite well. When we look at the figures at a glance, we can see, as already mentioned, that order intake has increased by almost 25 percent to a level close to €500,000,000 while net sales has increased by 12 point 7% to CHF424 1,000,000 The profit, as mentioned in absolute terms, more than doubled. And in percent, the EBIT margin reached a level clearly above our midterm guidance and stands at 12.2%. And net income just slightly under the double digit mark stands at €42,000,000 which corresponds to 9.9%. Usually, at this stage, I share with you our three dimensions of our business, the famous HUBE SONER CUBE. And for the first time this year, we report the figures not according to the technology divisions, but to the market segments. And we have changed basically the reporting pattern and the global consolidation from technologies to market segment, which corresponds to a 90 degree swing in the cube. We still look at the three dimension of this cube, and you get an overview here on this chart. On the left side, our split by market segment, it's a very balanced distribution, we can say, with communication being the largest market corresponding to 39%, while the industry market accounts for 32% and the smallest market segment in today's reporting structure is transportation with just 3% below industry at 29%. The old view in the middle by technology also shows a well balanced distribution between RF, Fo and low frequency. And we have Fo here still remaining at 39%, which is equal to communication. By region, you can see that more than half of our sales is achieved with European customers, while the Americas stands at 24% and Asia accounts for 22% of our business. We will come to the development of each of those segments at a later stage in the presentation. Looking at the Industry segment. We have a new benchmark in our group when it comes to profitability. And in the 1st 6 months of 2021, the industry segment developed really well, which is expressed in strong growth of 18% on sales and 24% on orders at a record high EBIT margin of 21%. This means that more than half of our profit is coming from the industry segment on EBIT level. We have to admit that we have experienced an industrial environment, which was very favorable in the 1st 6 months on a very broad scale. Our largest market, Test and Measurement and Aerospace and Defense, have benefited from various positive trends in the Test and Measurement market vertical. The 5 gs related testing capacities have been expanded following the accelerated rollouts of 5 gs equipment in the field. And in Aerospace and Defense, the growth was driven by the increasing demand for security. Also, a smaller niche that we serve, which is reported under the industry segment, is our fast charging for electric vehicles. And this market vertical has developed extremely favorably in the 1st 6 months as well as the wind power market, which also falls under the industry segment. Just to remind you and to build a bridge to the old reporting structure, the industry segment includes about 2 third of the volume achieved by RF or radio frequency or high frequency products. The communication segment has the highest jump, not in volume, but in profitability. But also net sales grew by 11%, double digit. Order intake also points high at €191,000,000 which corresponds to a growth of 20%. But the biggest leap we can report in the Communications segment on the bottom line where we have now finally achieved a double digit EBIT margin. You remember, here in the Communication segment, the dominant technologies, EFO. EFO had a history of double digit EBIT in the past, dropped below the 10% for 3 or 4 years in a row. And we have always pointed out that the potential is there that FFO returns to the double digit operating margins, which now stands at the basis of the leap in EBIT of the communication segment. When we look at the different market verticals here, we can say that there is a sharp pickup of business for the expansion of 5 gs mobile networks. And that has been blocked somewhat by constrained rollout activities as a result of pandemic restrictions, but that has been now released. And we see that 5 gs is deployed on a broad basis in the Western world and step by step also in emerging countries. At the forefront of this development, we have North America, where we have a significant upward trend reported in the communication segment. And here, it's mainly North America and not South America. Not everything is perfect. There are also some negative points in the communication segment, particularly that our business with communication equipment manufacturers is developing at this stage below expectations, while again on a positive note, the data center growth initiative has again contributed positively to the growth and to the bottom line. Our last segment, the Transportation segment, has 2 main market verticals. It's the automotive market and the railway market. And we could note in the 1st 6 months of this year that these 2 market verticals have developed quite differently. The automotive market has gained strength, again, after the decline already in 2019 and the pandemic related lower volumes in 2020, while in railway, we still see some projects being pushed out and delayed. So what helps in this segment is that automotive has grown sharply and more than compensates the decline in railway. But also in railway, we see a hesitancy to push very hard new rolling stock programs, while refurbishment programs develop quite favorably, and they include quite often an onboard communication package, which is one of our strongest application, and we can benefit from this trend in the area of onboard solutions. The business for conventional vehicles has returned. As I said, this represents just a small niche and a small fraction of our sales, but our focus on the electrification and there on the high voltage circuit in electric vehicles shows now really first results and pushes our automotive business to new highs. We also have quite considerable pre investments in new and innovative applications, which include in car communications and data links in cars as well as sensors for autonomous driving. Those initiatives consume relatively high pre investments so that we can see it also here on the bottom line, which is at 6.4% operating margin. And on that level, at the lower end of our expectation. What is definitely the highlight in this segment when it comes to the figures is the very high book to bill or, in other words, a much higher order intake than sales. Order intake rose by 31% compared to a year ago. This concludes the details on our new reporting segment. You can see here now again the overview of the new market segments. We have industry growing by 18%, communication with 11% and transportation stands at 10%. The view based on the 3 technologies on Wales, a different picture, which may surprise a bit here is that RF grows only at 4%. If you remember, I mentioned that 2 third of the industry volume comes from the RF technology, and industry grew clearly double digit, but it means that we have a decline on RF in the communication market, which is not really a surprise to us, but it also means that applications with fiber optics and with LF in the industry segment grew. F4 stands at 20% growth, and LF Technology grew at 12% in the same period. Look at the sales regions. Disclose where our growth driver is from a geographical point of view. In the middle, you see Americas, where we have been able to grow the business by more than 50% compared to a year ago, while EMEA grew with 11% and Asia Pacific is still not a very strong growth driver for our business. In fact, we have less business 8% less business in Asia Pacific the 1st 6 months compared to a year ago. With that, I have already concluded on my overview, and I would like to hand over to Ivo Wexler, who is now going into the details of our financial results. Thank you, Urs. Also a warm welcome from my side to all people in the room, but probably also to all, let's say, which are listen online to our presentation. I'm happy to share some more financial insights with you for the very strong half year result we can present. And I start with the order intake. You can see here that we almost grew by CHF100 1,000,000 and the far majority comes from organic growth with CHF92,500,000 or 23%. And you can see that all three market segments, so IN stands for Industry, COM for Communication and TRA for Transportation. So all three market segments contributed between 21% 25%. Currency on copper also contributed with €5,000,000 or 1%, whereas currency was slightly negative and copper was the positive impact in this bottom. On the net sales, we see that we have almost grown by CHF 50,000,000. Also here, the organic growth is by far the majority with 11.4 percent or €43,000,000 There, we see a slightly different picture, double digit organic growth in industry and com and, let's say, only 3% growth in transportation when it comes to organic growth. They mainly benefited also from the copper. And but overall, currency on copper here is on the same level as on the organic on the order intake level. I think we really benefited from a record high gross margin this half year with almost 40%. And there are several reasons for it. First of all, we could benefit from a very favorable mix, mix in the sense that the high margin businesses, in particular in the industry, but also in the communication segment, grew over proportionally compared also to the transportation segment. But also the mix when it comes to geography, you have seen before that America grew extremely and also Europe. And normally, we have higher gross margins in the applications in the U. S. Application and also in the European application compared to what we sell in Asia. Secondly, we could benefit also from a better fixed COPS absorption compared to last year due to the higher volumes. So we have, let's say, also less inventory cost due to that fact. And thirdly, we could actually also benefit from the measures we have initiated last year in optimizing our production network. As you probably remember, we have closed down our production site in Brazil. However, I have to say there is also some headwind already started in the half year, but probably more to come with regards to the sourcing, which will have also then an impact on the gross margins going forward. And I think this is not HUBOSUNO specific. I'm sure you have heard it from a lot of other companies before. However, it's also relevant for us, and I have summarized it in 3, let's say, major topics. First of all, we have also, let's say, the influenced by much higher prices in certain relevant material categories. Obviously, industrial metals, copper and all the others have increased sharply over the last few months. But also, in particular, chemicals and polymer or compounds, we have been confronted with a higher increase. On the other side, we have to say, I mean, certain part, we can pass on to the customer, in particular when it comes to copper. But in other areas, we are not in a position to fully pass on oil price increases to our customers. Secondly, we have been confronted with longer lead times, in particular, in some of our critical materials. And we had to do, let's say, a more forward looking, more longer term planning in order to secure the availability of all materials. So far, we managed it very well. So we had never had any production stop due to missing materials. However, in some times, it was quite close, and it's a challenge to make sure that everything is available that we can continue to produce on full speed. And it often has also an impact slightly on the inventory because we had to, let's say, to increase our inventory with some reserves in order to really be flexible. And the 3rd point is also higher transportation cost. So this is also valid for sea rail and freight. And the most affected routes are those from China to U. S. Or China to Europe. And also there, we are not able to pass on all costs. And but hopefully, it will also normalize after a certain while. When it comes to the operating expenses, we have increased them by CHF 10,000,000 compared to last year period to from CHF 107,000,000 to CHF 117 1,000,000 However, you can see it's still below the pre COVID level where we had €121,000,000 When it comes to percentage wise in relation to the turnover, it was a decrease by 1.1 percentage points to 27.4%. You can also see that all three categories, so sales marketing, R and D and administration costs, have been increased. We still invest 6% plus into the R and D in order to be innovative also going forward. I think most of the cost has been normalized. I think the only exception is probably traveling cost because there was still some some restriction for our sales guys to visit the customers. So on the sales and marketing side, as soon as traveling is getting easier, obviously, our sales crew will be closed, go directly to the customer also physically, and there might be then some increase on the sales and marketing side. On the other side, you also know that traditionally that the administration costs are slightly higher in the first half than in the second half of the year. We have heard before, the first time we showed the EBIT according to our new market segment structure. We've also heard that we have doubled our EBIT in absolute terms and ended up with a 12.2% EBIT margin as already pre announced in our June reporting. Yes, industry with a very high margin with 21%, very nice, but the biggest jump in communication to a double digit EBIT margin, 12%. And transportation, we have heard before. There have been some pre investment, and that's why they stayed more or less on the same level, but which is also for us at the lower end of the expectation. One comment with regards to the corporate costs. So they are also normalized in our new structure. Let's say, we have added the corporate communication cost also to this segment. And that's why going forward, a normalized run rate for the full year is in the magnitude of SEK 9,000,000. Before, we had corporate costs in the magnitude of SEK 7,000,000. So for those in particular, for the analysts, it's important to understand that there's a slightly higher level of corporate cost going forward. Then on the currency situation, I think there was a mixed Normally, there was a weakening of the Swiss francs in the 1st 6 months of the year, with a big exception, I would say, that the U. S. Dollar with average rate because 12 months ago, the U. S. Dollar was much stronger. So when that, let's say, wasn't balancing out most of the other increases in the other currencies. But overall, it can be said that currency was not a dominating factor in the first half year result. Going forward, we have seen that there have been some appreciation of the Swiss francs again in the last few weeks, and I hope this will not continue this way. On the net financial result, I think we were short, CHF 1,000,000 compared to last year. However, it doesn't come from currency. As you can see, it's mainly the other financial results. So we had higher cost due to more repatriation cost from China. We also had higher negative interest cost and also lower interest income. But overall, still, let's say, on a very controlled way. On the group tax rate, we could improve quite significantly to a very low number. So first, I comment on the 19.4 percent, so the expected tax rate. There, we could benefit from a very attractive mix, where we actually accrue our profit. So we had a high share of low tax countries where we could actually make our profits. And I mentioned it in March that we have now achieved the high tax status in China, and we could apply this also now for the first time in the half year result, and this is part of the 19 point 4%. And on top of it, actually, the effective tax rate went down to 17.5 percent. There, we benefited from the R and D tax benefits here in Switzerland and also from some losses carry forward we could use. On the other side, I have to say this tax rate is probably not sustainable midterm because already some countries have announced that they will increase the tax rates in order to fund the COVID expenses, namely U. K. Or the U. S. And I'm sure you have also heard that there is this OECD initiative to have a minimum taxation of 15%, most likely to come in 2023. And we, as HUBOSUNO, will most likely also be impacted by that. I mean, we don't know the technicalities, how it will really work. However, it's a high likelihood that midterm, the tax rate will go up again. On the investment side, I announced in March that we will have significantly higher investments to come. However, you can't see it here yet in the first half year. We are still, let's say, on an average level compared to the last few years, but I can guarantee you that they will come because we're currently constructing the new building in Pfeffekoen for the Witzburg to have to consolidate to one side and be investing also in a lot of production equipment for the automotive industry. So starting in probably second half of the year, but also then in the next year, we will have to see a higher CapEx level to come. On the balance sheet, overall, I think it's the same good structure. I think there was an increase in the net working capital position due to the increased business activity. On the other side, we could we have the same high amount of cash as compared to the end of last year and actually an increase of CHF 60,000,000 compared to 12 months ago. How this actually happened? You can see on this slide, we actually normalized our cash flow from operating activities to CHF 43,000,000 because this last year, this was very low. And just mentioned before, the cash flow from investing activities might be still low, but they will increase going forward. Deducting then the dividend payments and the purchase of our own shares for compensation purposes, we ended up with a free cash flow of minus CHF 3,300,000. With that, I'm already at the conclusion of the half year result, yes? I think we can really say we had a strong development top and bottom line. We could double the EBIT and thanks to an attractive tax rate, also the net income. And we also had a good cash flow. So all in all, we can say that it is the best half year result we could actually present in the last few Yes. And I will share with you our outlook and share with you how we judge the environment and the markets. And we can already say that the basic trends and prospects in most markets, they are currently very favorable, and we believe that they will continue this way for some time. However, and we have heard it already from Evo Wexler to a certain extent, market which cannot be neglected. For instance, COVID-nineteen is not overcome yet fully, And it's just June that we had to close one of our factories for some days due to COVID measures in Malaysia. And we still see some restrictions in some countries, and I think it's not over. I think we have all learned to deal with it, and I don't expect that there will be broad lockdowns in a large number of countries, but there are still individual spots where we are confronted with COVID restrictions. On the other side, we see a world economy, which is close to overheating, which will fuel the inflation and also, the already mentioned raw material price rally is difficult to predict when it comes to a peak. The availability of certain materials is scarce and particular, also electronic components and chip remain very tight when it comes to supply. Now you may ask yourself why do we care about chip because a few product a few of our products include chips. But on the other side, if there are line downs in some key market verticals for us, for instance, in the automotive industry, it will also impact Uber sooner as a supplier in these markets. And last but not least, the geopolitical tensions, they create a permanent uncertainty, and we don't know what's going to be next. So we have to be flexible and agile when it comes to adjusting our global business footprint and also our global supply chains. When we look a bit closer at the different markets, industry in general, we are not the only one that benefit from a very favorable and broad based upswing. But industrial applications, as you can say, from the results, they offer, particularly for our business scope, connectivity, very attractive opportunities. Driven by the need for communication solutions, also in industrial applications, we still see potential to grow our business in a wide range of market verticals. In particular, we see strong dynamics prevailing for high power charging. And also on the test and measurement applications, we still believe that the cycle will last for some time, fueled by the higher investments in 5 gs rollouts. Last but not least, the desire to feel safe fuels the demand further for Aerospace and Defense Solutions. And one of the reasons for the new organization and in particular important Industrial Market Verticals is that we have opportunities in bundling our technologies, RFFO and LF, which under the new umbrella of the industry segment and the new umbrella of our market segment organization, we have identified significant opportunities, and we are trying to leverage that in these applications. In the communication market, we believe that we have a strong period ahead of us. We think that this positive market environment will continue for some time. We have all experienced that the functioning of communication infrastructure is detrimental for the functioning of the economy and the whole society in COVID and pandemic times. And we believe that this situation will trigger and release further investments in communication networks. I mentioned several times, 5 gs picks up momentum. The evolution of 5 equipment is rolled out. We will see that 5 gs technology will also evolve. And even it is already installed and rollout, we will see upgrades. And we will, in particular, see investments towards higher density networks and also higher data rates. And last but not least, every data traffic generated by mobile network needs to be handled by communication backbone, which again releases investments in the fixed net application. The expertise in the optical technology, which is coming from the acquisitions, in particular, in filters, but also in optical switches and also with BK Dell in active equipment makes us one of the few companies that can master basically selling single products and combining it with complete solutions for connectivity on the physical layer in communication network. In the transportation area, we see railway, as mentioned, still facing headwind, but we believe it's a temporary headwind. The outlook still remains positive for Rail mid- to long term. We also still have a lot of projects in the pipeline. Visibility in this market is traditionally quite good. And there are a lot of significant bids out, and we are confident that the railway market will return at some point. On the other side, already now, we see a boom for onboard communication, and we believe that this application, a specialty where we are extremely well positioned to serve complete solutions for communication on trains. It will become more than just a niche, but really quite a significant trend. The automotive market is in a good state. It's back to growth, but the focus lies on electrification, so on EVs for commercial vehicles as well as passenger cars, and that will not change over the next year. And I think we are well positioned here to benefit from this trend. There is a particular trend for short haul commercial vehicles, so small trucks, which have very predictable routes to serve, are actually perfectly suited to be electrified. And for longer range trucks, we believe that hydrogen fueled vehicles may become the technology of the future, but also hydrogen fueled vehicles are driven by electric motors and need high voltage circuits. So for us, that doesn't change the picture completely. And last but not least, in this market, the trend towards autonomous driving despite the setbacks and all the hurdles to overcome from a regulatory point of view continues. And with these high number of sensors and high resolution gears in the car, We also see the data rates sharply picking up in automotive and in vehicles, which opens up opportunities for HUPRISONER and for our technologies. This is a short overview into the markets and how we see them. We can say as a business outlook, basically, sorry, we have in the 1st 6 months of 2021 seen a broad economic recovery. We have certainly benefited above average. We've also been hit a bit above average in the COVID peak, but now we have been able to recover from that, and we are back to pre COVID levels. We have a strategy which focuses on growth applications and market verticals, which are driven by major social trends, and that starts to pay off now. For instance, we see greater demand for security and also rapidly growing data volumes in all parts of the network, and these trends will certainly persist. Agility and flexibility was a key in our organization to benefit from the upswing because it came without long pre notice and quite suddenly, and we were not able to prepare very well for this upswing. As I mentioned, a year ago, we have been at a different state. We were in a restructuring and saving mode. And since beginning of this year, we needed all hands on deck. The organization has really done an excellent job in capitalizing on these opportunities offered by the more favorable market environment. The increase in demand in many industries, as mentioned, is under pressure of transportation capacities, but also availability. And last but not least, it's shown and reflected in higher prices. From today's perspective and to wrap up, Ubersunar expects the positive momentum in important and in most of our market verticals to continue for the next few months. This leads us to the outlook on net sales and EBIT, which is that provided the procurement and currency situation remains as is, The company confirms the outlook already issued to the market end of June for the year as a whole, which means that we will achieve double digit growth for the full year, and we expect an operating margin to be above the midterm guidance of 8% to 10% for the full year. With that, we have come to the end of the financial reporting. And as already mentioned in my introduction, we plan to have a first Q and A session. And I would like to start really in thanking you for following HUBOSUNNER closely and in such a dedicated way. And it's always a pleasure to be in contact with you. We appreciate your questions now, and I suggest that we start in the room. And we will then, in a second phase of the Q and A section, also give our participants in the video transmission the opportunity to ask questions to us. So are there questions from the audience in the room? Herr Ferenbach. I will repeat the questions afterwards so that the participants in the video call can also follow the Q and A session here from the room, please. Yes. It's a question about how well we are in a position to pass on the price increases in the sourcing market and how timely we can pass it on to our customers and what will be the impact on the margins. We don't have that impact. We expect, as mentioned, that the margin will be under pressure. But we have some contracts with we have some contracts with customers that allow us to pass on the price increase immediately. Others have clauses which allow us to share. And then we have some contracts where we are bound to our pricing. So there will be a mix. We expect an impact, but it's difficult to quantify. Heimager? So the question is if we can benefit in a similar way from the 5 gs life cycle as we were able to benefit from the 4 gs because in the 4 gs peak, we were able to generate business in excess of CHF 100,000,000 in this market vertical. And I can tell you that we expect similar development for us. The market has now started on a broader base. We have 5 gs rollouts ongoing since 3 years. Now we see really volumes starting in the North American market and in the Nordics and also some other West European countries. And we expect that this wave will continue for some time. We have in the result already presented a significant upswing in the market vertical, which addresses the mobile communication market. So that is already reflected and built into a certain degree. Maybe I have mentioned it in one of the last presentations, but for you to remember the 2 largest single market verticals for us is the mobile communication market on one side and the railway market on the other side. And the market vertical for mobile communication has had a sharp increase in the 1st 6 months. Maybe, Okay. So the question number 1 was why is Asia business shrinking with 8%. The third question was that whether there are learnings from the cyber attack. And the second question was restructuring, how the headcount is developing large part of our Asia business is Rail. And the Rail business in China has not picked up yet. And in particular, the high speed program of the Chinese government has been reduced in several steps to a fraction of what was planned, and that is the major result. We also had another impact, and that is related to India, who's been or that's been hit heavily by a second COVID wave. Basically, India was flat for 2, 3 months. Business was really at the bottom and was crashed, and we only see that business now gradually picking up again. And all the other countries, they play a lesser role on our business. But those are the two main impacts, China Railway and COVID in India. The restructuring, obviously, was initiated, announced, has been executed to a large extent, still some things to come in the second or in the first half of twenty twenty one. When we have realized that business pattern changes completely, we have obviously stopped these programs. We have not fully executed the reduction of 100 people in execute completely now in the 1st 6 months of 2021. As we have planned to do that in a social way, we have not just terminated contracts. There were discussions going on, which have now stopped. And it was announced to the organization that for the time being, that program has been stopped. We have closed the shop in Brazil that we have fully executed. So Brazil is just a sales office for us, reflecting also our business performance in Latin America. And in the other countries, we can say that we have reached a low at the end of 2020 early 'twenty one. And since then, we are building up capacity again. How many people in Brazil? 1 hundred and fifty? It's about 150 people. Yes, a bit more than 50 in Switzerland headcount. But since a few months, we are reemploying in Switzerland. And then cyber, I mean, for us, cyber is closed. We've been hit by a cyber attack 13th December. I'm getting a bit tired to report about that because for us, it's already really passed. But I don't regret that we have openly communicated at the time. I can tell you there are a lot of companies which don't do that, and you'll be surprised by the number of companies affected by cyber attacks. And what you can see and read in the news is basically just the tip of the iceberg. It's a major threat. We have been hit, and it was a bad coincidence. And there were several things which came together, which made this attack successful. We've been able to fight this attack on our own. We have not paid any ransom, and we've been able to reassume work or resume work after basically 2 to 3 days in our plants. There were some systems which took longer to get back, but we had fresh backups that we could use, and we could basically clean all our system landscape by ourselves and restore everything by our own. I don't want to be proud of that. I just hope it's never again going to happen. We have drawn conclusions. There is a very long punch list, and we are, I would say, about 80% through with the execution of all these measures. And you should never say never again. But I'm pretty confident that if we have this punch list 100% worked down, we will be one of the most protected companies in the industrial environment. But you can be hit once, and you shouldn't be hit twice. Yes. I mean it's neither of these points. The cycle in automotive is that they are very long designing cycles, where you have to prove your products in very tough tests. And based on that and based on attractive pricing and based on the product performance, a company gets nominated. And then from nomination, you basically go through an installation of the serial production processes, which then again have to be approved by your customer. And typically, you start a program or a project, particularly when it's a new technology. Let's take our example at the high resolution radar. There, you have between 3 4 year before you start to generate sales. And it can be that with a more mature technology, it's going down to 18 months or 2 years. But the cash out is in the middle of this pre investment phase because you have to prove the performance and the quality of your products based on serial processes. And then you have this typical ramp up life cycle curve, which means that the peak for your sales is only in year 3, 4 or 5. And that makes the automotive business quite pre investment heavy. So it has to do with the timing in this business. And the margins are comparable to Railway. For instance, we have programs for new high resolution distance radars. We have started to work on that 3, 4 years ago. We've been nominated in the last 6 to 12 months, and we will start to see 1st small sales volumes end of this year. And one additional comment to the growth in transportation. If you look at organic growth, it's only 3%. So there, my major contributor is the increase in copper prices. And that's why it was not I mean, the fixed cost absorption was not so high. On the other side, we have seen that we have the best book to bill ratio in this segment. So there will be some more to come. And then hopefully, we have a better fixed cost absorption because, I mean, it's not the dominating technology is LF. And I think they have been, let's say, always single digit, and they have the highest, let's say, from a capital point of view, the highest capacity needs. But also on the one we work with to consolidate the site and traffic count, this should also help. Then once this is done, that we can also have some efficiency in the production of this segment. That will be the full effect of this is not next year from the consolidation side. That's in 2023, the full year effect. No, we cannot give you the figure on the cost. We are still in discussion with the insurance. I don't want to report any figures in this case. Yes. There are several effects. Many of these communication equipment customers sit in China, at least some key customers, and they suffer. In the Western world, we see that particularly in North America, the large 5 gs rollouts, they include, obviously, communication equipment, but all the sell side material, which is a large portion for our sales into this market. And we channel that sales through 2 different routes, one through the communication equipment manufacturers for those operators that buy a turnkey from the equipment vendors. And then there are large operators like, for instance, the Swisscom and also the U. S. Operators, which buy that directly from the source and not through a Huawei or through an Ericsson or through a Nokia. And we see a bit the shift of business from the communication equipment market into the operator market. Then there is a second reason, and that has to do with Cube Optics. Cube Optics sells filters, and they are in a transition phase with clearly lower volumes. They have some end of life products, mainly on the 100 gigabit transceivers, and they are in designing processes for 200 gigabit, 400 gigabit transceivers, which have not really reached the stage where they are sold in volume. And in this transition, we see cube optics on a clearly lower level currently. We are confident that they will come back with 204 100 gigabit transceiver market, and they report all their business into this communication equipment, vertical because the customers there are Cisco, our HiSilicon, our Finisar, Sumitomo and the like? We hope so. Yes. So the question is if the Western or the European dominated railway market, how this market develops and whether this market will be able to compensate for the lower Chinese market. We can say that the business in railway in Europe is quite stable. We believe there is more potential, but I don't think that it will really jump. In order to get rail back to where it was 2 years ago, we clearly need the Asian railway market to come back. And when I say Asia, I particularly mean China, but also, to a certain extent, India, who is also an important rail market for us in Asia. Yes. It's a bit difficult to say seasonality is a pattern. You may remember the past 5, 6 years where we always had a stronger first than a second half. It also was driven by strong Indian business in the past, where we have monsoon season starting in September, October, and typically rollouts are slowed down. We have a much smaller share of our business in India, so that effect will fall away. I don't expect a very high seasonality this year. I expect more or less equal half years this year. And the main driver behind that is that we have the seasonality, yes, but we also have a relatively good backlog at hand, which is unusually high for Huppersonne, and it has to do with the high book to bill or the very strong order intake in the 1st 6 months. So I would expect that we can compensate a bit the seasonality this year. We expect the mix to stay as is, but we expect the margin to be a bit under pressure from the effect which we have elaborated on in details, price pressure and the like. The mix? No, I don't expect the mix to further improve. I would expect the mix to be as is. And then on top, we have a bit of pressure from the markets. I think at this point, I would like to hand over to the moderator in the video call, who is coordinating and moderating the questions from the audience that participates in our video conference. Please. There are no questions from the phone. That doesn't seem to be the case. Then maybe back to the people here in the room. One last chance. All questions answered. Okay. Then thank you for the lively discussion and the interesting questions. And with that, we would close the first section of our presentation, and I will share with you some insights in the focus topics. Here on this slide, you see an overview of our financial calendar. You have that also in the handout. So next touch point with public is end of October on 21st, where we report 3 quarter figures. And then as usual, late January on 21st of January 2022, we state the pre final date sales and order intake figures. And then again, the full year report will be published on 8th March. All right. So the focus topic, the market segment organization. I don't make it very long, but I think for those of you that follow HUBE SONR, I think it is important that they can relate to the past and see which way we go now and why we have done it. In very simple terms, we have shifted our reporting focus by 90 degree in the cube. Instead of technologies, we consolidate along the market segments. And why we do that? I will share now in a short video that explains how and why we have changed that. Momentum 2021 makes us ready for tomorrow. Even in tested processes, there is potential for improvement. If we work with this customer today, we offer exactly the technologies he needs. The knowledge of low frequency technology is located here. The customer is in lively exchange with the colleagues in this division. However, the customer would benefit from our radio frequency technology as well, but the knowledge of this need must first arrive here. With Momentum 2021, we are organizing ourselves based on the way the market is structured. Everything is divided into 3 market segments customer, not the technology we use to achieve it. His contact partner works in the transportation segment in sales for the automotive market. This way she can cover all the needs of the automotive customer directly regardless of which technologies we use to realize the solution. Each of the 3 market segments has the same clear structure. The areas are sales, strategy and business development and technology and operations. These teams work around the world. In our example, this means that no matter whether the new need from our existing customer arises here, here or here, our sales colleague or another sales colleague for automotive elsewhere can react quickly. To do so, she is connected to her colleagues in the other segment areas. The area of strategy and business development combines our offerings for the market and bridges the gap between sales and technology and operations. In doing so, it considers all of its own technologies and the technologies of 3rd party providers for the best solution. We are setting aside the existing sales regions and organizing ourselves in global teams with local presence within the 3 market segments. Our 3 technologies are split across the 3 market segments so that each segment contains the dominant technology. Within the 3 market segments, the paths are shorter and the coordination is simpler. We gain agility. Thus, we are focusing even more strongly on the market, simplifying our structures and processes and playing our technological advantage where it is needed with the customer. Momentum 2021 is a big step for HOOBA and SOONA and for each and every one of us. Let's take it together and lay the foundations for a successful future. 2 main objectives are related to this reorganization. It's an increased market focus and simplify structure. So for instance, we have got rid of our matrix structure. We have formed global teams. And we have with the segment orientation, I think we are easier to be understood also for outside people, but also for our customers and why internally we want to achieve more market focus. We can say that speed is a secondary objective. We are quite often very fast. We are early adopters. We are detecting trends, But then we are quite often not very fast when it comes to really implementation, and we want to change that. Simplicity, as I mentioned, for our size, probably quite complicated, organized in the past with a matrix. And we want with this simple organization to free up energy that will benefit our customers. And agility, the experience is one of our core strengths, technology, and we want to use that expertise more in a way that the customers benefit from it and combine it with entrepreneurial spirit. And last but not least, the market proximity. In a nutshell, we want more market pull and less technology push. That I mentioned, instead of regions, which are all or in the past, all needed a lot of alignment between the technology divisions and the sales regions. We have now truly global teams. And one of the basic elements and probably the preconditions why we have been brave enough to do that was the experience during lockdown and COVID times. And we have all of a sudden realized that we don't need to take a plane and fly everywhere just to have an alignment discussion. We can do that through video conferencing and other digital means, and that has encouraged us to shift to truly global organizations. A word about customers. I think quite often, we talk about figures and numbers and not so much about customers. We have an excellent customer base. We have had about 4 1,000 buying customers in 2020. If you take a longer period, you may find about 8,000 customers on the list here. And we have about 30 customers that represent 50% of our business. We have a bit less than 100 customers, which represent 80% of our business. And then we have a huge pool of customers, which represent quite a significant opportunity for us because they are buying just fiber optic or RF, and there is a potential to sell more than one technology to them. Three examples, why we do it and how we do it. So, across Technology Market Solutions, in the example of wind power, it's a market vertical, which is not a core market. It's a bit more than a niche. But here, typically, we can sell all three technologies. We've entered this market with fiber optic. It's mainly the cabling within the tower from the bottom to the nasal. And there are more opportunities. There is, for instance, the energy cabling in the medium voltage drives or I should say, converters. And there is also the wireless connectivity within a wind farm from wind tower to wind tower and back to the control room. Obviously, a market which cabling for us is significant for a complete investment in the wind farm. It's a small part, but if you don't have the right cabling, your investment as an operator is idle and cannot be used. But also, the harsh environment in wing farms, think about an offshore farm, is one of the challenges which requires higher quality products. So this is a perfectly suited application for HooperSuna. The second example is coming from the communication market. So large data traffic requires mobile network densification. Take a stadium. The last 2 years, that wasn't a very dense area, but it will become again or take a train station or an airport. There, we have to make sure that the increasing data traffic is coming to the spot and going away, but also the coverage within this high density spot is key. So here, we can offer products which provide the time stamps or a GPS signal is key to synchronize the different elements in a mobile network. We do that and we do it even a bit better than others with a direct GPS over fiber connection. So no voltage connection, no power connection, but the energy is transmitted with the laser through the fiber. Then there are also cube optic system, which provide more capacity on a given connection on an individual fiber. So there, we combine their filter technology, their WDM technology with an active part, and we can sell complete systems, which boost the capacity on a single fiber, and then there is the connections within the stadium or the airport. The last example comes from railway. I talked several times about onboard communication. We believe it's becoming more than a niche. We have typically a market leadership for the whole LF cabling on trains. And then there is the whole communication part, which consists of inter vehicle jumpers, which form a backbone through the whole train and with the train to ground communication and the onboard communication, which requires antennas. I don't go into the details. These are just a few examples, which highlight the opportunities in cross selling and leveraging our three technologies, and we plan to intensify that in the new organization and with the new organization. That's one focused topic. I suggest that we have a Q and A session at the end of both topics, quickly about sustainability. I mentioned that we have now a full sustainability report available, which covers 2020. We plan to synchronize the reporting with the full year figures for 2021. And then beyond 2021, have a fully integrated reporting at some point. So sustainability is obviously one of the key topics of today. At the heart of our business lies the ambition, the aspiration to satisfy the basic human need to be connected. And with our connectivity solutions, we can contribute to these needs and these strengths. And we are contributing, 1st of all, to People Be Connect through means of communication, but also through sustainable mobility, be it on tracks or through electromobility on the road and also responsible security while acting overall in a responsible way, which is our aspiration, as I mentioned. Why do we do it? Obviously, we have to, but then it's more than that. We want to go beyond. It's also differentiator versus our competition. It's also a driver for ideas because the forward looking mindset, which sustainability always includes, also helps us to navigate in the different opportunities and trends in the market and aligns also helps to align also our business strategy in a way that we have a long term perspective in the targeted market verticals. It's a driver for innovation. It helps us to anticipate risks and opportunities. And we have a proactive approach and the aspiration to exceed minimum standards in the field of sustainability. We have a business model. I don't go into the details. Maybe just in a nutshell, there is an input section and an output. The KPIs cover basically the span between input and output. We have in the middle of our business model our fundamentals with the vision, which consists of our claim, our mission, our values, our purpose. We have then the strategic focus, the ambition and the responsibility part, which includes the different aspects of responsibility for HUPAZUNA. And last but not least, that is all looked at in the context of the different dimensions of stakeholders such as customers, employees, the communities, the suppliers and the shareholders. That's our business model. A few highlights related to the business. So there were no cases of corruption, bribery and conflict of interest reported, and we have achieved 20% of our sales from growth initiatives, which per se are selected also always based on the fact whether they are sustainable or not. On the relationship part, there are also several highlights. I would just like to highlight maybe the figure here, which states that we have invested and spent €333,000 on 118 community involvement in development projects in 2020. On the environment, the key figure probably here, we've been able to reduce CO2 emission versus previous year by minus 21 percent. And all the others, I leave for your reference when you go through the handouts. A few examples. And when we do business, we also try to address the topic of sustainability. Here, an example from the mobile communication market, where 5 gs equipment is energy consuming. And the answer to that are cabling from HUBE SOONER and the cabling, which is able to support different voltage levels, so going towards higher voltage and, in particular, going from AC power to DC power, which requires quite significant changes to the product, but which also helps to save energy on these mobile network sites. Another example is our engagement electromobility with products going into the high voltage circuit in the cars and in the trucks, but also our solutions for the high power charging, which is an enabler for electromobility on roads, as you know. And last but not least, data center. Data center is a critical infrastructure, follows basically the data traffic. As we all know, data traffic is ever increasing, and data center are a key energy consumer of today's world. And hence, it is extremely important that they are eco friendly and energy friendly data centers. And with our products going into data center, we enable that. We do that by better organization, better arrangement of the cabling, which per mix and allows the Airstream to have a more efficient cooling in the data center. There are several other things that benefit the energy consumption of a data center that we can provide to this market and to our customers here. Yes, we have selected 13 topics out of business relationship and environment. There are 3 focal topics because we don't want to do everything just a little bit. Sustainable growth is one of those topics, the community involvement and development and the greenhouse gas emission. And our targets in those three focus topics are that we want to grow the share of business generated with the growth initiatives from today 20% to a share higher than 33% by 2023. The greenhouse gas emission, we want to half by 2025 and cut to 0 by 2,030. And the community involvement in development shall see spendings of 0.5 EBIT percent or at least €500,000 per year starting already next year. Those are our targets for sustainability. We report based on science based targets. We have rating of CDP and Ecovadis, and we have signed the UN Global Compact. It's just to close and wrap up this last focus topic. And with that, I'm now definitely at the end of our presentation, but not without not giving you the opportunity to ask your final questions as before to the people in the room first. Yes. You take last year sales, it's about €150,000,000 And then if you take an average growth, let's say, take 3%, 4%, 5% growth and apply that to the next 2 years and then multiply with 33%, you get plusminus. It is a starting point. We cannot exclude it and we cannot take it out, but it hasn't been more than 20% before. So actually, the growth initiatives have hold up best from all our market verticals in the COVID crisis. That's why they are cold growth markets. Yes. It's obviously not a decision which you take from one day to the next. And it was something that I carried around with me, but I don't believe in revolutions unless it's really needed and you're with the back to the wall. I never felt that Hoeber Sundar is with the back to the wall. So I took the organization as is, and we started to evolve and develop. And I carried that idea around, and I found the time right. Middle of last year where the decision matured, and I approached the Board of Directors, and they supported that. And as I said, I mean, there are several aspects. I could give you a whole list, but really the most important targets, and I want to keep it simple, is that we want more market pull and less technology push. So we want to be closer even closer to our customers. And I want for the size of our company, I want to spend less energy in aligning our strategies. And for that, one of the key measures was to eliminate the matrix structure. The journey is ongoing. It's also I mean, an organization has never is never 100% stable. I don't want to have such huge changes every half a year. We don't have that culture, and I don't believe in the benefit of doing this unless you really have to rock the boat. But I think we have despite the huge workload, which fell from sky all of a sudden beginning of this year, I have to say that the organization has adapted already, I would say, 85% to 90% and things are working perfectly well. I don't feel any efficiency deficits in the organization, and I have never ever at any point felt any lack of customer focus, which is one of the key risks when changing an organization so fundamentally that you focus internally and you forget your customers. And that has never been, not even for a very short period, been the case. Kia Car Management hasn't changed much. We still have some accounts which are called key accounts. The point is that they have a global need to be served, and we have global teams that serve those customers. But we have, of course, all other customers below the global key accounts, which also have multi regional footprints and multi technology needs. And they can be addressed now in these market segment teams in a much more effective way. Yes. I mean, it is an interesting exercise we are going through. If you change the view on a company by 90 degrees, as it can be seen from the cube, obviously, it gives you different insights. And of course, we are always measuring and monitoring the company in all different dimensions. But with the consolidation along a particular line, you have always a special emphasis on this view. And of course, by changing the view from technology now to market segments, that gives us indeed different insights and probably also triggers different decisions. I don't want to go into details, but capital allocation is just one of the topics which will be reviewed also now under the new structure. I don't expect any changes, but I don't want to exclude that there are still no questions from the phone. Thank you. Then for me to say thank you for your interest in Hoopersooner and goodbye and hope to see you in person or in the video call next 8th March 2022. Thank you very much, and goodbye.