Ladies and gentlemen, welcome to the Sika Third Quarter Report 2018 conference call. I am Gabby, the conference 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&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Dominik Slappnig, Head of Communication and Investor Relations at Sika. Please go ahead, sir.
Thank you. Good morning, good afternoon, and welcome to the Sika Nine Months Results conference call. We published our figures at 5:00 this morning. Now our CEO, Paul Schuler, and our CFO, Adrian Widmer, will provide further details on the results. Afterwards, they will be ready to take your questions. I will now hand over to Paul Schuler, who will start with the highlights of the first nine months.
Okay, good afternoon, and thank you for joining the call. I'm happy to inform you about a very motivating third quarter closing. In the first nine months, we had an excellent sales growth of 14.1% in local currency and 15% in Swiss francs, with the new record to CHF 5.323 billion. All our regions were able to grow. EMEA, I mean Europe, Middle East, and Africa, increased by 14.4% in local currency. We recorded double-digit growth in many countries and areas, as Eastern Europe, Africa, the Middle East, and a strong, solid growth in Spain, U.K., and other companies. The newly established region Americas had an excellent run with also 13%. Double-digit growth in U.S., Mexico, Argentina, and Ecuador. Brazil posted a sales growth of 8.8% after some difficult years, and Colombia with 5.4%, we are also happy. In Asia Pacific, we grew by 4.8%.
Double-digit growth in India and Indonesia. China's construction market picked up further, enable us to grow with a strong 9.5%. Solid growth, 4.8%, in Japan. In some markets, we had some difficulties like Malaysia, Thailand, and the Philippines, but overall, we're happy with the growth rates. The segment global business includes our automotive business with the new acquisition, Faist, and the Sika Axson Technology, our market leader in tooling and wind industry. With 29.9%, an excellent run, mainly driven by the acquisition effect. Thanks to greater market penetration and structural growth, our automotive business grew clearly faster than the market. The pressure from high input costs, like raw material, were well managed through many price adjustments. We're still walking a bit behind. Volume growth, together with disproportionate low cost development, resulted in a strong EBIT improvement.
The one-off cost effect in connection with the resolution of the dispute with Saint-Gobain of CHF 23 million negatively impacted the EBIT. Nonetheless improved by 9% to CHF 728 million. Net profit grows by 10.5% to CHF 527 million. In the first nine months, we continued to invest in future growth in the market by opening six new factories and found a new subsidiary in Honduras. With the acquisition of Index in Italy, we secured a market lead in the roofing/waterproofing business, and the closing of Faist in February extended our access and offering to the automotive industry. With Polypag, we acquired the market lead in polyurethane foam systems. The integration runs excellent, and the synergies are even higher than expected. Overall, we had a great run, and I would like to hand over now to our CEO, Adrian Widmer. He will guide you through the financial information. Adrian?
Thank you, Paul, and good afternoon, everybody. Following our CEO's business summary and the presentation of the highlights, I will now give you some further insights into the financial results of the first nine months of 2018. Q3 saw a continuation of the dynamic sales growth of the first half year, with nine-month sales, 2018, increasing by 14.1% in local currencies. Organic growth in the third quarter even picked up slightly from the 6.8% increase in the first half year to 7.4% in Q3, resulting in a strong organic growth year-to-date of 7.0%. Acquisition contributed another 7.1% year-to-date. Translation impact was negative in the third quarter, negating part of the positive foreign exchange impact in the first half-year, resulting in a modest year-to-date positive impact of +0.9%. Total sales in the first nine months were CHF 5.323 billion, which represents a growth of 15% in CHF.
As we have heard, all regions, as well as mature and emerging markets, contributed to our growth in the first nine months. In the region EMEA, sales grew at a rate of 14.4% in local currencies, with Q3 growth accelerating to 16%. Organic growth of 7.2% was driven by solid volume growth in core markets such as the U.K., Spain, and double-digit growth in Eastern Europe, Africa, and the Middle East. Organic growth was matched by acquisition growth of 7.2 percentage points, mainly coming from this year's acquisition of Index in Italy, as well as KVK in the Czech Republic and ABC of Turkey, which both closed last year. Foreign exchange impact in EMEA in the first nine months was a positive 3.6%, while in Q3 we saw a slight negative impact of -0.9%.
Four new plants and production lines in Senegal, Saudi Arabia, Dubai, as well as the acquisition of Polypag closed at the end of September, will support continued growth in EMEA. Region Americas continued its double-digit growth with year-to-date increases of 13% in local currencies. Targeted investments into the supply chain and sales organizations, primarily in the fast-growing metropolitan areas, solid demand, as well as acquisitions in the U.S., contributed significantly to this continued strong business performance. Sales growth in Mexico, Argentina, and Brazil was also strong. Total organic growth in the Americas came in at 8%, while acquisitions added another five percentage points. Foreign exchange impact, however, was strongly negative at -3.4%, driven by weak currencies in a number of markets. Growth in Asia-Pacific increased by 4.8%, in line with previous year growth. Growth was all organic and foreign exchange impact was neutral.
Highest growth was achieved in India and China, while growth in Pacific and in Southeast Asia slowed. In Vietnam, a new state-of-the-art mortar plant was commissioned next to an existing production for admixture, which will further enhance the supply chain and market access in Vietnam. The newly formed segment global business achieved a strong growth of 29.9% in local currencies compared to 9.2% in the previous year period. Organic growth in this segment was 7.2%, which is only slightly lower than in the first half year. While the acquisition of Faist ChemTec contributed almost 23 percentage points of growth. Positive foreign exchange effects contributed another 2%, leading to an overall growth of 32.1% in CHF. Moving down the P&L, growth result as a percentage of net sales decreased by 140 basis points from 54.7% to 53.3%. A slight improvement versus half year impact of a minus 150 basis points.
Ongoing price increases as well as various initiatives on the procurement and R&D side limited the impact of significantly higher raw material costs. Dilution effects from acquisitions accounted for about 30 basis points of this material margin contraction. On the other hand, and driven by solid volume growth as well as further efficiency improvements, we showed a strong operating leverage with both personnel costs as well as other operating expenses growing significantly below sales growth, in spite of a certain dilution effect from acquisitions. Organically, cost growth continues to be around 50% of organic sales growth only. The successful resolution of the long-standing dispute with Saint-Gobain led to a one-time cost of CHF 23.3 million year to date, which are included in other operating expenses.
A positive impact in Q3 of the previous year of CHF 8 million related to the reduction of the pension conversion rate in Switzerland impacted cost growth in Q3 2018 negatively. EBITDA increased double digits by 10.3% to CHF 880 million, compared to CHF 797.9 million in the same period of last year. If one-time costs related to the dispute resolution were excluded, EBITDA growth would have been 13.2%. Driven by increased intangible amortization coming from acquisitions, depreciation, and amortization expenses increased by 70% versus the previous year period. This resulted in an EBIT increase of 9% year-over-year. Excluding one-time costs, EBIT growth would have been 12.4%.
In absolute terms, EBIT is up CHF 59.9 million to CHF 728.9 million on a reported basis. Net interest costs were higher by roughly CHF 5 million in the first nine months, largely related to higher debt in connection with the purchase of the 6.97% of outstanding Sika shares from Saint-Gobain. Net other financial expenses also increased due to higher hedging costs, primarily related to higher level of intercompany financing and increasing interest differentials, particularly to the US dollar. Group tax rate, however, reduced markedly from 25.8% in the previous year to 23.9% in the first nine months, primarily related to the lower tax rates in the U.S. As a result, net profit after tax increased double digits by 10.5%, from CHF 477.4 million to CHF 527.7 million. With this, I conclude my remarks and hand back over to Paul for the outlook.
Okay. Thank you, Adrian. Our outlook 2018, based on the results for the nine months, we confirm our full-year targets. We have an outstanding pipeline of big, newly won construction projects, many new products and initiatives, as well as several acquisition candidates throughout the world. We are well on track to increase sales by more than 10% to reach sales of above CHF 7 billion for the first time. The volatile raw material price continues to present a challenge in the next months. However, with efficiency improvement and continued price adaptation, we expect a double-digit growth for EBIT and net profit. Thanks to the commitment of our employees and the strength of Sika growth model, we can look forward with high confidence to the last quarter of 2018. Okay, thank you for your time. Any questions?
We will now begin the question and answer session. Anyone who wishes to ask a question may press star 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 two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star one at this time. The first question is from the line of Phil Roseberg with Bernstein. Please go ahead.
Hi. Good afternoon, gentlemen. Thanks for taking my questions. Just a couple, please. The first one is, can you help us understand the big drop in operating leverage in the third quarter? I believe EBIT grew at only about 6.5% on revenues of about 13.5%, compared to the 10% growth that you got in the first half, or even 16% in EBIT that you got if you take out the CHF 23 million related to Saint-Gobain. My understanding was that the worst of the raw materials inflation was felt in H1, not in Q3. Perhaps you could break down the elements behind why Q3 was substantially less.
My second question, related to that is, can you also help us to get comfortable, given that Q3 number, that you can get to your full-year guidance, which I think requires, at least in my calculation, you to get to about 13% growth in EBIT in Q4. Coming from 6.5 to 13%, it would just be nice to know how we should think about that.
Yes. Thank you, Phil. I will be taking this. I think there is two elements I'd like to point out on Q3. On the one hand, the material cost impact or increase was actually quite significant in Q3, even with increasing prices. Basically, the impact here was very similar to the first half year in terms of material margin reduction. The second one, on the cost side, I mentioned one factor, this one time gain we had in the last year in the third quarter related to a pension effect, roughly CHF 8 million. If you deduct this, we're basically at a like-for-like EBIT growth in the third quarter of around 10%. Looking forward into the fourth quarter, over time, the price component will overcompensate what is a more flattening raw material cost input curve.
This effect should be bigger in Q4, and also we will not have this negative effect in the previous year as we had in Q3.
Sorry, can I just one clarification there, because from my understanding, if you take out the CHF 8 million, you get to 10%, like-for-like growth. If you take out the Saint-Gobain CHF 23 million in H1, you get to around 16% underlying. If the material cost impact is similar, what makes that difference?
The impact has been increasing actually throughout the year. Q3 was quite significant in terms of input cost.
Good. What are the key materials that are really moving the needle on this? We're trying to track this and predict things, but it's very difficult for us to really understand what has really changed in the third quarter. Can you give us any more detail?
Well, there was a further push on the epoxy side. Silicones have continued to go up. We have also seen a further impact on the plasticizer side. The situation has been quite volatile, also not uniformly across the regions, with foreign exchange moving having some impact. There is a number of factors which have influenced this.
Okay, thanks.
On the positive side, we already increased our prices throughout the region where most affected in the mid of September, so we expect relief in the October, November numbers.
Great. Thanks very much.
The next question is from Martin Huesler with ZKB. Please go ahead.
Yes, good afternoon. Thank you for taking my two questions. I'm looking a bit ahead into 2019 and trying to understand what's going to happen there on the margin side. Maybe you can help us. You showed on page 33 in your presentation, the gap between price increases and cost increase. I was just wondering, basically, if you assume for next year that the gross margin could be on a level of 2018, because you were mentioning those price increases and kind of a flattening of the cost increases. Basically, my first question is, what about gross profit margin for 2019, your best estimate? The second question is turning to your acquisitions that added about 7% to overall sales. You were mentioning a 30 basis point impact on gross profit margin.
Can you elaborate a bit on the impact on the EBIT margin or maybe the contribution of this 7% sales to EBIT? Was there any contribution at all? Did it show up because of integration costs and amortizations? That's basically my second question.
Okay, Martin, I take the first question, where is our target for raw material margins. As we said, we expect now rather flattening out. Was it the fourth or fifth price increase in the last three months? We see clearly signs that in certain areas, the prices will stay or come down. With our price increase, as we said, we're lagging behind. However, we feel strong for 54%-55%, according our guidance.
On the acquisition side or the dilution, it is correct, particularly the initial months, there is typically only a notional contribution. We're seeing a gradual, actually, a significant increase in relative contribution throughout the year and continuing as these synergies and also growth leverage is in this target. Well, that for 2019, we have a strong pipeline. We have a lot of new projects. We feel good in keeping the results and increasing our guidance.
Okay. Thank you. Maybe just to add on to Adrian's answer. Is it just as a rule of thumb, if you say contribution of acquisition 7% to sales, maybe contribution to EBIT about half of this, 3%-4%? Is this a fair assumption?
I mean particularly in the first couple or first few months, the EBIT contribution is typically, if you factor in all the sort of integration and transaction costs, below 5% of sales, but quite strongly increasing thereafter.
Okay, thank you.
Thank you, Martin.
The next question is from the line of Erik Karlsson with Industrial Equity Partners. Please go ahead.
Yeah, thanks for taking my questions. I was just wondering on the price to raw materials spread that has been negative throughout the year. Could you just confirm if you think that spread could now be neutral in Q4 or whether it's still a negative but smaller than prior quarters.
Just on the material input side. Yes, the curve should be flattening, therefore the margin impact or the negative one should be smaller in the first and fourth quarter, given the increase in effect of price increases.
Negative, smaller negative.
Yes.
Perfect. I had one question on EMEA construction. You probably haven't seen this, but KONE, which is a large elevator manufacturer, they lowered their construction outlook for EMEA going forward. Have you seen any change in demand trends in EMEA?
I think we have a very nice position here where we work on refurbishment and new builds and on the project. We don't see that this will suffer. In certain countries, yes, there will be a change. Therefore, other countries will go strong. We don't see that in the moment in our business.
Super. I think if I can ask just a third question, please. Auto production has been weak specifically for China and Europe. I appreciate it's very much a penetration game for you, and you help the OE manufacturers lower the weight of their cars and strengthen them and lower emissions. Do you think that will have any impact on your auto business, or it's so much penetration it won't really be meaningful for you?
I mean, to be fair, if they produce less car, which we have existing, of course, they will slow down auto. However, on the other side, the penetration rate, the new project we have, and the build rate, I think we are still feeling confident. We had a 6% increase, even the market went down by 1%. We are confident that also in a slower auto market, we will continue to grow. Looking to Europe mainly, I think if the Germans get a hold on their issues, I think they continue then back on the growth path. I'm not so pessimistic for 2019.
Fantastic. Thank you so much for your help. Very impressive. Thank you.
Thank you. Erik.
The next question is from the line of Martin Flueckiger with Kepler Cheuvreux. Please go ahead.
Yes, thanks for taking my questions. Good afternoon, gentlemen. Actually three, if I may. Coming back to the old macro story regarding the U.S. and Chinese trade tensions. I was just wondering whether you have any updates with regards to potential signs of a market slowdown in the relevant markets for Sika in that market. That would be my first question. My second question is with regards to coming back to the outlook for EMEA and particularly Europe. I understand your answer that you've just given a couple of minutes ago, but looking at building permits, particularly on the residential side, but also on the non-residential side, they started to slow and I think on the resi side, they're even flat now year-over-year. If any, when would you expect slowing building permits to have an impact on your business in Europe? That would be my second question.
Just clarifying the squeeze from FX on the margin. Could you quantify the total currency impact that you've seen on your Q3 EBIT? Assuming constant FX rates, what do you think could be the estimated impact on the full-year EBIT? Thank you very much.
Okay, Martin, I take the first question with the trade war, China, U.S. I mean, the whole world is nervous. The whole world looks what's going on. From our side, we are in a lot of new projects. I don't expect that they stop building. That would be very critical, but we believe they will continue. For the next six to seven months, we are on the strong side to continue this project. We have a strong side on refurbishment. We still strong there, so has not really an impact regarding to the building permits. However, we prefer high rate on building permits. That's clear. It's easy for us to go double digit with a lot of building permits out there. For the next 6 to 12 months, confident we continue on our guidance of 6%-8% growth rate.
On the EBIT increase, Martin, the translation impact basically is very similar as to the top line. In the first half year, we had a more two percentage point positive effect, which has now squeezed. I would assume actually the foreign exchange impact for the full year is pretty much going to be flat.
Okay. Just to clarify, sorry, is that on top line growth or is that on EBIT growth? I'm just asking because other companies have complained about the Brazilian real, the Indian rupee, and also the Turkish lira, with some of them being down heavily. I was just wondering whether there's also a transaction impact for you guys, even though I realize that overall you're well naturally hedged.
Yeah. No, the transaction impact is very insignificant.
It's really translation, very similar on top as well as on EBIT.
Okay, thank you very much.
Thank you.
The next question is from the line of Andrew Fraser with HSBC. Please go ahead.
Thank you. Good afternoon, gents. four from me, please. The first one, Adrian, you mentioned operating leverage of 50% of organic sales growth on the other expenses, personnel and other expenses. Should we think about that kind of level going forward into 2019 and 2020? That's the first question. The second is in the global business, which slowed down a bit. You mentioned the auto plus six in Q3, but it seems that was higher actually than the other parts of industry. Was there a sort of wider slowdown, not just in auto? The third question is on FX. I hear what you say just now, Adrian, but your dollar costs must have increased and was because of the FX depreciation against the US dollar. Was that part of the gross margin squeeze that we saw? And is it just chemicals that you pay for in dollars?
My fourth and final question is, can you give an update on October trading, if you're able to do that? Thank you.
Okay. I'll take the first question on operating costs. I guess, we have a high leverage in the last years on improving our efficiency. We have several project running also to offset the other costs. I guess, guidelines are 50% in this magnitude. Could be fair to say it's 2019, probably also 2020. We have to see. We have enough capacity to invest in future without over-leveraging this 50%. Yes, you could assume we're going this direction.
Maybe on the foreign exchange impact on particularly the US dollar and then in relation to the material margin. The foreign exchange impact per se is not material. Where we, of course, have a bit more of an issue, this is rather short term, is in markets where, for example, in Latin America, where a lot of the raw material costs are actually US dollar-based, which means we have to even more strongly increase prices. In these markets, they're basically used to doing this. There is some slight impact, this is not material.
Okay, to the question of the global business, yes, we had over years double-digit growth with automotive. Now the build rate comes back. We are single digit, high single digit. Yes, it hurts, and with the new models, we can increase, as I said before. Beside auto, you surely aware that the wind energy here in Europe dropped quite significantly. We had a big share there. For the next three, four months, we think it slowed down, but it will come back. Also in China, it already started to rebuild the wind parks. From that side, it's a combination a bit between wind and auto. On the other side, we have good run rate in the bus manufacturing, rail manufacturing. We're also strong in appliances. It will settle up a little bit in all the different issues.
Overall, we still feel strong with 6%-8% growth rate also in the next months.
Thank you. Just the last one on October trading.
Here, some of your peers also made some rather cautious remarks. The second question, how satisfied are you really with the capability of your sales force and also your industry to increase prices? You announced price increases in both Europe and North America already in May, but I'm actually not really sure whether we already have seen any impact of these price increases in the Q3 results.
Do you agree that probably your whole industry should be a little bit more active or proactive in increasing prices going forward? Thank you.
Thanks for reminding me that we have other cost increases. It's nice to have that. I thought I have a nice afternoon, but yes. We have this situation in Germany where we have 3% more costs on personnel costs. We know that one of the biggest challenge is transportation cost to get it. On the transportation cost, I think it's easier to hand it over to the customer because they are clearly cost allocated. Here we are strong and fighting. On the personnel cost, we have to find efficiencies, therefore, we go down with efficiency. We push efficiency, so to set off our additional costs. I guess that's the measurement we have to do. Regarding the nice clash with the price increase, if I visit customer, they say, "Don't come and show up again." Usually we have the third price increase.
Sometimes we have to see, we really can leverage our prices. We can demand bigger prices. As I said before, it's the third price increase or the fourth price increase in certain material, and we just can continue to do that. Usually you have three, four months period where not just can go back. I feel one of the strong suits we have in industry or in our building market is a very strong sales force, and confident that at least compared with our competitors, we increase prices. It's clear Sika is the market leader throughout the world. The market leader has to increase the prices. I fully agree, our competitors should do more, so it would be easier also for us.
Okay. Very clear. Thank you, Paul.
Okay. Thank you, Bernd.
The next question is from the line of Daniel Jelovcan from Mirabaud. Please go ahead.
Yes, good afternoon. Hello as well. Just one question, a tiny one left. On Argentina, you mentioned quite a strong business there too. Just today, one bigger company, not in your sector, had a substantial profit warning because of IFRS. They had to restate all sales and EBIT because of the hyperinflation. Actually quite a complex topic. Can you, maybe Adrian, guide me or teach me on, is that something which affects you as well? Thank you very much.
Well, the rule is if there is three years in a row of more than, I think, 30% or 40% inflation, you do apply this hyperinflation. It should actually not have material negative effect on the P&L. It means basically inflation adjusting parts of your balance sheet. We are applying this as well, but it will not have a material effect on the P&L performance of the Argentinian business, nor the group, of course.
Okay. Yeah, thanks. Very clear. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We have a follow-up question from the line of Erik Karlsson with Industrial Equity Partners. Please go ahead.
Thanks for being patient with me and answering all my questions. Very impressive cost containment at the SG&A line where you have grown at only 50% of organic sales growth. Do you think that's sustainable also going forward?
Yes. We will work on it. I think we are confident. We have lots of leverage in our factories. Yes, we will go there as said before.
Very clear. Thank you. One more, if I may. You commented on that the price to raw material spread, if we look at those two together, will be negative in Q4, but less negative than before. Do you think they can be positive already in Q1 next year if you just freeze raw materials where they are? Should it take a little bit longer during next year?
I think this is possible, yes.
It's our clear target to turn it around as fast as possible. Yes, this is clearly the target doing this possible.
Fantastic. Thank you.
Okay. Thank you, Erik.
We now have a question from the line of Patrick Rafaisz with UBS. Please go ahead.
Thank you, good afternoon, everyone. Looking into 2019, you have mentioned also the capital markets day that you will provide new midterm targets. Does the fact that we will probably end this year with a lower margin, unlike the initial expectation for this year, does that affect in any way your thinking or planning around the new targets? Do you think this is such a short-term issue, and as you just answered in the question before, it could be recovered by Q1 already that it won't affect your midterm planning at all?
Thanks for the question, Patrick. I think therefore we have long-term planning, we are in the process now to discuss it, to define it. There are certain elements in there, how acquisition strategy, what plays in the game. We'll come out with our target in the moment we confirm 2020 targets, we continue with that, we'll enter as soon as we know more. We are positive to go in the right direction.
Okay. Thank you.
It-
Just one more. If I think about the bridge for 2019, it seems that the M&A dilution has become smaller from maybe 70, 80 basis points in H1 to maybe 40, 50 basis points now in Q3. Should we assume that the dilution gets smaller and smaller in the next one to three quarters as well, assuming no major deal? Would you then say that you have half a percentage point of margin improvement in the bag anyway, just from the space?
As you know, that is one of our strong suits we have. Each acquisition usually have to work for a year or two to bring the margin up to our level. I think the past showed it very good. We have now two acquisitions this year where the dilution, as Adrian explained, is already there. Yes, we will continue to bring them up to our level as we did in the many acquisitions. Looking forward to 2019, the question is what kind of acquisition we have, so we cannot answer. Question is, can we really go up if we have another acquisition? Yes, we are able to increase the margins of the candidate we acquired.
Okay. Thank you very much.
Thank you.
We have a follow-up question from Martin Flueckiger with Kepler Cheuvreux. Please go ahead.
Thanks for taking my follow-up question. Just going back to your performance in Canada, if I remember correctly, I think in Q2 or Q1, Canada was a bit of a problem child in the North American market. Now I realize the U.S. is much bigger and it's thriving, but how's Canada been doing in Q3 and what is the outlook there? Talking about Canada, could you also elaborate a little bit on your outlook for Brazil, because looking at the economic situation there, it doesn't look like you're going to get much tailwind at least, let's put it that way.
Starting with Canada, yes. We have a tough year like many. I think the build rate, everything is very constrained in Canada. We manage a small growth rate, not on the level we would like to be. We have certain measurements in, we have certain new projects in. Yes, a tougher market, I agree. For next 2019, we are rather positive that this turns. Now is the third year Canada is more or less a little bit in a recession of the country. Confident we can continue, but yes, one of them. Looking at Brazil, we have in the moment an excellent ground. Nothing shows with 8% growth rate. We are very confident after the bad years they have. So far we see no sign that we slow down, but as you know exactly, in these countries, we never really predict the next 24 months.
Thank you very much.
Okay.
We have another follow-up question from the line of Martin Huesler with ZKB. Please go ahead.
Yes, just a minor financial question. What about cash flow after the first nine months? You didn't show any number. What's the trend according to expectation and according to EBITDA? Maybe for the full year, what do you expect at the end of this year, the level of net debt to be?
On the cash flow, cash flow development is positive. We're not reporting these numbers in detail. The gap in the first half year to the last year has basically vanished in spite of the CHF 70 million lease buyback we did in the first quarter. In terms of the reported net debt, I'm expecting this to be a little bit shy of two times EBITDA.
Okay. Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to management for any closing remarks.
Thank you very much, and thank you. I think from our side, everything is said. We thank you very much for your interest, and like to say goodbye to you. Bye-bye.
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