Earnings Call: H2 2019

Mar 10, 2020

Good morning, ladies and gentlemen. Welcome to the Media and Analysts Conference 2020 of HoopSuner. Also a warm welcome for the first time to the participants in our webcast. So we have decided to offer 2 alternatives to participate in our press conference, either with physical presence here at the 6, but also as of now with remote participant webcast. This is not a measure due to the coronavirus, but it definitely suits the situation quite well here. We also decided for the first time to have the conference due to the webcast in English. We have then also a chance to ask questions at the end. Please feel free to choose the language you feel comfortable with. With those brief remarks, I am inviting you to look into the HUbersunner Business 2019, and I'm going to give you an overview of the business here. In a nutshell and to start with a few key highlights, We've been able to improve our profit despite lower sales last year. Of course, the lower order and sales level doesn't satisfy us. We have had to accept the railway market with lower volumes, particularly in Asia. But we have also seen significantly lower volumes in unexpected. We have actually pre warned the public that this is going to happen. And so it didn't catch us as a surprise. On the other side, there are also some positive notes. Radio frequency has been able to increase the volume in sales as well as in orders, while fiber optics and low frequencies were behind previously. We are coming to the details. The further down we get in our P and L, the more we are happy. So it means that we have been to increase our EBIT margin. And our net income also grew in absolute terms versus previous year. And last but not least, we were very happy about very high free operating cash flow despite very high investments and acquisitions. The good bottom line in 2019 despite the lower sales volumes were due to well managed costs and also an improved business mix. And the free operating cash flow is attributable to well managed net working capital. We've seen 2 different patterns last year. We had a very strong start and consequently we could report very strong half year results. We already warned in our press conference for the half year figures that we will not be able to maintain this pace throughout the whole year and our markets prove to be more demanding clearly in the second half of twenty nineteen. In general, we can say that the industrial markets and the niches we are in, they performed quite well till the end of the year. Consequently, we could mark a jump in sales in the industrial application, while communication and transportation markets declined. The growth initiatives overall developed favorably, but at varied pace and contributed to the growth overall. And the strongest region of the 3 main regions was Europe that convinced with higher volumes, but was not able to offset the lower business demand from Asia. This is in a nutshell a few highlights. And now to the figures at the glance, you can see orders and sales as announced already end of January were below 2018. On orders, we managed to get just above the €800,000,000 mark with €801,000,000 12.5 percent behind 2018. This for us certainly the most disappointing KPI that we have to report today. And as I said, the lower we go in our P and L, the more convincing the result is. So that overall, I would consider 2019 as a decent year for Hooperson. Net sales at 8.31 percent. Here, we had 8.1 percent decline and operating profit where we managed to keep almost a level in absolute terms of 2018. And in relative terms, in percentage, we were able to grow by 0.4% to 9.7%, which is really just at the upper end of our midterm guidance of 8% to 10%. Last but not least, the net income also grew in absolute terms by 2.3%. And in relative terms, we could achieve a good 7.6%. When we look at net sales over a 5 year period, you can see that we are coming out of a strong growth period with 3 consecutive years with nice growth until 2018. And as we have also pointed out several times, 2018 marked a very tough benchmark for us. So we were not able to continue the growth story in 2019. But on a 5 year comparison basis, the 2019 result also looks quite okay. And if we take the 5 year aggregate that growth rate, we are at 4.2 percent, as you can also calculate. The same 5 year analysis on EBIT shows that also on return on sales level, the 2019 result marks quite good. Result overall was €18,500,000 and particularly it is 9.7 7% in relative terms, which compares quite well with the past 4 years. I'm going now a bit more into the details and I do that as always along the three dimensions of our business. I will start with the technology segments and here with radiofrequency, who had the best performance in 2019, a small increase of orders and good increase of 7.7% in sales and a record EBIT of 17.1% is a very convincing performance. The growth was broadly based, particularly in Aerospace and Defense. We were able to develop the business further. And here, the main driver were satellite components, which have gone into those large scale satellite programs. But also Test and Measurement, one of our core markets, developed favorably with higher demand for high quality RF connections. And here, the main driver were pre investments into 5 gs rollouts. And the last but not least, we've been also able to complete our portfolio in the area of specialty antennas, railway antennas and for special forces. And we've been able to acquire a part of the Cap Trine business that was divested. Further, Fiber Optic Technology segment. You may remember that this business was the main growth driver in the past. It's now going through a bit more difficult times, not just from a top line point of view, but also from a bottom line point of view. And consequently here, we have the big impact from the large four gs rollouts, namely the project with Samsung in India had a big effect here on the fiber optic business last year. So the order intake went down by 21%, while net sales also shrank by 15.5 percent. On the other side, here, we have been able, as already I've already presented at the half year, we've been able to increase our return on sales from 5.9% to 6.6 percent. On the positive side, we have been able to develop the business with the acquisition conducted in 20 16 further. This is the optical switch business from Pilates, which grew significantly and which also contributed to the bottom line. And another highlight here is that towards the end of 2019, we could announce the acquisition of a sizable company active in the area of active equipment for cable TV networks and for fiber to the home. The company name was BK Tel. Their main focal area is the German market, but they market, there were first 5 gs mobile infrastructure rollouts starting, and we can confirm that in those newly initiated rollout, Hooper Sun has been able to take a very strong position, which is promising for the future. Then last but not least, Low Frequency Technologies segment after an extremely strong 2018. We also had to accept here lower orders by 15% and lower sales by 7.4%. We still have been able to maintain the 8% on the EBIT margin, which also means a decline of 1.8% versus previous year. The main driver behind the top line reduction were the submarkets railway, but also conventional automotive, which developed towards the end of last year unfavorably across the globe. On the other side, we've been able to further drive our design ins in the area of electric vehicles with high voltage cables and solutions and also our high power charging solution for electric vehicles was developing quite favorably, and we could defend our market leadership position in this business. When we look at the different main markets, we can see what I have said in the beginning that Industrial developed positively with growth of 23%. And of course, that also helped to improve the business mix and consequently the margin as we have traditionally in the high-tech industrial niches the best margins. On the other side of the scale, we see communication applications where we had clearly less sales with 21%, and also transportation business went down by 8%. If you look at the distribution among those 3 main market segments, you can see that Communication now accounts for a bit more than onethree, while the others, they contribute with 30% 32%, which is quite well diversified mix of applications in our portfolio. When we look at the volume by net sales by region, we can see the growth was in Europe with 6%, while the Americas were flat and Asia Pacific shrank by 24%. That means that we have now again about every half or about every second Swiss franc turnover in Europe, Middle East, Africa, including Switzerland, while the other two main regions account for the other half of our sales. With that, I have concluded my first part, and I would like to hand over now to Ivo Wexler, our CFO, who will guide you through the details of our financial results. Thank you, Wolfgang Mittenand. By now, but I also will now switch to English. A warm welcome to all of you here in the room, but also on our webcast. I'm happy to guide you and to give you some more insights with regards to the financial performance 2019. I will start with the order intake development. You could see, we have heard minus 12.5%. So 2% can be associated to currency and copper impact to minus percentage points. And on the portfolio side, we have a small increase, 0.5 percentage points. This has to do with the Kart Line acquisition we have heard and also a short month in December of the Cartel. So this means and at the end, we end up with an organic decline of 11% and about half of it can be associated to the 4 gs rollout in India, Samsung. So half of it means €50,000,000 plus has to do with this one individual single project with Samsung. So then on the net sales side, we see a similar picture as in the order intake. Currency and copper is also minus 2%, portfolio is 0.5% plus. So the resulting decline in organic terms is 4.6 percent or €40,000,000 Also here, it's the same magnitude with regards to this 4 gs rollout project. It's about €50,000,000 plus has to do with this project. So in the other side means that we had I mean, we have seen some growth in some other areas. You can see here, when we look at the technology segment from a sales point of view, we see a nice growth in the radio frequency of organically almost 9%. We have heard there was Space Defense was growing, but also Test and Measurement, so the Industrial business as well, so nice growth on that side. On the Fiber Optics, this minus 15% organic decline. Here again to mention this 4 gs rollout project in India and then on the low frequency side, there was an organic decline of 4 When we look now at our development of the gross margin, you could see that we could improve the gross margin quite significantly to 36.2% And this is due to an improved business mix. So what I mean with business mix is, yes, it's we actually can sell more high margin business. In particular, the increase in RS helped us on that way. And we have also a less lower margin business. So the as we know, this gs rollout in India is a low margin business. So it was really a good development. And on top of it, we, as always, see how what we can do to optimize our cost structure also in the production side, and that also helped to increase the margin to this good level. On the operating side, you could see it was a decline by €3,000,000 to €223,000,000 However, in relative terms, it's an increase to 26.8%. Here I have to mention that in particular in the second half, we actually stand on the cost break because we knew and we anticipated that we see lower volumes. So there was really some cost saving initiatives started in the second half of the year. And on top of it, it's worth mentioning that we have not compromised on the R and D. So we have invested €5,000,000 more into R and D. On the other side, we could save that through lower administration cost. We now look at EBIT per technology segment. We have heard before record high numbers with regards to radio frequency with 17% EBIT margin, which is more than half of our group EBIT. Fiber Optics, a small increase to 6.6 EBIT percentage points. And in lower frequency, we saw after a very strong year a certain decline, but I think with 8%, this is still a decent EBIT margin level. The corporate cost remained unchanged at 7%, so we ended up at 9.7% EBIT margin, so 40 basis points higher than last year. Now the financial result, I think it was last year not so spectacular. I think we were able to limit the negative currency impact and by that increase, let's say, or have a less worse financial result compared to previous year. But now I would like to make a small excursion with you with regards to the currencies in 2020. And for those who are in the room, this slide is not printed. So but it's on the online version because we have just finished it yesterday. And as you all know, I think the Swiss franc is also, let's say, corona impacted because, say, the safe haven, correct, of the Swiss francs came very popular again at the beginning of this year. And here to show you a little bit compare, let's say, the most relevant currencies from a HUBER SONEN point of view, and this is just development this year. So starting from last December to early March. And you can see here the decline is from minus 3% to the maximum minus 17%. And now then on the right hand side, I then make a small simulation for you to get a little bit of feeling of the magnitude. If I imply this early March FX figures and at the bottom you see what I applied. So for example, euro, I applied €106 and for the €092.5 So obviously, this can change as we all know, but apply these numbers to the 2019 result. And if those FX numbers would remain for the whole year or would have been the FX exchange rate for the whole year in 2019, you could see that our reported sales of 8 €31,000,000 was more than €50,000,000 less, so €778,000,000 So this is would be a decline of 6.4%. And on the EBIT, it would be a decline of €30,000,000 or when percentage wise minus 16%. And our EBIT margin would be 100 basis points lower, so it would not be have been 9.7%, but 8.7%. And here, I just want to make you aware that as we all know, we are still, let's say, we have an exposure to a strong Swiss francs and that it will it could also help us going forward depending on how the currencies will change. And I mean, all the other things, the corona impacts, then from a volume point of view, this is not included in this small simulation. This is pure FX exchange rate change. Good. So I go back now to a better information, better 2019 impact on the tax rate. You could see we were able to reduce our tax rate quite significantly. First of all, the expected tax rate went down to 21.7%. So here the major reason was that we were able to achieve more profits in Switzerland. And within Switzerland, we were able to do a strong RF result to have more profits in the Canton Appenselauceroden where we have a lower tax rate. On top of it also India reduced their tax rate. And so those two impacts were the major driver for this development. And then the effective tax rate is even down to 20.4 percent here. On top of it, we were able to benefit from R and D super deduction in China, but also we could benefit that we could use some loss carry forwards in some jurisdictions from the past. The Swiss tax reform has had almost no impact for us at that stage last year. But obviously, going forward, we will also benefit and which is and obviously will support us to keep this group tax rate on an attractive low level. So now at the bottom line of the P and L, the net income deferred despite lower sales, we could increase it by €1,400,000 On the EBIT side, we have less €2,000,000 less, but you could see at the bottom that also there the currency and corporate effects was about approximately €3,000,000 This means the organic EBIT actually increased very slightly than a better financial result, lower taxes, ended up with a higher net income despite lower sales. One comment with regards to the investments. As already announced 1 year ago, we are now at the more normalized investment level. We have invested €38,000,000 in the last year. This corresponds to 4.5% in terms of sales, in particular high investment cycle now in the RF division, which also show growth and a nice margin. So and also going forward, we will see more, let's say, 2019 levels and 2018 levels. So also now we have quite some ideas where we could invest and we will do if it really turns to be attractive for us. A short summary with regards to the financial impacts of the Bay Cartel acquisition. As you have heard, we have acquired them early December. So the purchase price was €52,400,000 For that, we actually received hard net assets in the magnitude of €13,500,000 ending up with a goodwill of almost €40,000,000 which corresponds about 75%. With regards to cash, the cash outflow was €43,000,000 in 2019, and there is no, let's say, deferred payment or earn out clause in it. So let's say, all the cash has actually already gone with regards to this acquisition. The P and L effect was still immaterial because it was only short months in December. So the balance sheet overall, there is a decline of 3% on the balance sheet in total, but with regards to the structure, there's unchanged very strong equity with a ratio of 78% and also the cash position remained very strong. However, let's say, the net working capital slightly decreased also due to the shrinking business. That we have also heard it already flow from operating activities of €129,000,000 And yes, we have to admit that partly was also, let's say, supported by shrinking business. Nevertheless, I think it's important that also in, let's say, in these times, you really convert your profits into cash. And it helped us to finance our acquisitions. Altogether, there are €49,000,000 for the capital and capital and capital and also our increased investment plans, we will finance that funded by our own generated cash flows and still ending up with a free operating cash flow of €45,000,000 On top of it, as you might also remember, we had a UBL dividend last year, so also high dividend payment. And even by that, our free cash flow was only minus €5,000,000 at the end of the year. So that's my comment. And to the dividend development, the Board had proposed an increase of the ordinary dividend by 7% from CHF1.5 per share to CHF1.6. This corresponds to a payout ratio of 50% of our group net income. And it's in line with our overall communicated dividend policy of 40% to 50% of the net income of the group. So I'm then already at the last page from my side with the financial assessment. And as you can see here, I have, let's say, 4 positive points, 1 negative. That's also the feeling. When we look back into the last year, we have heard it was not our aim and it's not, let's say, positive when you have a shrinking top line. In particular, we had a negative book to bill to report and that will obviously then have an also impact into the start into 2020. But regardless of that, we could improve our operating profitability to 9.7%. This is the upper end of our midterm range. And supported by a lower tax rate, we were able despite lower sales to increase our net income. And also to position that into a medium term view with this result with this net income or is the 2nd best net income in the last 10 years of HUBOSUNO. Overall, I think we have we can be satisfied with this result. And then finally, as we have I've mentioned it before, the high cash flow, our ability to our cash conversion ability was really a highlight and allowed us to pay all the acquisitions and also the our investments by our own funds. So that's all from my side at the moment. And then I'll hand over to Urs to have give us some insights with regard to the outlook 2020. Thank you, Ivo. And I'm going to give you now an outlook into the present business here. But before I do that, I am sharing with you some milestones in 2019. There were quite a number of highlights, and I just picked 4 from the various options. 1, and some of you have been present, we could share with the public our 50 year anniversary. And we have organized a number of events starting in Switzerland with special events and also employee events in Winterthur beginning of April. Then there was also a day where we invited the public to our 2 sites in Switzerland. And towards the end, in September October, we went on the road with the 50 year anniversary, and we tried to connect with our customers worldwide in all major regions. And we also had employee events where we showed our appreciation to our most important assets, which are the employees. Then a few highlights from the markets. 1 of our growth initiatives is the solutions and cable for electric cars. Here we have to we can report another milestone that we have been approved that we got nomination from a European American car manufacturer to supply customer specific cable solution for EVs, which is a big step for us. On the acquisition side, as you could hear, we have conducted 3 acquisition, 2 small ones from Capline and 1 midsized acquisition. Bekkaptel here, we strengthened our position in broadband communication, in particular with optical transmission technology. So we moved into the field of active equipment here, and we have quite a number of ideas how we can use that technology also in other areas. So it's basically on the edge between RF signal and optical signals. So it helps us to build the bridge between the RF technology and the fiber optic technology. And the where we have a half DS, and it's based on a patented technology, which we call rotary swaging. The benefit of this product is that we have those milestones. I leave 2019, and I'll come to the outlook 2020 with some trends in the main markets of Hooper Sunor. And I can summarize that from our perspective, in principle, the basic trends and the prospects remain intact. So we can say in communication, the market is still growing in general, and the growing communication market always means more connectivity, which is our business goal. So the densification of mobile networks continues and goes clearly towards higher capacity, better coverage and also lower latency. And we can see, as already mentioned, that the 5 gs programs pick up speed and gain momentum. And as I've already outlined, we are well positioned in those newly emerging infrastructure projects. On the other side, and that trend will continue, it's not that we will be able to maintain this 4 gs business on the past level. So the 5 gs business that is emerging will substitute to a large degree declining 4 gs rollouts. We also still see increasing data traffic, which drive investments into infrastructure for fixed wireline access networks and also some specialties at the bottom of the communication market, which is the trend to use existing fiber in the communication market is that quite often the RF signal, which is always an analog signal, is not going to be digitized and is not going to be a digital signal, but remains an analog signal when being transmitted through fiber and optic transmission technology. And that is called RF over fiber. That's a market which is emerging and where we are obviously also very well positioned because we master both ends of the technology needed for that transmission links. In the transportation side, mobility is the driver and mobility right now is obviously not increasing. But on a long term perspective, mobility remains a key trend in our society. So we see in the railway market, which is one part of our transportation segment, we see a quite good activity in the market with regard to project tenders. So we from that conclude that the market is in a healthy state. And we can say from today's perspective that the market environment in Railway remains reversible, in my opinion. So the next 10 years, they will belong to electric vehicles with batteries. There are other ideas how we can go forward, but the next 10 years, I'm convinced it will be battery electric vehicles that will gain a lot of importance in the road transportation. And one important point here is that we see now quite a lot of trucks and commercial vehicles being electrified. This is a market that suits us even better. And so we will also refocus our designing efforts a bit towards this commercial vehicle market because the service life of a commercial vehicle of a truck is about 5 to 10 times longer than of a private car. And so it's normal that the demand and the requirements and the specifications of the components used in a commercial vehicle are of a higher level, and that suits our differentiation. So that's an information for me and for you and for the other people that we will shift slightly focus towards commercial vehicles, and we still continue to take in an opportunistic way also business in passenger cars as we have done in the past. When we look at the industrial market, it's a constant strive for better solutions, for lighter solutions, for more efficient solutions. And here, we have several applications and niches that offer a nice growth opportunity for Hooper sooner, mainly through highly differentiated products. And we expect that market to sustain quite well. We also expect a a strong momentum to continue in our Test and Measurement core market as well as in a small niche, which is the wind energy market, where we supply fiber optic communication connections into wind powers and last but not least, high power charging, where we expect further growth in the U. S, but also in Europe and in Asia. When we then look at the main markets and they are relevant for our Technology segment, we can say that the fiber optic has the largest footprint in communication. And I remain positive long term for the fiber optic business as the main drivers behind the communication market remain positive. Our LF business has a center of gravity in the transportation market. And also here, the outlook mid to long term is quite positive with regard to an increasing mobility. And the RF business has the highest business share in industrial applications and also here the growth opportunities remain intact going forward. No event and certainly no business presentation without a few words about the coronavirus outbreak. And here, I would like to say that, yes, we have seen an impact in China as HUPRISONOR is present in China with a large business scope business in terms of group sales. We have plus -1000 people in China. First of all, a majority of those. And then we have a sales organization spread across China in various sales offices. Our headquarters are in Shanghai. We have sales of New Year break by another 10 days. So the 1st official working day after the Chinese New Year break was February. HUBER SONER has taken all the precautionary measures applied for reopening the business on the 10th February and got approval to do so with a reduced number of people on board at that date. Also that we could pick up the production starting 10th of or starting 11th of February. Since then, we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we have been able to we hope to be back to 100% by the end of March. We have been extremely lucky not to have one single case. As it looks from today's perspective, the country has gone through the worst. The challenges remain mainly on the logistics, are struggling with shortages in logistics. And the airfreight is difficult to get and to book. In principle, we had about 50% of the output planned in Q1, business with a contribution from the Chinese side, so an impact from our global on the global supply chain, where value add was coming from China with another €50,000,000 So we expect an impact of about €30,000,000 in Q1 on our sales. What we do not know is if all the effects are gone by end of March. We hope it's the case. And what we do not know is how much we will be able to catch up. The Chinese government has promised to launch stimulus programs in various areas. And I'm quite positive that if those programs are being launched, we are able to participate in those programs as we are in areas that are very future oriented and are very high up on the agenda of the Chinese government. What we cannot say today is what the impact will be on the global spreading of the coronavirus on HUBER SONOS business. So we cannot estimate and we cannot judge an impact on what will happen in the rest of the world, namely in Europe, but also in the Americas. And I think we are not the only one. It's very turbulent times. And whatever you plan to say the next day is already obsolete by the time you're opening your mouth. And so I was at home yesterday reading the news, and I was reading about Italy closing down all the borders basically and preventing people from moving around except for going to work. And those kind of things, it goes without saying, will have a severe impact, 1st of all, in the areas where those measures are being implemented, but then secondly also on a global scale. And we don't know today what's going to happen tomorrow and what the impact will be. That leads me to the outlook 2020. And as far as our net sales guidance for 2020 is concerned, we can say, and here I refer to evovex loss statement, we can see that the lower order intake, particularly in the second half of twenty nineteen, will have an impact on the reporting year. So we will have a rather restrained start into the current year. The measures against the coronavirus, I just elaborated on. The impact in the Chinese market is guaranteed and we have 2 impacts. So the impact is 2 fold, 1st of all, on our local business, but also on global supply chain. What we can also say is that we have headwind from a strong Swiss franc as the development of all major currency versus the Swiss francs is unfavorable for Hooper sooner. And at this point, it's very unclear how the geographical expansion of the corona epidemic will impact our global business. For this reason, we refrain from specifying a sales outlook at this stage, and we will get back to the public with more details when we present our half year results and the focus. As far as our profitability objective is concerned, the aim remains unchanged to achieve an EBIT margin within the medium term target range of 8% to 10% for the full year 2020. And it goes without saying that under the present market conditions, that is a challenge. With those words, I finish the official presentation, and we are coming to a Q and A session, which we will structure in the following way. The first chance to ask questions is given to the people, public or present here in the room. And when there are no further questions from the room, I will hand over to the people in the webcast, and we will then also try to answer the question of the people that participate remotely to our press conference. Well, German or English. We will now I will repeat the question for the people in the webcast. We have decided not to move microphones around. May I take question by question? So the question is where the 5 gs rollouts take place geographically and where the main focus is with regard to the technology. So I can say that we have 5 gs rollouts in mainly Switzerland, but also in some Western countries in Europe that are starting. We have in some Asian countries like Korea, Japan, but also Australia is far advanced. We see rollouts starting in the U. S. And we will see the Chinese government pushing now very hard to roll out 5 gs technologies going forward in China. There are three areas that are of key interest for network operators. It's the capacity increase. It's the densification and it's the latency. And it's a mix of different things. Of course, the change to 5 gs addresses all those things. In some cases, it's done through the existing That's right. So the question here is where the market in railway is most dynamic. And I can confirm that we see a positive momentum across the different regions. It's mainly Europe and it's all Asia. And here, of course, the Chinese railway market is a key market. We will see to we will see the high speed rail orders in China to continue on a good level. And the thing here is that usually the Chinese government releases those orders, so it's very much controlled by the Chinese authorities. Usually, that should make it quite predictable. In the past, we've experienced also delays. Even if they have announced that they will soon release the orders, we think they are close to release again some nice volumes on the high speed railway side. So the question is where the level of future CapEx will be. Is it more the 2018 level or the 2019 level where there is a €10,000,000 difference between the two countries? Yes. We said that the right level or the right level, I think the level going forward is definitely the 2019 level. So we normally say 4% to 5% of our net sales is in the investment side. You can also project wise be higher or sometimes a little bit lower, but definitely 4% to 5% is the right magnitude going forward. So the question here is, if we have some actions going on to mitigate the impact of the strong Swiss francs. I mean, short term, the only action we can do is really to save cost. And midterm, it is, of course, the case that we will review all activities in Switzerland. And long term, the only chance a Swiss industrial company has is to invest in R and D innovation and customer proximity in order to differentiate. And we are doing all three things. It's true that the low hanging fruits are gone, and still we have an exposure of about 30%. So we have, yes, cost in the area of I'll be more than about 30% in the Swiss francs, and we have only about 8% of our or 10% of our turnover of our sales denominated in Swiss francs. And we will not be able to get that away overnight. Probably one additional comment to the hedging proposal. I think we actually reduced our hedging with regards to because we have reduced our exposure overall. And at the end, the hedging cost and it's not a solution. It's only a short term, let's say, supporting or buying some time, but it's not a long term solution for the problem. Good. Mr. Liggoire? The question is, if we see more positive signals from the Chinese railway market than a year ago. Yes, it's a difficult question to answer. We see similar signals, and it's always difficult to estimate the timing of when those orders are being released. So we have been wrong in the past. I don't dare to give you an exact date. I can only say that I firmly believe that the Chinese government will release again orders of high speed trains in in 2020. The question is if the coronavirus will postpone and delay certain infrastructure investments, and it's a question that is extremely difficult for me to answer. It's possible that we see certain delays. On the other side, we also see that when people stay home, they need a very good infrastructure to communicate. My youngest daughter came from school, and she was tasked to check the infrastructure at home, whether this was suitable for homeschooling. And you can see, you can have a digital agenda in school for 20 years and nothing happens and then a virus can change everything overnight. So I think in principle, I mean, we are affected by the coronavirus, but we are definitely better off than some other businesses. And in infrastructure business, if their investment is postponed, there is still a need to do it. And you can always have a certain catch up effect also when things are postponed. In other businesses, this is not the case. If you're on a restaurant and it's empty, you don't have double the amount of people once you can reopen it. And so I think, yes, we may see a slowdown in several markets in a lot of applications. I'm confident that the volume will come back once people are back to work. And then we might also see a small effect that volumes will even increase to catch up a bit. Regarding R and D, can you tell us where you are standing? The question where we spent the R and D money on, in particular, the 5 €1,000,000 additional spending in R and D. We can say that we always have a split of Product Care, where the main focus is to remain competitive on mature products. These are mainly designed to cost initiatives, and it depends on the business how much is going into that. And then we have an area in R and D, which is very future oriented. It's opportunities with growth potential mid- to long term. And one of the areas where we invest, for instance, our money is in the area of distance radar for automotive, which are a key technology when it comes to autonomous driving. But there are other areas where we invest our money into. The question is, if the margin in RF is sustainable and how it developed in Q4 versus Q3. So we don't give information on a quarter basis of those margins. I can answer more generically. I'm quite convinced that we have in the applications that we are working with RF, a relatively high differentiation. And this allows us to maintain the margins going forward. We have to understand that RF was highly of their business was in communication application. Now in communication, we see that the connections are getting smaller. So in the past, the connection was from one device to the next. And today, we see RF connections between boards. So they are getting shorter, smaller and cheaper. We also see that fiber optic technology takes some of the volume of RF in the communication area. On the other side, RF is not a dying technology because each and every antenna needs an RF signal. And RF signal is something that you can either have in good quality or in bad quality. And that gives this nice position of Hooper sooner that we can differentiate with our RF quality and RF technology quite nicely. And today, we have more than half of the volume in RF in industrial applications. And here, we have a bit of a niche type of market portfolio that we deal with. And so I'm quite positive that we can maintain the margins on the present level provided that we can keep the volumes. That's important. And of course, we have been able to add on one side diversifying to higher margin business. On the other side, we've been able to grow the business and it's those two elements which helped RF to perform on this very high level. The question is if margin was under pressure in the Q4 and I can say that structurally, it was not under pressure. I cannot give you that answer because it depends also on the business mix in the quarter. And it could be that in a quarter, the margin is slightly lower because you have a high share of lower business, but that can change in the next. So a pattern quarter by quarter doesn't give you any indication if it's already a trend. And I can confirm, no, there is no trend to lower margins. So two questions. The first question is with regard to the missing volume in which is as a result of the coronavirus outbreak in China, RF and LS than on FL. And what was the second question? The distance radar in Automotive, yes. The question is here, if and when we expect the first sales. So we are in the process of investing into the production of those radars. So in other words, we have nomination of first designs. And we expect volumes, small volumes in 2021 and a bit large volumes in the following years. I can see that there are no further questions from the people here in the room. So I would consequently open Then I would close our media and analyst conference here and now, and I would like to thank you for participating in those turbulent times. I would like to say thank you to those that have attended through webcast for the first time. And for the people here in the room, there is an option to have a lunch with us, a buffet lunch as always, and you're invited to join us. Thank you very much, and goodbye.