Ladies and gentlemen, welcome to the Oerlikon Q1 2023 Results Conference Call and live webcast. I am George, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star on on your telephone. For operator assistance, please press star zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stephan Gick, Head of Investor Relations. Please go ahead, sir.
Good morning, ladies and gentlemen, and welcome to Oerlikon's Q1 results call. With me in the call, I have Philipp Müller , CFO of Oerlikon. Philipp will start the call with a presentation providing an update on our end markets, financials, and strategic progress. We will follow up with Q&A. With that, I would like to open our presentation and hand over to Philipp. The floor is yours.
Thank you, Stephan. Good morning, everyone, welcome to our first quarter results presentation. In Q1, we made progress on our strategic objectives and delivered results in line with our expectations. I will start with an overview of the group results, followed by an update on our end markets, the divisional results, and we'll conclude with an update on our strategic priorities. At the group level, orders were CHF 681 million. As we anticipated, Polymer Processing Solutions customers are beginning to delay their investment decisions. In Surface Solutions, orders were up slightly with a book-to-bill ratio above one. Sales were up 11% at constant FX to CHF 735 million. This includes a 3% contribution from our acquisition of Riri. In Surface Solutions, the sales increase was driven by higher equipment sales and strong performance in the aviation markets.
In Polymer Processing Solutions, we executed well on the existing order book. Operational EBITDA was CHF 116 million, impacted by mix and higher input costs. EBITDA margin was 15.8%. As expected, this is slightly below our target range of 16%-16.5% for the full year. Margins in the coming quarters will be supported by structural price increases to pass on wage inflation and energy costs. The cost actions we took in 2022 will also phase in throughout the year and support margins. Let me provide you an update on our end markets. In Polymer Processing Solutions, customers are delaying investment decisions, which is reflected in our order intake. On the filament side, we have a good order book coverage for the first half of 2023.
Chinese customers have experienced a difficult macro environment in the past years. They were exposed to higher input costs, logistics challenges, tighter financing to softer domestic consumer demand. We see Chinese filament customers postponing their CapEx decisions and preserving cash until they have more visibility. This started in the second half of last year, to date, we have not yet seen a significant demand revitalization. Especially during this time, we continue to drive innovation that will extend our technology leadership. Efficient new machines will bring forward the investment decisions of our customers as they look to stay competitive. Improving financing conditions in China and increased consumer demand will also drive investment decisions. We expect an order uptick to happen in late 2023 or in early 2024.
For the time being, we remain cautious and implement the cost measures we discussed to manage the expected lower sales volume as of the second half of the year. In non-filament, we saw continued organic sales growth, which was up 4% in Q1. This was supported by the flow control business. Oerlikon's leading technology in hot runners is seeing continued growth in automotive as carmakers bring in new electric vehicle models. Technology leadership is being leveraged into adjacent non-automotive markets such as durable goods. The nonwoven and industrial yarns businesses may see some customers delay investment decisions. Typically, orders are smaller here with lower financing needs and return faster when consumer demand picks up. In the Surface Solutions division, we're operating across the tooling, automotive, aviation, luxury, and general industries end markets.
We saw a relatively slow start to the year on the service side of the general industries and tooling end markets, however, experienced higher equipment sales. The service business has closer correlation to industrial production. Manufacturing PMIs continue to indicate that industrial activity will be softer this year. This may be mitigated by activity in China, which improved in March after lockdowns and the national holidays. In automotive, the first quarter was still impacted by supply chain challenges and a lag between car makers production and reordering stock. Industry forecasts show a conservative level of growth. We expect improving demand to phase in across the year as shortages release and destocking stops. This is supported by positive indications from major European car makers. Oerlikon has also made significant commercial progress with e-mobility solutions, particularly in battery shielding. I will provide more details later in the presentation.
In luxury, the China reopening is set to drive growth. Chinese customers are expected to spend more on luxury, both domestically and as they travel to overseas destinations. Global Blue, which tracks tax free shopping, showed same store sales above 2019 levels in Europe and the Middle East, driven by mainland China consumers in the first quarter. This provides an exciting growth environment for Coeurdor and our newly consolidated Riri acquisition. In aviation, we see continued volume growth as increasing flying hours are driving MRO activity. The China reopening and return to long haul travel is a key factor as the industry returns towards 2019 flying hours. Oerlikon's leading technologies will support more efficient and more sustainable new planes. Summing up, the difficult market environment for Polymer Processing Solutions and filament will impact 2023 and 2024 sales.
We've taken proactive measures to preserve profitability and emerge even stronger. In Surface Solutions, we expect growth in automotive, luxury and aviation. This may be balanced by softening industrial activity. Now, let's move on to page four with the financials for our Surface Solutions division. Orders were CHF 382 million, up 6% FX adjusted. Sales increased 17% in local currency to CHF 369 million. Book to bill was above one. Softening industrial activity had an impact on service revenues in general industries and tooling. This was more than offset by higher equipment sales in Q1. Aviation continued to recover in Q1, and we saw a strong quarter in energy. Luxury included one month of the Riri acquisition. Operational EBITDA in the third quarter declined 3% to CHF 59 million. EBITDA margin was 15.8%.
The business was impacted by higher input costs and saw negative sales mix effects from increased demand for equipment and materials. January and February were weak service months. The trend in March and April makes us confident that we are looking at a more favorable mix equation for the remainder of the year. Cost actions initiated in the fourth quarter of 2022 will support margins during 2023 as they phase in. We also took pricing actions during the quarter and plan a further round of price increases this summer. On Polymer Processing Solutions. Orders in Polymer Processing Solutions were CHF 298 million. This is down 24% in local currency, with customers postponing orders in filaments as anticipated. Sales of CHF 366 million were up around 5% in constant FX.
This was against a strong comp and demonstrates solid execution by the team. Non-filament sales were up 9% at constant currencies. Operational EBITDA was CHF 55 million. Margins were 15.1% impacted by sales mix and higher input costs. Cost measures booked in 2022 will support margins as lower sales volumes phase in later in 2023. Let me give you an update on our strategic priorities. A key pillar of the Oerlikon strategy is to leverage core competencies into new areas. One prospective new area is battery shielding. Car makers urgently need solutions that protect passengers from battery fires. We indicated our battery shielding development last year at the Capital Markets Day, where we outlined exciting new products for electric vehicles. These products will be key drivers of our midterm growth ambition in automotive.
As you see at the top left of the slide, Oerlikon has technology leadership in carbon friction materials and coatings for automotive applications, including synchronizers and transmission components. Oerlikon accelerated the application of this technology into e-mobility with a small acquisition in 2020. The platform which we acquired specializes in the development of thermal insulation material solutions for EVs. With our global automotive business and long-standing relations with auto OEMs, we were well-positioned to accelerate and industrialize the development of battery shielding. Our newly developed solutions protect passengers from fire, electrocution, and toxic gases. They are ESG compliant, thinner and lighter than alternative solutions. We are pleased that we're signing our first two supply contracts with two European auto OEMs. We are also in conversations with a number of additional car makers around the world.
Just for this solution, we see an annual sales opportunity well in excess of CHF 50 million. Next, on our sustainability progress. Oerlikon published the 2022 sustainability report at the end of March. We made significant progress towards our 2030 targets. We reduced our greenhouse gas emission intensity by 17% versus the baseline. This was driven by energy management systems rollout, energy efficiency actions, and the increased use of renewable energy. In particular, the energy efficiency measures reduced our energy intensity per million CHF of sales by around 7% in 2022. This supports both our sustainability and financial goals. We increased the percentage of R&D investments that cover ESG criteria. This will drive future sales through more sustainable products that help our customers be more resource efficient. We also made progress on our Scope three project, our diversity goals, and our supply chain.
With that, let me conclude the presentation on the next slide. During the quarter, we made progress on the execution of our midterm strategy, while at the same time we have proactively addressed short-term macro headwinds. Polymer Processing Solutions has executed well and delivered a Q1 in line with our expectations. We are executing the cost out program that brings the flexibility to support margins at transitorily lower filament volume. The division continues to deliver innovations and has the flexibility to ramp up quickly when demand returns. The non-filament business continued to deliver growth, supported by new e-mobility car models and market extension. In Surface Solutions, cost and pricing measures will support margins throughout the year in line with our expectations. We expect growth from the easing of shortages in automotive, recovery in aviation, and luxury expansion to be partially offset by lower industrial production in 2023.
In terms of strategy execution, we are successfully leveraging our core competencies into new areas like luxury and battery shielding. These areas will drive sales growth in the midterm. On ESG, we are on track with our 2030 targets. These measures support both our sustainability and financial ambitions. Overall, we have made solid progress and our strategy execution is on track. We confirm our 2023 guidance. With that, let me open it up for Q&A.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners from the phone are requested to use only handsets and eventually turn off the volume from the webcast. Anyone who has a question may press star and one at this time. The first question comes from Michael Foeth from Vontobel. Please go ahead.
Yes, thank you. Good morning, Philipp. Two questions from my side on, first on the margins and the cost actions. Could you remind us sort of the phasing of those actions and the impact on margins that you expect through the year? What profile should we expect here versus your Q1 margins and the guidance that you put out? The second question is on the filament business. You said you expect orders to pick up again in late 2023. Did I get that right? Sort of what profile are you now expecting into 2024? Maybe that's a bit early, but if you could share your thoughts there. Thank you.
Great. Good morning, Michael. The first one I think is specifically on the Surface Solutions side. I would say there's two things. The mix that we experienced that was highly unfavorable in January and February, that's already turned. March and April have a much more favorable mix component. In other words, services is much stronger. I'm expecting that to have an immediate impact on margins. We're expecting Q2 margins to be substantially stronger, Q3 and Q4 as well. You know, the cost actions, I would say something similar. I think the majority of them will fully take effect in Q2 and Q3. We're expecting that to support margins as well. On top of that, the price action.
We look at that pretty confidently and having a better layup for the rest of the year, even as some of the labor cost components continue to slightly increase. On the filament side, you're right that that's what we said. Our outlook for 2024 is currently unchanged from what we previously said. We're looking at sales above CHF one billion and margins well into the double digits. We think that the order book can refill towards the end of this year. The initial feedback we're getting at the moment from China is very positive. Demand has picked up substantially from a consumer standpoint. Destocking is happening now. As you know, that translates only with a certain time lag into CapEx investment decisions at our customer side.
Again, we're bringing new technology into the market. We've done that in previous cycles, and so we're confident that is happening. I'm traveling to China in two weeks to have some discussions directly with customers. I think we're cautiously optimistic that the economic development there is obviously substantially stronger than anticipated.
Great. Thanks a lot.
Thank you, Michael.
The next question comes from Tommaso Polpetta from Credit Suisse. Please go ahead.
Good morning, Phil. Thanks. Just a quick question on networking capital. The lack of advanced payments has been quite the drag, so just wondering how you kind of see networking capital, the evolution of the networking capital for the remainder of the year, and potentially related to it is this kind of affecting your CapEx plans for the year? Secondly, you mentioned price increases that you're already planning in summer. If you could just share a bit more detail there on which kind of ranges of price increases for the year that you would expect. Thank you.
Sure. you know, on networking capital, you're exactly right. I think, I would expect, inventory to be a source of cash, just, on the basis of where we are in the cycle in filament. we're gonna see that come down versus prior years, receivables as well, and payables at similar levels. There will be a certain drag from lower customer advances on the filament side. I think the use of cash on net working capital is gonna be substantially lower than, last year. but I think it's unchanged from what we sort of laid out as expectations at the beginning of the year. The, start of the year is broadly in line with, those assumptions.
Also meaning it does not change our CapEx plans. I do think we have quite a bit of flexibility built into our CapEx phasing. In other words, if we don't see the need to spend certain CapEx, then we won't. At the moment, we have some very interesting and promising CapEx investments from our teams. Like we always said, you know, to the extent that the investments have the right payback, we want to continue to invest into the future. I think everything from a cash standpoint, from a free cash flow standpoint, unchanged from what we said at the beginning of the year. The price increases, it's always a little difficult to give the average.
I would say across the Surface Solutions portfolio, we are thinking about something mid to mid-single digit price increases for the year. There's obviously different parts of the portfolio. You know, on the material side, it's larger contracts, so it's more in one go and one pricing initiative. On the service side, it's really individual negotiations and price actions country by country, customer by customer. On average for the year, we're expecting about 4%, and we're obviously only in the early stages of implementing those. We're thinking about it in two bigger waves, one here in January, February, and then another one in May, June.
The next question comes from Alessandro Foletti from Octavian. Please go ahead.
Yes, good morning. Thank you for taking my questions. I have a couple as well. First on the prices again, I understand, actually you mentioned in the press release that you had bad mix because of material in Surface Solutions. Of this 12% organic growth, ±, that you published, can you say how much it was due to material price surcharges? Basically, those price increases that simply pass through the company because you adopt the cost of the input materials.
Good morning, Alessandro. The material surcharge effect in the quarter is very minor and is also very minor in the overall price guidance that we're giving for the year.
Okay.
Think of significantly below 1%.
All right. That already answers, a lot of follow up questions. Thank you. I was wondering on the filament side, you speak about cash preservation from your clients, right? What does that mean exactly? What are the sort of the elements that will allow them to sort of go away from that, from that sort of risk-averse strategy at the moment?
Yeah, it's a good question. I would describe it this way. What you saw midway through the last year is a reduction in demand, especially Chinese domestic demand for their products, so for produced filaments. That, in turn, led to lower sales for them and a price deterioration for them. So that their operating cash margins were very slim to partially negative. I think these are obviously very large, multi-billion dollar companies that have very solid financing. I think for them to really unlock the next wave of investment decisions, I believe they need to sustainably see them operating again at positive cash operating margins. In other words, demand has picked up now. Demand is picking up substantially right now in China.
The destocking of the product that was left on shelves has already started significantly starting in January and continued in February, March and April. I think that leads to higher production again, better cash operating margins for our customers. We firmly believe that their investment strategies to continue to invest in broader, more diversified and more vertically integrated sets of equipment continues. It's completely unchanged from all of our discussions with our customers. I think if they once they look at this more favorable operating environment, they will also greenlight the same investments that they had previously anticipated. We're really thinking about this as a postponement versus a change in our customers' behavior.
Right. May I ask a follow-up here? This is limited to China. That's correct?
Well, of course, you know that 85% of our customers, 80%-85% of our customers are located in China. Even more specifically, I would say the challenges on the demand side were really largely driven by Chinese domestic consumption this time.
Mm-hmm.
Global consumption for discretionary spend was obviously also not significantly up last year, but was remarkably resilient in light of everything we had going on from an inflation standpoint. That would have not caused a problem to our customers. Here, we're really talking about Chinese domestic consumption. That was really the change in the outlook or in the operating environment for our customers last year. That is also the thing that's changing to the more favorable now since the reopening of the Chinese economy towards the end of last year.
All right. The financing is not an issue then?
Financing is not.
Maybe higher interest and maybe higher cost of financing equipment, et cetera.
No, we don't see that at the moment. Actually, the financing conditions in China have improved quite significantly versus the second half of last year. Remember, they're obviously looking from an interest rate and inflation standpoint. They are not facing the same challenges as the Western economies in Europe and the US.
Okay, thanks. My final question, you speak about, in your presentation about, if I quote properly, "Delays in non-filament part of the Polymer Processing business." yes, delay investments. What is that?
You know, I think that'll depend a little bit on the timing of certain investment decisions. Remember, here, the projects are a lot smaller. We are not seeing that yet. Obviously, if customers, if large consumer companies are looking at slower, you know, customer demand, discretionary spend, I think those projects can move. At the moment, we're not seeing that. I think we still have a very, you know, positive outlook on the non-filament side of things, and specifically in flow control solutions, around the INglass acquisition, which we're building out significantly more. The demand environment remains very favorable.
Okay. control is not impacted, but we are left with polycondensation and nonwoven.
That's right. That's right.
... of the non. Can you specify more? I believe if you speak about large consumer and discretionary spending, it's more related to polycondensation, packaging materials and this kind of stuff. Or?
In those senses, that's exactly right. Nonwoven fabrics can also be part of that, but this is usually, you know, as it goes into hygiene products, and it goes into diapers and those kind of consumables, they're sort of at the maybe at the border of discretionary spending 'cause typically they have a pretty stable spend behavior.
Great. Thank you very much.
Thank you, Alessandro.
The next question comes from Sebastian Kuenne from RBC Capital. Please go ahead.
Yeah. Good morning, gentlemen. Just on the Riri acquisition, could you give us an update on the purchase price, also EBITDA margin impact in Q1 and going forward, and also what it means on the PPA amortization going forward? I kinda imagine that it's just a large chunk of goodwill or, you know, intangible assets that you acquired. If you could give an update, that would be great. Thank you.
Yeah. Thank you for the question, Riri, Sebastian. I'll start with just the outlook for Riri. We, you know, the demand outlook for Riri is maybe even a bit stronger than what we had anticipated when we did the deal just based on the Chinese consumer, what I mentioned in my remarks. The EBITDA margin is slightly above, is slightly above, you know, the OSS average. When you think about what we guided for the year here for Surface Solutions margins around 18%-18.5%, Riri is expected to be slightly above that. You're right. We are going through the purchase accounting as we speak.
We're validating those assumptions obviously also with our auditors. We're not done yet with that analysis. You know, of course, we will get that into our half year of financial statements. I don't have any reason to believe that the, you know, the initial assumptions that we've made from a, from a, from an additional amortization standpoint and so on are changed. We're still expecting the acquisition to be EPS accretive, and really in line with what we had previously assumed. It's a little bit too early to quantify goodwill exactly and so on, because we're going through the valuation of the intangible assets and so on, so forth. We still think we're gonna land close to what we had initially indicated.
That also means that there's no PPA amortization now included between the EBITDA that you report and the EBIT that you report. Is that correct?
In the future, there will be. At the moment, we have included an estimate there because it's obviously the amortization schedules are not fulfilled. That may be a good point, Sebastian, for the month of March, which is the month that we included. We were obviously not able to completely close the Riri company in line with our closing schedule. You know, we basically booked this on a good level of, you know, their financial statements without a full translation and a certain pre-acquisition estimate of all components also similar to purchase accounting and so on. We will refine that in the second quarter, and we'll have a pretty final set of full financials, but also purchase accounting-related financials by the time we publish our mid-year results.
Good. Just a follow-up, also on M&A. Are there more deals to come? Do you plan to be more accretive now? What is the focus there that you have as a technology add-ons, new business units?
You know, I think the focus is really unchanged, Sebastian. At the same time, I would say we are very focused on integrating our overall luxury platform in the best way possible. I've always said, you know, you really generate the value from these acquisitions with a very thoughtful and very well-executed integration. Mind you, we are integrating Riri into Oerlikon, but also our previous Coeurdor acquisition, together with Riri and really with a common go-to-market strategy. We're very excited about that, but I think we're gonna focus as a team for quite some time now on getting that absolutely right. I would think that that puts some of the other M&A priorities, maybe, delays them a little bit.
I don't anticipate us making any significant M&A, here in the next, 12-18 months.
Yeah. Maybe one follow-up on, PPS. With demand slowing, especially from China, and I guess your competitor in Japan, is also looking at the Chinese market very closely. Do you see any impact on pricing already? Is there a new price war starting that you had experienced a couple of years ago? Is it still kind of a stable situation and just the demand is going back? Is there more discipline, let's put it this way. Is there more discipline in that, in the competition? Thank you.
Yeah. I think we've learned a lot from the from, you know, the I think the last time, 2016, 2017. The discussions we're having with clients are actually of quite different nature. Projects that we had been discussing also in terms of commercial terms are still in the same stage. The discussion we're having is more along the lines of our cost basisTo an extent will change as we're looking at an inflationary environment in Europe. In other words, if we had contemplated a transaction for late 2023 that will now occur in 2025, our cost basis is different, our clients are very aware that the prices will also be different. I think, you know, the technology differentiation is high.
The level of integration of our technology and our systems into the client's final solution is high. We are not looking at an immediate price competition with our Japanese competitors. You know, our conversations with our clients are right along those lines.
Mm-hmm. Thank you very much.
The next question comes from Christian Arnold from Stifel . Please go ahead.
Yes. Good morning, gentlemen. That is Stifel . On your 2023 guidance, which you confirmed, say it's CHF 2.9 billion-CHF 2.95 billion at the constant of the currencies. If we take today's currency situation, is it fair to assume that you probably have a negative FX impact of some between CHF 50 million and CHF 100 million in 2023? Is it further fair to assume that on EBITA margin, there's actually not a material FX impact, right?
Yeah. Good morning, Christian. Your assumptions are exactly right. I think if the currencies stayed where they are today, that's approximately the range we would be looking at. Obviously, you know, the euro has deteriorated more against the Swiss franc as well as the Chinese yuan. You're also absolutely right that the margin tends to be not impacted by this. When we have revenues in foreign currency, we also have the cost in foreign currency. It decreases proportionally.
Okay. Thank you very much. Second question on your price increase, your plan for May, June. You were referring to wage inflation as well as higher energy costs. Talking to other companies, they are rather benefit from lower energy prices. I wonder if you can help me here, where do you see higher energy costs? Thank you.
That's a good question. I would for sure start with the higher wages. I think that's an important factor that we've known all along, right? It's well integrated into our plans. That's probably the biggest factor when you look at the negotiations with the unions and with labor representatives that we have around the world. There's obviously a lot of this is based on the indicators that we've seen over the past 12 months. Our overall labor increase will be quite substantial in the current year. Again, well planned and anticipated, but that's the biggest driver. On the energy side, there are some spot markets that are, of course, lower than last year, especially lower than, you know, during the spike of energy prices that we've seen about one year ago.
During that spike last year, we were impacted only at a relatively minor level because we had hedged a lot of our energy supply contracts in Europe in 2019 for three to four years. As those hedges expire and we are entering into new contracts, the basis for our energy contracts might still be higher. Again, in some cases, it's lower, especially where last year we saw some of the hedging counterparties go insolvent and we had to buy in the spot market. The spot market is cheaper now. To the extent that we're comparing energy costs to the hedging contracts that we entered into in 2019, there might still be a slight increase.
I don't think this is an overly material factor, but we're still looking at it when we're talking about the price increases with our customers, because this is still to the extent that prices were based on 2019/2020 levels, that's still a base effect that we need to cover with our customers.
Okay. Understood. Thank you very much.
The last question comes from Sebastian Vogel from UBS. Please go ahead.
Perfect. I've got three questions I would ask them one by one, if I may. The first one is on Surface Solutions. Is it possible to sort of quantify the pricing effect on certain orders from past prices or from past price increases, how much they have contributed in Q1?
Yeah. I think In, in Q1, the impact, the year-over-year impact was below what we had said for the full year. I said for the full year, something close to mid-single digits, and I think it was a little bit below that in the first quarter when you look at that year-over-year. That's just due to the phasing of the price increases. You're gonna see more of that in the second, third, and fourth quarter.
Got it. The second one would be on the top line progression, what you sort of have budgeted for Surface Solutions for the rest of the year. In that sense, what is your sort of game plan for the second quarter, third quarter, fourth quarter compared to Q1? It would be great to hear your thoughts on that one too.
Yeah. You know, when you kinda look at what we've set for the total year guidance, you know, you see year-over-year growth slowing down a little bit. I would also say, in the first quarter, we obviously did have some disproportionately high equipment sales. At the same time, the first quarter was quite strong from a sales standpoint. It'll depend on really the shorter cycle businesses and overall industrial activity to see what the phasing really looks like. I think it was a very promising start to the year when you kinda run rate that out with our usual sequential growth rates. I think that bodes well for the total year outlook for Surface Solutions, but it's maybe a little bit too early to tell.
Got it. The third question would be on the auto side within Surface Solutions. In that regard, I was wondering, I mean, it seems like some other competitors or peers in the industry have seen sort of better revenue numbers in Q1 than what you have seen there. I was wondering, did you see or do you have some sort of special angle in mind that could explain that?
You're saying on the orders development?
Oh, sorry, on the auto side, sorry. Auto as a sub-market in Surface Solutions.
Yeah. I think for us, this is obviously, I try to elaborate on that. We are seeing those positive indicators too. To the extent that our service business is directly production related, we will see a little bit of delay in demand for our services as destocking of already produced component happens. We actually see a very similar picture to some of the other competitors and suppliers in the auto industry, where demand is picking up quite substantially. Demand for our services maybe with a slight time delay. Specifically when I look here at the second quarter and the read-through both in Europe and in China specifically, a read-through also for the third and to a large extent, the fourth quarter is quite positive.
We're looking for, we're looking at increased order demand as we move through the year here.
Got it. Many thanks. If I may, slip in one follow-up question on the polymer processing side of things. When you talk about the uptick in order intake, by when, or how quickly do we expect that will sort of materialize in sales? Normally like six months, but do you think giving you a sort of capacity utilization can be somewhere quicker or so? Is that a fair thought in that context?
You know, it's, usually we talk about the, on the large, equipment orders, about a 12-month, cycle time. Of course, we are doing a percentage of completion accounting, so that can sometimes help a little bit sooner. Very importantly, we're very thoughtful about, how we bring capacity back. I think, you know, that is one of the key focus areas for us to be able to ramp back up when, demand returns. I usually say 12 months, but it could be a little sooner.
Got it. Many thanks. That's actually all my questions.
Great. Thank you, everybody. This concludes today's call. In case of further questions, don't hesitate to contact us in the IR team. Thank you for your attention today. Goodbye.
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