Earnings Call: Q3 2019

Nov 5, 2019

Ladies and gentlemen, welcome to the Ehrlichon Q3 2019 Results Conference Call and Live Webcast. I'm Andre, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Andreas Schwarzwelder, Head of Group Communication, IR and Marketing at Ehrlichon. Please go ahead, sir. Thank you, Andrea, and good afternoon to everybody. Ladies and gentlemen, welcome to our conference call on the results for the Q3 2019. Andreas Strathwell, the Head of Investor Relations and Corporate Communications, your host today, as usual, Doctor. Roland Fischer, Group's CEO and Jorg Fedje, the Group's CFO. And today, we also welcome Filip Muller. In our earnings call, Phil will take over the CFO position as of January 1 from Jorg. Phil, welcome to the team. As a reminder, all related documents on the Q3 9 months results, including the following presentation, are available for download on our website. Today, we will follow the well known agenda. Roland will start with an overview and an update on the segment's performance, followed by Jorg, who will comment on the group's financial performance and the full year outlook. After the presentation, we will hold the Q and A session to answer your questions. The conference, as usual, will be recorded, and the replay will be available on our website later today. Having said that, it's my pleasure now to hand over to Roland. Thanks a lot, Andreas. Good afternoon to everybody on the line, and thank you for joining our Q3 9 month earnings call. In the Q3 of 2019, silicon had been operating in a challenging market environment. I think that's not a surprise. Geomolitical uncertainties are delaying investments in capital goods production and consumption, and we do see the impacts in almost all of our businesses. Group order intake was 4.3% lower compared to the same period of last year and stood at CHF627,000,000. This was mainly driven by a reduced order intake in Service Solutions Equipment. Group sales went down by 7.9% reported to CHF 633,000,000 This is largely impacted by the record high level of sales in Manmade Fibers in the Q3 of last year. Organic segment sales of Service Solutions were flat year over year. And allow me to emphasize that in the current adverse markets, we have achieved top line results, which are in line with our expectations. In the 3rd quarter, delivered an EBITDA margin of 13.3 percent for the group. The EBITDA margin of the Service Solutions segment came in at 15%, and it's clearly below our own targets. We have seen adverse mix effects in terms of products, meaning equipment and materials business versus service business and regions, which declines in Asia in particular. And secondly, and as announced in our earlier calls, we incurred higher operating expenses as we continue to execute significant investments to secure future growth, which includes, amongst others, our efforts in industrializing additive manufacturing. We continue to be fully committed to these investments, and consequently, we are prepared to bear the related operating expenses. The Manmade Fiber segment reported an EBITDA margin of 10.7% in Q3, which is mainly attributed to the recognition of a number of lower margin projects from the prior down cycle period. This here keep in mind that this margin level is as expected. It is fully in line with our full year guidance, and we had communicated this margin development already in our last quarter's call. Today, we announced the launch of a share buyback program. The purchased shares will be held as treasury shares. This makes clear that we remain fully committed to our group strategy of investing in organic and inorganic growth. The share buyback is expected to start after the end of the blackout period on November 7 this year. And now looking ahead to the rest of the year, we do have a healthy order pipeline. We have been nominated as a supplier for a number of new contracts in automotive, and we are seeing positive signs for newer technologies such as EPD. And based on the assumption that we currently do not see further deterioration in the market environment and that we will see benefits from our initiated cost measures, we are leaving our guidance for the full year 2019 unchanged. And now let's turn to the segment's performance in the Q3 2019. The adverse trends in important end markets have impacted the top line development in the Service Solutions segment. We have seen a decline in orders by 11.4% across all markets and in particularly in automotive, tooling and power generation. Segment sales declined by 1.1% year over year, driven by China and Europe, but were partially compensated by higher sales in aerospace in the U. S. The effect from small sized acquisitions and raw materials surcharge was around CHF10 1,000,000,000 year over year. Excluding this and the effects from currency movements, the fees resulted in flat organic sales growth compared to a minus of 1.1 percent on a reported basis. And despite downbeat markets, we also saw positive signs, such as the strong increase in the thermal spray business in both services and equipment and the continuing success in the uptake of our Zumeboort technology. The automotive business, on the other hand, continued to suffer from significantly decreased production volumes and continues to execute mitigation actions to save costs. The overall profitability of the segment was negatively affected by the higher proportion of lower margin businesses in the mix, plus the aforementioned execution of investments for future growth, such as the EPD and CBD competent centers as well as additive manufacturing. In addition, we have seen supply chain and inventory issues in the materials business that weighted on the segment's margin as well. Looking ahead, we see that the actions we have taken with regards to segment profitability will provide benefits soon. The operational excellence, restructuring and cost saving measures, such as short term work in some of our facilities and positive inventory valuations, are expected to positively impact profitability margins from the 4th quarter onwards. Looking at Q3 twenty nineteen numbers for the segment. Orders decreased by 11.4% year on year to CHF 3 50,000,000 and sales decreased to by 1.1% compared to the Q3 of last year and stood at CHF 369,000,000. EBITDA for the segment stood at CHF 55,000,000 for the quarter. That is 15% of sales. The operating profitability is lower this quarter compared to Q3 2018 and is partly anticipated through investments, as I mentioned before, and partly impacted by product and regional mix. From an end market point of view, we observed reduced activity in the tooling industry, which is facing difficult end markets as well. In the automotive business, we still see substantially reduced production volumes, but recognize first signs of stabilization. We have been nominated as a supplier for a number of new contracts in the automotive industry and are seeing positive signs, particular for EPD, where we see increasing acceptance for this specific technology. Although our customers are still holding large investments decisions back, we are well positioned for recovery. Also in the industrial sector, we see stabilizing demand, however, still on a low level. The aerospace market is assumed to grow further despite current industry challenges. Our generation remains a challenging market in general. And from a regional point of view, we see an overall good business environment in North America, flattening activities in Europe and a clear slowdown in Asia and here mainly in China. And in the Q3, we acquired AMT AG in Switzerland to extend our product offering for thermal applications and turnkey solutions. And in addition, the Service Solutions segment launched 2 new digital services for our customers and introduced 4 new technology solutions in the Q3. Innovative strength and technology leadership of the segments are in place, and we are in a strong position to take advantage of opportunities as soon as markets recover. And as a closing remark on service solution, allow me to reemphasize that the segment delivered a good top line result in a very difficult market environment. Our business model remains sound, and we are capable to address before mentioned profitability issues in the upcoming quarters. And now let's move on to Manmade Fiber. The Manmade Fiber segment sustained its high top line levels in the Q3 and achieved EBITDA margins in line with expectations. The segment reported a high level of order intake above CHF 200,000,000 for the 8th consecutive quarter. The Mammoth Fibers achieved a strong growth in sales for textile applications, especially in filament equipment in China. And this was partly compensated by a decline in special filament, mainly due to ethylene investment transitions of carpet yarn customers in markets such as Turkey and the U. S. And also, plant engineering saw a decline in revenue, mainly in Stabil Fibers. Now let's have a look on the numbers for the manmade fiber segment. The order stood at CHF276 1,000,000 in Q3, an increase of 6.2% year over year. The segment sales were 15.6% lower compared to the Q3 of last year and stood at CHF 265 1,000,000. This was driven by declines in all regions except Europe, but at the same time, compares against record sales of Q3 2018. And as anticipated and as guided before, the segment reported a lower operating profitability in Q3 due to the recognition of a number of lower margin projects from the prior down cycle period. Pelicorn Mammoth Fibers delivered a double digit EBITDA margin of 10.3% and an EBITDA of CHF 28,000,000,000. And when we look at the market developments, we see a continued strong project pipeline for filament equipment in China, where our key customers take position to secure their leadership in tightening market conditions. In Special Filament, we see low demand levels, which is mainly driven by the BCF markets in Turkey and in the U. S. And also starting from low levels, the segment is active in further exploring new technologies and is observing growing interest in its recycling solutions. And finally, for plant engineering, we see a variety of project opportunities with high interest, especially in the nonwoven business. The segment is also making efforts in positioning itself for continuous polycarbonization solutions. For stable fibers, however, we currently see challenging market conditions. The sustained high level of orders persists for the manmade fiber segment and it's leading to an order pipeline with delivery lead times reaching into 2021 2022. We expect the healthy demand and good order intake to continue in the upcoming quarters. And after this review of the segment's performance, let me hand over to Jorg for additional comments on the group's financials. Jorg, please go ahead. Thank you, Roland, and good afternoon to all of you. Let me start with the group's financial review with a closer look at Q3 and the 9 month group figures. Group order intake stood at CHF 627,000,000 in the Q3. That's down 4.3% year over year on a reported basis or down 1.6% after adjusting for currency developments. The increase in order intake of the Main Med Fiber segment was offset by a decline in orders in Service Solutions equipment. Sales came in at CHF 633,000,000, that's constant exchange rate. Let me reemphasize that Service Solutions achieved a flat organic sales growth year over year in a challenging market environment, while manmade fibers is comparing against a very strong comparable Q3 2018. Book to bill for the group was exceeding CHF 1 for the 1st 9 months and was slightly below 1 for the 3rd quarter, And EBITDA reached CHF 84,000,000 in Q3. That's a decline of 18.4% and was driven, as mentioned earlier by Roland, by adverse mix effects and continued investment in future growth in the quarter. The EBITDA margin stood, what we have heard before, at 13.3%. EBIT was CHF 36,000,000 for the quarter, which corresponds to an EBIT margin of about 5.7%. The development of exchange rates in Q3 2019 report in Swiss francs, the as we report in Swiss francs. The depreciation of the euro against the Swiss francs was only partially compensated by a stronger U. S. Dollar against the Swiss francs. Assuming stable currencies, orders would have been at about CHF 645 1,000,000, a difference of almost 3% compared to the reported figure. Sales would have been at about CHF 650,000,000 also higher by almost 3% compared to the reported amount. Currency development had an impact of more than 2% on EBITDA, and the impact on the margin remains minor. When looking at the group sales split, good performance of Service Solution in this quarter becomes visible as its shares of group sales in the Q3 2019 increased to 58% compared to a level of about 54% in the same period of last year. And when looking at the EBITDA split, we see a stable development year over year. The Service Solutions segment accounted for approximately 66% of total EBITDA in the Q3 of this year, while Manmade Fiber delivered approximately 34% of group's operating profitability. From a regional point of view, our proportion of sales decreased slightly in the Asia Pacific region to around 46%, while increasing in Europe to about 34%, in North America remained stable at about 16% and decreased only slightly marginally in the rest of the world. The share of our service and spare parts business increased to 38% of total group sales in the Q3 compared to the same period of last year. The group's CERC quarter performance resulted in a rolling 12 month return on capital employed of about 8.3%. The decline in ROCE is the result of a lower EBIT, of course, over an increased asset base, which is largely impacted by the recognition of leasing assets under IFRS 16, which are running in a magnitude of about 180,000,000 dollars Elerlikon's return profile continues to run at a solid level and reflects our commitment to create value while executing on our strategy. Ladies and gentlemen, let me conclude with the 2019 outlook before we start the Q and A session. In a difficult market environment, we sustained good top line levels in the Q3 and 1st 9 months of the year, which are in line with our expectations. We recognize the uncertainties in the global economic environment and how that affected the investing behavior of our clients in the Q3 of this year. As of today, we have a strong order backlog and project pipeline to support sales in the Q4, and we see upcoming benefits from the cost saving initiatives that we have implemented throughout the year in order to improve profitability. Based on the current visibility, we do not see further deterioration in the markets towards year end, and we are therefore leaving our guidance for the full year of 2019 unchanged. We protect group orders, sales and EBITDA margin to be sustained around the comparable levels of performance us for 2018. Ladies and gentlemen, summarizing the Q3, Ehrlichin has reported a set of results that are reflecting the challenging markets in which the company operates to date. Still, we succeeded to deliver increased order intake in Manmade Fiber in the Q3 and flat organic sales growth in Service Solution compared to the same period of last year. The Board of Directors has decided to initiate a share buyback program, which foresees the repurchase of shares with a total value of approximately up to CHF 340,000,000 CHF 50,000,000 over a period over the next 36 months. And finally, given the visibility we have as of today, Oerlikon is on track to meet its guidance. We have a strong order backlog and project pipeline and expect to benefit from cost saving initiatives that are ongoing in combination with our expectation on market developments. We are leaving the guidance for the full year 2019 unchanged. Ladies and gentlemen, after serving as CFO over the last 10 years and commenting in over 40 quarterly earnings calls, This is my last set of results as Ehrlichman's CFO. It was a pleasure providing you insights in the company and often having lively discussion with investors, analysts and journalists about performance and strategy of Ehrlichman here in the calls or at roadshows or at conferences. I'm pleased to hand over to Phil, who will take over this task in the coming weeks. And again, thank you very much for the support over that long period of time, and I'm looking forward to seeing you all again probably in different capacities. This closes our comments on the Q3 2019. We thank you for joining us on the call, We are always happy to open the lines now for questions. Operator, if I may ask you to go ahead, please. We will now begin the question and answer The first question from the phone comes from the line of Michael Foth from Vontobel. Please go ahead. Yes. Good afternoon, gentlemen. Well, first of all, thank you, Mr. Fede, for the collaboration over the years. I think I probably listened to all of those calls. So thanks a lot. My first question is regarding the contributions from EPD in Surface Solutions. I was wondering how much EPD actually already contributes to the results, to the revenues and what sort of expectations you're having for, let's say, Q4 2020, if you can give any indications on how that develops? And then eventually also the order of magnitude of the impact of the additional investments that you're making in EPD. The reason I'm asking the question is I'm trying to understand if there's any changes to the underlying profitability of the Surface Solutions business when we exclude the all these additional investments. And then I have one question on the manmade fiber. Those low margin orders that you mentioned, for how many quarters going forward will they impact the mix negatively? That will be it for the moment. Thank you. Okay, Michael, a bunch of questions actually. As expected, of course, I'm not ready to give details on EPD business. This is a young a new technology, right? And just to give you somehow a flavor, there is 1 operational unit or one unit in commercial operation. A second one is going to be commissioned right now. And European Automotive OEMs have started buying the equipment. In the midterm, Q, we expect volume up to triple digits, but that is nothing what is coming in 2020. This is really over the course of the next 3 years, but it gives you a kind of dimension. The spendings we do in innovation and new technologies such as EPD and CBD is in the and others is in the order of negative €20,000,000 to €25,000,000 in 2019. And this includes EPD, right? And maybe the last question was concerning manmade fiber. For sure, we will see effects out of this low margin project for the coming two quarters. And following ones, but not to the same extent anymore, right? Okay. So in Q1, we will still see a negative impact as well? Yes. Okay. Okay, then great. Just one last follow-up, if I may. Why was the decision to start the share buyback made right now? I mean, what has changed? I think nothing really has changed. I mean, we have been looking at the possibility of the share buyback over a certain period of time. I mean, we are obviously sensitive about the capital efficiency, which we have. I think Roland said that before, and I think we also quoted it on the press release, it should not be construed as an element of changing the strategy. On the contrary, we continue to work along those lines and the right thing will come at the right time. And again, based on the current market environment, it's I relate to M and A and the valuation issues, combined with the efficiency, as I said, on the balance sheet, we believe that's the right thing to do. And we believe that we're not impairing ourselves. That's the reason. So there is really no underlying change. It's the exception that we try to make it more effective for the company overall. Thank you. The next question from the phone comes from the line of Armin Rechberger from ZKB. Please go ahead. Yes. Good afternoon, gentlemen. Well, you kept or you sticked to your guidance for 2019, which I think is rather sportive, especially when it comes to EBITDA margin. You still guide for around 15.5 percent. And especially at Surface Solutions, you guide for 17% to 18% reported. That would mean that you would have to reach in Q4 a margin of 19.8%, so which is would be quite difficult to reach. So I figure you must be more confident at the other segment in manmade fibers. You mentioned that we will face a negative impact of these low margin projects, but at a lesser extent. So I mean, you expect what margin do you expect around for Q4 in manmade fibers EBITDA? Can you give us some indications there? I know you won't discuss the margin specific, but still try from my side. Okay. I will do our best, yes. Talking first about Service Solutions, you are right. Making the guidance means we expect a stronger Q4, and that is what we actually see based on the order pipeline we do have. And having understood what are the reasons for the weak Q3 and here, we have a product mix topic. I think I mentioned it or yes, I mentioned it. We do have a regional impact and investments. And what we did on top, of course, in between is launching a bunch of activities to reduce cost and to improve the profitability. And these measures are starting to kick in. And based on that, we believe that we can achieve the guidance around 15.5 percent EBITDA on a group level. And but it's also clear it's not a done deal. It's not a home brand, for sure or not. And important is as well that we do not anticipate and foresee any further market deterioration in terms of politically driven or whatever, right? But based to the best knowledge what we have today, this is what we can do. And in manmade fiber, you are right. We have this we do have this impact from low margin projects. The contribution of the effect is not equally distributed across the quarters. And we expect our MainMag Fiber to be around for the year about 13%, right? And now the simple math kicks in, and you easily find out what we do expect for the Q4. Okay. And second question, if I may, regarding product mix in Surface Solutions. You explained already you were saying something about Asia as well and product mix. Can you elaborate maybe again a little bit on this topic? I think the nature of our business piece is following on. We do have not a homogeneous distributed profitability margin across our portfolio. In materials and equipment, the margins are lower for service. That's why the service share is a very important one. And then even if you have a deeper look into the regional pattern, There are regions, countries where the profitability is much better than somewhere else. And there is a clear tendency that in Asia, China and India, the margins are I don't want to give too much details, but are better, right? And when we are weaker there, this has an impact, right? Okay. Thank The next question comes from the line of Sebastien Cunha from RBC. Please go ahead. Hi, Sebastian Kuehne here. My question is mainly relating to the share buyback. So what is behind it? You buy back the shares, you keep them as treasury. If a target comes along, you will use those shares. If no target comes along, what happens then with the share? That would be my first question. Secondly, of course, you could always use your cash for M and A. The fact that you buy the shares, does it imply that you think the share is significantly undervalued? Yes, this would be my first two questions. Thank you. Well, you're absolutely right. And we all know that there is a certain holding period on the treasury sales, but that's absolutely the intent, which by the way is running for 6 years. So we talk 6 years as of tomorrow. But definitely, that's the intention that we use the shares, speed in any kind of construct, a straightforward acquisition, a combine of companies and the like where we bring the shares In terms of valuation, it's not up to me to decide whether the share is undervalued or not. We obviously have a certain view about that, but I think that didn't play a significant role in the decision here. But the intention is effectively to keep it for the purpose of redeploying that into M and A. I would now take the stance that to answer the question on what if we cannot use it, what happens then, I think I have sufficient transparency and confidence in the management also going forward that we're going to be able to redeploy its currency in acquisition, which continues to be one of the main drivers and intention obviously from our side. I hope that helps and will address your question. Can you cancel the shares if you wanted to? There will be a possibility to do that, but then you would have to run through the whole procedure, which is to take over for it and all that. And I think it would take it a little bit too far now that we elaborate on that. But the intention is not to do that, let's put it like that for the term. So it's not to improve capital efficiency. It's more to redeploy the shares. So we should not Yes, whatever way you look at it, yes. Yes. One question on manmade, on the market. I remember you always mentioned market size of around SEK 1,000,000,000, that's something that the market can absorb. Has that changed in the past 12 months or in the past 3 months, your view that the long term market size for this machinery is €1,000,000,000 or slightly above €1,000,000,000 Has it changed? No. The market for or anemic fiber market has not changed. It's still mainly driven by the Filament business. And here, we do see this well known phenomena since I don't know, since many, many quarters now that 4, 5, 6 Chinese players are still working on new projects. I gave an indication reaching into 22 and first discussions even beyond. That's one part of the story. I also was clear that the smaller market, the carpet yarn, which is just a smaller part of it, is weaker right now after having seen a strong 2017, 2018 actually and beginning of 'nineteen. Now it's going down. This is mainly Turkey and U. S. But overall, I would say the fact that the manmade fiber market is stable. We are in a lucky position, actually. Thank you. And final question, the competition in this business, is it the Japanese player and you guys or so TMT and you? Or is there any other meaningful now? The competitive environment is unchanged. Of course, there are some other smaller players but not playing in the same league with respect to technology. And this is I do not expect any change here. This duopolistic, if to say so, situation will remain. Thank you very much. The next question comes from the line of Fabian Hickey from UBS. Please go ahead. Thank you. Good morning. Good afternoon, gentlemen. Got a few questions, one after the other. Again, on the share buyback program, if you will buy back 10% of the shares and Renova Liveit would not sell any, wouldn't isn't that risk that you drop under the sanction risk of U. S. Authorities? So let's that's a very important question, of course. And you can be assured that we have looked at that in all the angles. No, that's not the case. So even if that would be the case, and by the way, we don't know, Levett is not part of this arrangement. But we will not or Levett, in the worst case, will not surpass the 50%, which is the off off threshold for the sanctions topic. So that's not going to be the case either way. Okay. Okay. Then my next question is on the surface business. You mentioned supply chain and inventory issues in the material business that was also burdening profitability. Can you specify those issues? And is there anything I mean, for how long are they going to persist? And is there anything to quantify here? Yes. I think it's a fair point. We did see some challenges here. It was actually a supplier of 1 of our suppliers, which missed delivery schedules. It was actually a planned shutdown, which had to be extended. And this was somehow creating a situation where we had definitely quite tight on certain materials. And the second was the net positive. The second part of the question, supply chain and inventory topics, yes. You know that the material prices are on a very low level right now. And this was creating a reevaluation of Tungsten and Cobalt and stuff like that. I think the total amount was in the region of €5,000,000 to €6,000,000 Okay. And is there any relief we can expect already in Q4, be it on your supply side, on material side or in 2020? Is there any outlook you can give to you? Yes. I think the supply chain topic is soft. The inflow raw material is fine again. And the reevaluation of the material topic might go into different direction, hopefully, or depends. Okay. And then on cost in which region did you implement short time work? How widely within the company? For how long do you expect this to persist? And is there any other measures on the cost side you have been taking? Of course, I think what you can expect that we really use the entire bunch or the entire toolbox in cases like that in regions, in countries where it's easier. We reduce headcount with a lot of people, honestly spoken, to a substantial amount FTEs, right, on the one hand side. In other countries, other regions, we do have the opportunity of short work modes, which doesn't apply to all countries. But beyond of that, project cost savings and optimization in different meanings, I think this is nothing special. This is what you can expect, and this is what we did and what we do. And the effects out of this toolbox is expected to kick in already in Q4. And then on the Additive Manufacturing spending, where you mentioned throughout the year that the 300 bps in the burden, it's also in your surface solutions guidance. Is that something when you look at your plans for the CompuSensory Immunic and the atomizer and all those investments, something we should expect? And keeping our model for 2020, would that persist? We did our investments in additive, in the infrastructure, and this is actually done. Whatever is coming now is purely volume driven in terms of printer or stuff like that. And from that perspective, it's not so much new investment in additives. There are other elements. I mentioned CEPT and the CVD, what is chemical vapor deposition and other alternative technology, a company which we acquired, I think, 1.5 years ago or something like that. That means these elements are kicking in. Can you I have now a bit I'm mixing starting a bit to mix up things. Can you clarify here? You earlier mentioned you spent innovation about €20,000,000 to €25,000,000 in EPD and Auto Technology, but I think that does not include Additive Manufacturing. But now with the 300 bps in AM, you also say or you put EPD in the same basket. So I'm a bit confused now. No, I think the 300 basis points has is a frame, which is for sure not exceeded yet. And this is a long term perspective here. No, let's put it the other way around. I mean, we have been currently guiding on this 300 basis points contraction. We obviously do understand that the speed of adaptation and all that. And we said that, I think Roland said that very clearly as well, that the speed of adaptation is slower than what we have anticipated, which inevitably means that we're going to more diligent or very not more, but very diligently manage the cost and the expense side of additive. So don't expect significant addition in terms of investment and also expect that that will already level in light with the ramp up of the top line, the cost base of the global business, right? So what does that translate to? I think it's too early to say. We probably believe that with all the activities which we have been taking that the $300,000,000 seems to be the cap and that we should expect lower negative contribution as we go forward, obviously, in light of a slower but still coming increase in the top line. Does that help a little bit more? Okay. And the 3 on the tapes, initially, they were kind of R and D costs. But now it seems like this is idling capacity. So this is OpEx due to unused capacities because the orders are not flowing in, right? Well, again, let's be careful the way we word that. If you say the orders aren't flowing in, the orders are flowing in, but not to the extent we expected it to be. And needless to say, that has an immediate impact, in particular if you look at the material part of the business on the titanium production in Plymouth that the unabsorbed cost needs to be worked out of the system. Yes, absolutely. Okay. One last one here. You mentioned 3 years ago, euros 300,000,000 in revenues you're planning for 2020. Where are we at the moment? And what is your current forecast for Additive Manufacturing revenues next year? Can you give us any sense here? I think we gave, I don't know, quarters, I think, always some hints that we are still in a double digit range. And €300,000,000 by 2020, not at all, right? But we also have been clear that the investments, which we initially also declared as being €300,000,000 are also not yet done or will not be done or be done at a very later point of time. So the £20,000,000 sorry, the double digit digit range you're doing is basically what you acquired with Cittim as an additive manufacturing service company and the powder you already produced before, right? No, no, no, no. I think we have a phasing business, which we acquired, I think, 2 years ago, which we are building up. We do have the powder or the material business, which we are building up. And Jorg was just referring to the new plant in Plymouth where we installed the new vacuum atomizers, which we didn't have before. And both together and they are both together, we are not and I'm not giving you the precise figure, but it's somehow medium double digit number. Okay. Okay. Thank you. Yes. The next question comes from the line of Christian Obst from Baader Bank. Please go ahead. Yes. Hello, and thank you for taking the questions. It's more on the balance sheet and on the cash flow side. First, can you give us some kind of idea concerning your CapEx spend this year and next year and the split between surface solution and manmade, I would say it's a little bit above EUR 200,000,000. And then when it comes to operating cash flow and free cash flow, having in mind that you generated approximately EUR 300,000,000 EUR 430,000,000 of operating cash flow last year. We have an EBITDA of minus 17% in the 1st 9 months. So let's assume we have well below EUR 400,000,000 of operating cash flow this year minus CapEx, EUR 200,000,000 less than EUR 200,000,000. And then on top of that, you now initiated the share buyback program so that we have then might have some kind of a free cash flow minus EUR 150,000,000 to EUR 200,000,000 Am I right with that kind of assumption? Sort of the first area of question? No, no, no, no, not really. So let's go back on the CapEx. Your assumption of $200,000,000 on the CapEx was indeed, if you take it back a couple of years and the expectation based on the environment which we are in, And I think Roland alluded to that before, we obviously take all measures, including more very diligent management of the CapEx number. So I would expect that, that number is coming in probably around €150,000,000 max based on the current visibility which we have. And for next year, you should expect that to be even lower. So I mean, we are migrating away from this €200,000,000 The €200,000,000 were perfectly justified if you look back over the last couple of years. And by the way, they did contain a significant amount of investment into additive manufacturing, which again we confirmed before is not taking by far not taking the same speed of investment on CapEx. On the split, if you assume it's SEK 150,000,000, in fact, below 150,000,000, assume that about 20% max will go into MEME fiber and that's related to a couple of specific projects which we have coming out of Noimark for staple fiber development and all the rest is being allocated on OSS, right? And from a free cash flow point of view, I mean, needless to say that the current development also in terms of the lower income in prepayments is impacting the free cash flow pattern, notwithstanding now the dividend and CapEx for a matter, but we still expect that we're probably going to run-in the vicinity of about this year of about $150,000,000 between $120,000,000 $150,000,000 for this year. And then again a tick higher from a free cash flow point of view going into 2020, right? So that's basically the assumption which we have. Okay. Thank you very much for that. This is, of course, before the acquisition, before the purchase program of shares. Yes. No, absolutely. Then going back a little bit to the balance sheet, it's intangibles. Can you give us a split of the more than EUR 1,000,000,000 of intangibles you have on the I would assume the majority, of course, and it's on Surface Solution, so 80%, 85%, something like that. Can you give us an idea there? And do you see any risk of some kind of impairments going forward, especially from your acquisitions in Additive Manufacturing or some smaller acquisitions in special areas? Yes. We are not decomposing in detail on the level of BU, the goodwill. But as you rightly say, a big part is coming out of the Mesco acquisition still, which is obviously to be attributed to service solution. We do also requested, of course, on a midyear basis, all the calculation for impairment and even the weaker environment, which we cited in terms of additive, does not leave us to believe based on current plans and the expectation of future development of the business that we're going to have in any regard in impairment on the assets based on today's knowledge and based on today's planning assumption, which we have for the underlying businesses. Yes, of course. One last question is concerning return on capital employed on NWAC. So you mentioned or you highlighted here that in Q3, you received the 8.3%, and this is including, of course, the impact of IFRS 16. Has this IFRS 16 development or inclusion has an effect on your WACC calculation? And what kind of WACC you are currently calculating with? Thank you. The WACC which we are assuming or the way we talk about WACC internally is obviously on a segment level. If you look at the company, we normally talk in the vicinity of about 7% to 7.5%. Obviously, depending on the external development of the markets as well. And the what was the other question was related to the inclusion of IRF-sixty. IRF-sixty on the back. Yes. No. Not to the extent I could think of or nonmaterial, right? Let's put it down. So let's calculate the 7.5%. That's fine. So thank you very much for the detailed answer. Thank you. You're welcome. There are no more questions on the phone. So thank you very much for participating. Sorry to interrupt you. There is a minute registration from Patrick Lager from Credit Suisse. Please go ahead. Okay. Happy you, Patrick. Yes, noted. Sorry for that actually. Thanks for taking my questions and also a big thank you to Jorg Sverdier from my side. I'm sure you're having a lot of fun going forward playing golf. Hopefully, we will get in touch here. Three questions. Coming back to Fabienne's question on cost saving efforts, he was probably hoping to get some numbers here. I mean, do you have any figures you could share? I mean, for instance, the number of temps who left the company or how your headcount has developed or even better, how much costs you are expecting to take out from the P and L by end of this year or next year? This would be my first question. A good question, of course. I it's very difficult for me to give any details. I tried to give you a sense of flavor. In the automotive business unit, we reduced the headcount by about 200. Just to this is 10% of the permanent headcount, just to give you an idea. But all the rest, this is no, I'm sorry, we simply don't do it. Okay, okay. Which makes our life a bit harder, yes, but it's okay. And then that's more a general question coming back to Additive Manufacturing. I presume you won't tell us actually that this was maybe a bad decision to invest so much in this space. But fact is today that we are not seeing any signs of industrialization in 3 d d printing today. And it looks like you are still confident that this technology will be used also for larger batches in future. But actually, when I'm talking to other companies also sitting here in Switzerland and also investing in this space, they tell me that this will not happen. So just as a general indication, why are you so confident this will happen in the future? I think the answer here is quite simple because the world is going to be to see much more digital processes and the life and the world even the production world will become much more digital. And additive is the physical arm of digitalization, right? And but you are right, it takes longer. It's a bigger effort. And it's I think, shifting the mindset and shifting the position from just sorry, taking the parts and the goods we have today and replace the manufacturing technology from casting or from milling or whatever to additive is not good enough and it's not the solution. I think the real development kicks in if the products are designed in a different way. And this is and I'll give you an example. If we talk about a next generation military aircraft, which takes time, right? But it's clear that the weight to thrust ratio and performance and everything is far beyond everything that has what does exist today. And if such tough and stretched goals are kicking in, it's not about using the old technologies. It's about new technologies like additives. And from that perspective, it's the statement that this is not going to happen is clearly wrong from my perspective. It's going to happen. Unfortunately, yes, it's not going to happen tomorrow, and it takes a little bit more time. Okay. Good. And then finally on surface solution again, you can you make I mean, you showed all the extra costs you were having in you had in Q3 and potentially also in Q4 and the extra cost you had in Q1, Q2 related to additive manufacturing, etcetera. But can you make our life, at least here, easier and give us the kind of underlying margin you had in Q1, Q2, Q3 just to make really make our life easier here? A kind of clean margin would be great because, of course, we can't do our own calculations here, but probably we will miss something. And I just want to make sure that we have the kind of clean or adjusted margin for every extra, every one offs you had. Actually not. I think I'm sorry, but I think you have all the ingredients, Patrick, that we gave you in terms of the impact. So therefore, everything that is public is public, and you can take your conclusions from that. Okay. Good, good. Okay. No problem. Thank you very much. Okay. Thank you. So no further last minute questions coming in. Thank you very much for participating. This concludes our Q3 earnings call. Looking forward to speaking to you after Q4 on the 3rd March when we disclose Q4 and the full year results. Thank you very much and have a good afternoon or a good day in the U. S. Thank you. Bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.