Dear ladies and gentlemen, welcome to the conference call of Andritz AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode, and after the presentation, there will be an opportunity to ask questions. If any participant has difficulty seeing the conference, please press star key followed by zero on your telephone for operator assistance. We will now hand you over to Wolfgang Leitner, who will lead you through this conference. Please go ahead, sir.
Thank you very much. Good morning, everybody. Welcome to our Q3 conference call. I hope you are safe and have adjusted to the second wave. I'm sure when we are ready to enter the third wave, we already will have developed a good tradition of how to cope with these circumstances. If you'll allow me, I would do some general remarks in the beginning before I take you through the presentation. I think Andritz has managed to cope reasonably well with this crisis. We started with cost containment measures at a very early stage based on certain assumptions we had made in regard to how the business could develop. We intensified then these measures, obviously, as the full impact on the global economy has been felt. I must thank our employees. They were acting extremely professionally, extremely committed way.
They were hanging in construction sites across the world in countries with, I would say, not fully developed health systems. They were willing to spend two weeks in a hotel room in quarantine to be able to enter China, for example. I think without this commitment of our employees, we would look very differently when we report on this third quarter. With regard to the Q3 results, I hope I can say that it was a good quarter for Andritz. After a rather low order intake in Q2 of about EUR 1.2 billion, we achieved a good order intake of roughly EUR 1.7 billion in Q3, with basically all business areas achieving good order intake.
The solid performance with regard to the order intake of Hydro is here, especially mentioning, I'm glad that finally I could deliver on my optimism from the last several quarters where I said I'm optimistic that Hydro will improve and increase their order intake. We booked some larger orders and achieved overall, made good for the shortfall of the first half of 2020. Now after nine months, the order intake is basically unchanged compared to the same period as last year overall. It's also important to note that the order intake of Schuler has been reasonably good in Q3, a bit higher than in Q3 of 2019. We won some sizable orders from well-known electric vehicle or battery electric vehicle manufacturers.
I think it's also of interest to say that about one third or slightly more than one third of Schuler's order intake in the first three quarters has come in connection with e-mobility, with battery vehicles or hybrid vehicles. I think that shows that there is also hope for the automotive industry and the suppliers of the automotive industry, to which Schuler belongs. On the revenue side, we've been able to proceed on our major project sites without major delays, despite all the challenges and travel restrictions and immigration issues that I've mentioned before. Group revenue basically reached the same level as last year, around EUR 1.7 billion, especially driven by the execution of these large Pulp & Paper orders. Good sales generation and continued cost discipline led to a strong development of our operating result, the EBITDA, and the corresponding profitability. Liquidity position continues to be good.
Solid net working capital was certainly impacted to a certain degree by the progress of our large POC projects, leading to a reduction of POC payables and an increase in work in progress, as well as advanced payments to our suppliers. Everything in line with the regular project development. Nevertheless, both net working capital as well as cash flow from operations have been basically the same level as Q3 of last year. So far my general comments. If I now may take you through the presentation, starting on page three. As mentioned, group order intake EUR 1.7 billion. Pulp & Paper is down compared to last year's quarter, from a very strong Q3 2019. Metals declined due to Metals Processing. Metals Forming year-on-year is up. Hydro is significantly up due to some larger orders, which we finally obtained. Separation slightly increased also.
Revenue, same number, EUR 1.7 billion. Strong increase in Pulp & Paper due to order backlog execution and a decline in the other business areas. EBITDA at EUR 104 million after having provided for restructuring costs to the extent of EUR 26 million. As I said before, I think the result of good and early cost containment. EBITDA margin adjusted for these provisions at 7.8%, and the reported EBITDA margin is 6.2%.
On slide five, now starting with details. Order intake down 18%, but still with EUR 1.7 billion at a very good level. Four times 1.7 is EUR 6.8 billion, that certainly is a very good order intake for us, the EUR 2.1 billion of Q3 2019 were definitely a peak, a quarterly peak. If you look to the middle, you see Hydro up from EUR 343 million in Q3 2019 to EUR 469 million in this year's Q3. Overall, a good order intake.
On the right side, you see that the year-to-date numbers for three quarters down from EUR 5.8 billion to EUR 4.7 billion. Again, the EUR 4.7 are a good level for our business where we are. On slide six, you see the quarterly development. On the right side, perfect balance between developed markets and emerging markets, 50/50. Overall, very stable with certain fluctuations, typically between South America and China. Here, China is on the higher side, and South America is on the, not really lower side, but not as high as it has been last year due to these larger pulp projects. On the lower left side, some orders to reference. We got a pumped-storage Hydropower plant in India. We got major turbine refurbishment order from Canada. Press lines, as I said, from electric vehicle manufacturers.
By the way, also battery lines, cell housings for batteries for electric vehicle manufacturers or their battery suppliers. Sold flue gas treatment system for waste management facility in Singapore. You remember that we are executing the largest waste water treatment plant in Shanghai currently. Also got the first part of an order for railway wheel production, which is a joint project between the old ANDRITZ Metals and Schuler. Slide seven, the revenues. Very stable on a quarterly basis and slightly up, but basically stable on the year-to-date basis. I think nothing else, especially to be mentioned here. Maybe, yes. I would say slightly surprising to us that Capital has held up very nicely in revenues. Obviously, order intake has been affected by COVID.
Service was affected somewhat in the range of roughly 10% due to limitations of access to mills to do refurbishments, and also due to lower utilization rates of the mills of our customers. Lower need for consumables that resulted in a slightly lower service. Revenues, you see it on the next page, slide eight, that if you compare Q1 2019 with Q1 2020, that was basically stable. Q2 and Q3 were both about 10% below the corresponding quarters of 2019. Overall, that led to a reduction of the share of our service sales from 40% of total sales to 36%. In absolute numbers, a slight decline in service sales.
On slide nine, you see that this basically is true for Pulp & Paper, where the service share went down from 51% to 40% because it was basically two developments which had the same effect of reducing the share of service. Service one is the substantially increasing revenues for our capital business. The other one, as I said, was a slight decline of service revenues for the Service business. For the other business areas, basically has been a very stable ratio. Slide 10, order backlog. Picture is also, I think, slightly now declining, obviously, from this peak order intake that we had in 2019. With EUR 7.3 billion, still a very good and comfortable order backlog. Slide 11. Profitability and EBITDA. Before restructuring expenses, we went up from EUR 102 million to EUR 130 million or from 6% to 7.8%. Obviously, we like what we see here. Very good development.
The reported EBITDA obviously is heavily impacted by substantially different restructuring expenses. We booked EUR 95 million in Q3 2019, whereas we booked only EUR 26 million in Q3 2020, the reporting EBITA obviously is much improved. As I said, I think the more relevant comparison is before these restructuring expenses. You'll see the breakdown on the right side. Approximately 60% of this EUR 26 million went into the Metals business area, but also Hydro incurred some sizable restructuring expenses. On slide 12, same picture for the first three quarters. Here again, the EBITA margin went up from before restructuring expenses from 6% to 6.5%, reported from 3.9% to 5.8%, still there is a sizable difference in restructuring expenses. In the first three quarters, we have booked about EUR 35 million of restructuring expenses. You probably will ask, what do we expect for the fourth quarter?
It will be, I would say the EUR 35 million probably are a little bit less than half of the full restructuring expenses that we plan to book in 2020. Obviously, it depends not only on what we want to do, but also on what we can agree with workers representatives, unions, et cetera, in a binding way so that we can book this provision for the restructuring expenses. So much that. On 13, you see the breakdown of profitability and the EBITA between the business areas. Pulp & Paper, Q3 were 10.2%, very good profitability in spite of the higher share of capital. Keep in mind that this went down from 60% to 40%, which obviously has just a diluting effect on the overall profitability. First three quarters, 9.6% or 9.4% after restructuring. Metals, still struggling.
Still in the first three quarters, slightly negative before, or let's say a red break even, I would say, before restructuring expenses. Q3 already is somewhat better. We hope that we can stabilize this level to a certain extent before we hopefully see the effect of the restructuring expenses. Hydro, 5.8% better than year to date, 5.3%, but obviously, not exactly where we want it to be. For the balance of the year, we expect probably a further slight improvement of this margin. Separation is doing well. Excellent quarter and excellent profitability for the year to date nine periods. I hand over to Norbert Nettesheim, our CFO, who will take you through the next several charts.
Good morning also from my side. Let's start with chart 14, which shows you the bridge from the operating results to the net income. Start with the EBITA of EUR 278, which you have heard already. This is compared to last year, a significant increase, but mostly coming out of this reduced non-recurring and non-operating topics. Going to the left, the depreciation is lower than in the last year. It's only EUR 126, which gives us a very good development in EBITDA, which is more than EUR 80 million above previous year's number. To the right, nothing really exciting to be reported. The regular depreciations of about EUR 55 million compared to EUR 60 last year, slightly increased, but due to the regular effects which we have in this position. We have this year, a small position in the first three quarters on impairment of goodwill.
This is a small foreign operation, which we have value adjusted simply due to the expectations for their cash flow for next year in this operation. Gives us an EBIT of EUR 218, which is significantly better than last year. We had EUR 93 last year after Q3 financial results slightly improved also by about EUR 7 million, and taxes with a constant value of 30%, simply calculated on the EBIT, which leads at the end to this EUR 134 million of net income, which is compared to EUR 40 million in the last year, also significantly increased. Next page is the bridge from the net income to the operating cash flow, this EUR 134 net income at the very left you have seen and I have explained.
We adjust the non-cash relevant elements in the P&L, which is not very exciting positions and mostly in the range as of positions in the last year. We come to a gross cash flow of EUR 446 million, which is EUR 80 million higher than in the last year, simply driven by the better net income, which we report. From this gross cash flow, we have, unfortunately this year in the first three quarters Consumption of cash by increase of our net working capital. Here in the last year, we had just the other way around, EUR 153 million tailwinds by the reduction of working capital. This year we have EUR 108 million headwinds from the increase of working capital.
As you know, our business is highly driven by these huge capital projects, and the net working capital position is fluctuating very much depending on down payments, which we receive mostly shortly after receiving major orders, and then later on from the consumption of this cash in the regular order execution. Cash quarter- to- quarter, we have here some fluctuations. Overall, for the total year, we don't expect very much impact from a change in working capital. Our net working capital target is still at about EUR 600 million, and as we had it at the end of last year. Here I can, let's say, give a short outlook that we are heavily working on keeping this target in the next quarter. The rest of the positions are also regular positions. Interests are not very much changed to the previous year.
Taxes paid a little bit lower in the current year, which gives us then a favorable and comfortable cash position of EUR 255 also in the first three quarters of the current year. This leads to page 16, to a still favorable financial position. EUR 254 million net liquidity out of EUR 1.5 gross liquidity and EUR 1.3 gross debt. Here we had some repayments of debt, but also some currency effects, which were not the same on both sides of the balance sheets. Overall, this nine million increase of net liquidity is influenced by EUR 80 million of unfavorable cash developments. Otherwise, we would show here a much better number, which would be much nearer to the cash flow development, which we showed you before. Overall, we feel very well with the EUR 254 million net liquidity, which we still have in our hands.
Here also the projection is that it will increase at the end of the year. With regards to the grand overview, I quickly can summarize on page 17. Very satisfying order entry compared to the recession and the whole situation where we are in. Solid backlog. Stable revenues. Significantly improved EBITDA. Improved EBITDA before adjustments, which gives us an also very favorable development in net income at this side of the P&L. With regard to the cash situation, also a satisfying total situation with a very stable total working capital. So far about the financial numbers. Let's turn back to Dr. Leitner.
Thank you very much, Norbert. Yeah. Continue on page 19. Briefly take you through the business areas. Pulp & Paper , I think everything's going well. Good profitability. EBITDA margin 10.2% in Q3, 9.6% for the first three quarters. Still up from last year. We continue to do some business on COVID also with the mask production lines that we are selling. I think 21 or I think a few more in the meantime have been sold already, which shows how fast we can act and which is also a good opportunity for this Italian company, Diatec, that we had acquired a few years ago. Which has developed these mask lines to establish new relationships with global top providers of diapers also, where we hope to expand also the regular product line. I think overall, the field of nonwoven is booming.
We will exceed, definitely, we'll probably make EUR 150 million order intake just for nonwoven. For the nonwoven division, which includes these mask production lines also. A very good development. On slide 20, Metals obviously are a continuing challenge. We are doing a very substantial restructuring on the Schuler side. We need to adjust to a lower volume, and we need to reduce our presence in Germany to be more cost competitive. I think the highlight is that the EBITDA margin before restructuring measures or costs is with 2.7%, 2% positive in Q3. It's slightly negative for the year-to-date number. We expect it to be slightly negative for the full year. Very little only. I think looking forward, we are facing the challenge that a certain one-time cost reduction effects in 2020 will expire or will not be available next year.
Others continue to be available in Germany, for example. We are concentrating on making all the temporary effects to make them permanent, going into the next years. I think that's the main goal currently that we are pursuing. You see the declining number of employees, obviously. I think that's it. On Hydropower, we are executing some orders with a somewhat lower gross margin. Therefore, we see a slightly lower profitability than we usually see. Q3 showed some upswing already with a 5.8%. Q1 to Q3, 5.3% is certainly not satisfactory. We are reasonably optimistic that we can continue with this upward trend in Q4, so that the full year profitability should be, not dramatically, but somewhat better than what is shown here. Good order intake, we have this offset. I hesitated to say that, but I continue to say it. Some larger orders still to be expected.
Obviously, a little bit more complicated because of COVID, also because of some political issues in some countries where these projects would be realized. We continue to be confident that some larger orders are around in the next one to three quarters. Slide 22, Separation. Good development, very good profitability. Slow organic growth, but definitely a certain growth. Stable business with many different segments, as you probably remember. High service share. It's our smallest business area, but it has above-average profitability, and we see good growth opportunities, organic, inorganic. We definitely are happy with this, provided this trend and performance continues. The outlook by business area on slide 24. Paper, reasonably good project activity. Obviously, we had now two years of very high ordering intake. That certainly will not last forever.
It's a mixture of various projects, so that we still continue to be optimistic, including this high activity in nonwoven business. Metals Forming, slightly improved. Remains to be seen how it develops. I think the ones that feel that are following the automotive industry, we have seen that the guidance has been improved by the main German suppliers, at least OEMs, substantially. They had obviously a very good third quarter. Whether that was dominated by a catch-up for the lost second quarter or whether that is a sustainable trend remains to be seen. In my meetings with the automotive people, I think it's dominated by uncertainty, hoping that this is now stabilizing, but still a certain level of skepticism also. We just need to see.
Again, with our very good presence in e-mobility, as long as cars are purchased, I think we should be in a reasonably good shape. In Metals Processing, obviously suffers from this slump in the steel industry and also the stainless steel industry. It's a low level of projects. As a consequence, very high price pressure. We'll have to expect a few more slow and difficult quarters. Hydropower, overall reasonably good environment. Hydropower is currently fighting to make sure that European Union does not see it as a transition technology, but as a sustainable technology, because the Greens obviously are split. Apparently, the split of the Greens for wind power is slightly smaller than the split of the Green parties regarding the hydropower, they are more skeptical there.
On the other hand, there are many projects in Asia, for example, that we expect to proceed, in spite of the globally reduced electricity consumption due to COVID. Clearly, short term, that is not a favorable factor in demand. Separation, good project activity, both for the Separation equipment, but also for feed production equipment. To conclude, outlook on slide 26. What is our agenda? As I've said several times today already, secure the appropriate cost structure for 2021. We want to be conservative in this regard. Obviously within this task, which really applies to all four business areas, within that, obviously, the focus is on Metals Forming and on to much less extent on Hydropower, where we definitely need to improve our profitability so that also our group profitability hopefully goes up again. What is our guidance? With margin guidance, we've slightly increased last week.
We had to publish it, we apologize for that, but you were too pessimistic in your consensus. Michael Buchbauer got very concerned and convinced me that we need to go ad hoc and publish the results. The adjusted EBITA margin 2020, we expect to be more or less unchanged compared to the adjusted EBITA margin 2019, which was 6.8%. The reported EBITA margin after extraordinary provisions for restructuring, expected to be stable or slightly higher compared to 2019, where the reported EBITA margin was 5.1%. The group revenue we expect to be slightly lower compared to the EUR 6.67 billion. Much my presentation report, and I look forward to your questions.
Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question has answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question.
No questions?
We do have questions. We're just waiting for them to come in. The first question is from Sven Weier, UBS.
Yes, good morning. Thanks for taking my questions, Wolfgang Leitner. There are three, and I maybe ask them one at a time. The first one relates to the Schuler restructuring, and now we've had the second quarter where the EBITA outcome was somewhat better than expected, so no further setbacks. You talked about near-term stabilization in this, and then later on improvement towards the margin target. Just wanted to check in again with your confidence, the evidence you may have that we now have reached a kind of a more stable path also going forward, and that we should not expect any other setbacks as we've seen in the last couple of years. Maybe when you look at the backlog of Schuler and Metals overall, maybe do you think that the lower margin contracts are now behind you so that you can really look forward?
That's the first one.
Yeah. Obviously, easy question, difficult answer. What are we doing? We are reducing or lowering the break-even point of Schuler substantially. Having said that, currently we think that it is low enough, or we will be in our capacity by the end of next year when all the restructuring actions are really fully in place and are seen on the regular current quarters, that we should have a reasonable low level of break-even point. With Schuler's high market share for these larger automotive production lines, inevitably Schuler will always depend on the market. There's not enough room to say, "Okay, we hope to increase our market share. We have a better product now, and because of that, we think we can increase our market share." Schuler has a very high market share, and therefore for this automotive part, this top end of automotive production lines depends on market.
To achieve an attractive profitability in a range of 5%, 6% plus, requires certainly a certain uptick in the market, upswing in the market. When will that come? We all can speculate together. The same qualities are, as I said, third quarter has been good for the automotive industry. China is developing reasonably well. Yes, could be that new investments are starting, but can I bet on it? No. I hope that these disappointments, negative deviations, negative surprises, if you mentioned, that they are over. That we are, I would say, break even. We certainly hope that we can gradually, step by step, in small steps, increase this from break even over the next four quarters. That's the plan. I also don't want to promise too much in confidence where we are with Schuler.
What I can definitely say is that we are far ahead of our schedule with regard to restructuring, that we have a very good cooperation with workers and representatives with unions. We are not the only ones that have to resize in Baden-Württemberg, and therefore, the public environment is favorable for this type of restructuring. It's also obviously supported by the short work week subsidies and supports offered by the German government. For the other part, Metals Processing. In simple words, a similar thing applies. The same applies. Markets are very difficult. We expect a low level of new projects as we go forward. We have increased our presence on the aftermarket side. There where we have had, due to low utilization of certain steel mills and actually closures of certain steel mills, we had to adjust there also our capacity.
The profitability of this aftermarket service segment of Metals Processing has been lower than usual. That should change as we go into next year, and I would say by the middle of next year. I think there I would see some increase in profitability. If that would be followed by gradual increase in profitability by Schuler, I think we should have a good chance to see one or the other percentage points of higher profitability next year for the Metals business area as a whole.
How do you feel about the quality of the order backlog? I think that was also an issue in the last years, right? That you had some lower quality, low margin orders that had some setbacks for you. Do you feel that this has improved?
It has not become worse, for sure. Has it dramatically improved? Dramatically, certainly not. Maybe slightly. I think in this Metals Processing part, we have been able to get rid of certain problems, risks. We're not fully through with others. Schuler, obviously, the prices we achieved. Schuler definitely, with regard to order intake, as far as we know, has done much, much better than their main competitors. One of their main competitors, as we know, has order intake of -50, - 50%. Obviously, this doesn't come by itself, but this comes if you offer low prices, and therefore the backlog certainly has low margins. The plan has always been we can live to a certain extent with low margins, provided they are not doubled by under absorption in the respective locations. On the top of cutting half, I would say, or taken away by under absorption.
That we are taking care of. Clearly we just this week, we had budget discussions, and Schuler was yesterday. Obviously, we have said that we need to now try to be a little bit more resistant with regard to discounts compared to what we have been willing to offer last year, for example.
Yeah. Thank you for that, Wolfgang Leitner. Mm-hmm.
We need to really be back to the old profitability. We do our homework, we need a pickup in volume to be really profitable and we need a few, let's say, somewhat better prices. Obviously, we are reducing the cost of our product at the same time. That, taken together, should improve the quality of the backlog also.
Yeah. Thank you for that. The second question ties into restructuring, but more on the Hydropower side. I think here you are a little bit later than with Schuler. I was just wondering now how confident you are there in the negotiations with the workers council and looking forward on that one.
Yeah. We've published certain things already. We had to publish in Austria, for example. We do it in several different countries. We are simplifying the structure. We're also liquidating certain companies in countries where the level of business has been too small or is too small. I think the better part should be on the way this year. Will we be fully done? The effects we should see before middle of next year. Are we fully done there? Not quite fully. I probably would think a little bit more can come, but nothing dramatic. Obviously, Hydropower has never been close to the low profitability that Schuler has been. It's more a question of fine tuning and optimizing and adjusting to a somewhat lower volume. I think we lag a little bit and have lagged a little bit behind in adjusting to the lower volume.
Okay. I know it's a little bit too early to look forward to 2021 in the margin. Also, I trust you provide that in March. If I summarize what you've just said on Schuler and Hydropower, I guess you have some little tailwind from restructuring next year. I guess the mix wise, and this year you actually had the headwind, as you said, from the equipment side and from the mix. I guess service should catch up next year. The backlog quality is a little bit better. Sounds like we could expect some further margin improvement then next year overall for the group. Is that a fair statement?
Yes. I would hope for, let's be specific, for Metals and for Hydropower. For Metals, I definitely would hope to see, what I'm going to say, one point, two points more for sure. For Hydropower, hopefully one point more or something like that. This is really nothing you should count on. I mean, obviously we are not planning to stay as we are. Obviously we have plans. Obviously, the results can only be positive if we get the support from the market, that COVID at some point is stabilizing. Because clearly we have limitations to access the mills, to do service work, to do refurbishments. Obviously, also the development of the early phases of projects suffer from the lack of being able to travel both ways. Nobody can come from Asia and we cannot go to Asia unless we spend two weeks somewhere before and so on.
That obviously still are headwinds and, although in spite of that, our goals are to improve profitability. Yeah.
Yes. Thank you. My final question is on cash and cash conversion. I mean, last year, I think you introduced that also to specific incentive for your management level. As far as I can see, at least in the underlying working capital, you've already seen some improvement compared to the past. I was just wondering how you look at further improvement potential here. Maybe also with a view to incentivization of management maybe also next year. Do you see there further steady improvement potential on the working capital side?
I think what we can do is, and what we are doing is, incentivizing the management with regard to things they can influence. The cash or the cash flow is, in our case, so dependent on the aggregate of cash flow on large projects. It depends on down payments and exactly when are the progress payments and so on. I think we are making good progress on our payables. We are managing our inventory. I think recently good on receivables. Down payments is difficult to forecast because it really depends on when the orders are coming to force. If we continue to get a reasonable amount of larger orders in a reasonably stable timeframe, I think it should stay at least the same. Whether we can further improve it is questionable, I would say.
It's possible, but we have to live with certain volatility in this regard, for sure.
Yeah, absolutely. That's why I was more referring to the, let's say, the working capital outside the, let's say, project working capital that is more influenced by the down payment.
Yeah. No change with regard to the execution. Typically, if in the beginning of a large project or a large order, we are cash positive, then for, let's say, two quarters in the middle of the execution period, we are negative, and then we hopefully get positive towards the end, depending on where the costs are. It really depends on the mix of large projects. Now we have, as you remember, we had high order intake recently that obviously had some effect on the net cash flow of these individual projects and overall also. If Hydropower continues to get some larger orders and if Pulp & Paper gets one or the other of these large orders, then we should probably be stable, maybe slightly better, but not dramatically.
Okay, that's all. Thank you, Dr. Leitner.
Thank you.
This question is from Daniel Lion, Erste Group. Your line is now open. Please go ahead.
Yeah, good morning. Thanks for taking my question. I would like to start with the Pulp & Paper and Services business, in terms of the recent development, we've seen that Services is, of course, hampered by travel restrictions. Would you expect this to become worse? Going forward, would there be a pent-up demand that would, maybe in the short term, increase Services business than once the travel restrictions are eased somewhere hopefully next year?
Yes. Clearly what we have seen is that the shutdowns of pulp mills, which is quite a sizable part of our aftermarket business in Pulp & Paper, these shutdowns have been postponed where they could be postponed. You can only postpone them by three to six months, basically. In March, we have made certain assumptions, and in simple words, it was that Q2 and Q3 would be terrible with regard to new orders and also with regard to what we can do on the revenue side, on the service side. We had the assumption that Q4 will be substantially better. Do we still have that? Not really, I would say. I think Q4 will remain quite quiet, most likely. Let's see. Q1, these shutdowns have to come. Because of that, the following shutdown then will also be postponed by three months or six months.
It's not really an issue. It's like in tourism. Probably we have lost one quarter of shutdowns. In simple words, yeah. Obviously, it's not the dominating part of the aftermarket business, but it's a sizable part. Other than that, I think we have seen the effect of the lower utilization rates, lower production of our customers, that we think it will go down further. I think that may stabilize on this level, and, but at some point, that should go up again.
Would you have the capacities to over supply services once it's possible again?
Good question. To a certain extent, yes, but not indefinite. Not without any limit, yes.
Okay. Coming to the automotive business, can you give us an overview of the market activity based on regions currently?
Yeah. Roughly, Europe is 40%, North America, roughly 25%, China, probably 30%, and what is missing, 5% would be the missing is the rest of the world.
Do you see the order intake dynamics to be, in the meantime, spread rather evenly, or is it rather a Chinese or Asian topic at the moment?
No, it's Europe and U.S., as I said. I mean, three quarters of the order intake come from Europe and North America from metals.
Oh, yeah. Okay. Very good. One short one on the Separation. How sustainable would you see the recent margin developments? 10%? Is this the new reality, or is this just because larger projects were finalized?
I would prefer if you take, as a basis for your question, whether it's sustainable or not, the three-quarter profitability, how much has it been? This was 8.4%. I think that certainly sustainable. The 10% I would not take yet, the goal is it, yes. The goal is it to go up to that. There are no one-time effects or anything where we say, "Okay, we have to warn you that Separation will go back to a much lower level." That's not the case.
Okay, perfect. Last one, rather strategic one. Hydrogen. Is this a business area that you can think of expanding to diversify further?
Yeah. Which product would you have in mind for us?
I don't know. I haven't reflected on a specific product.
Okay.
We're seeing that the investments are increasing, of course.
Yeah. I would say we have with an eye on related technology, whether that's carbon capture and storage or sequestration in pre-combustion in power plants, whether it's conversion of CO2 into methane, whether it's biomass into methane. All that we have an eye on. We are following the hydrogen part because obviously, you could also say surplus electricity could produce hydrogen. That's something that Hydro Division is looking into. It is more, as I said, having an eye on developments. We certainly do not have a business plan how we could benefit from that. For that, I think it's a little bit early for us.
Right. Very true. Perfect. Thank you very much.
Thank you.
The next question is from Sebastian Growe, Commerzbank. Your line is now open. Please go ahead.
Yes, good morning. Thanks for taking my questions. The first one would be around the Metals division. When looking at the year-to-date staff reduction, it's down about 750 heads. In the earlier reduction target was about 500 at Schuler. Can you give us a sense how it breaks down between the Metals Processing and the Metals Forming business for the year so far? Where you would see the headcount trending by the year-end or early fiscal 2021? That would be the first question.
I would not want to be as specific with personnel numbers. The vast, vast majority of the risk of the downsizing in employees is in Metals Forming and not in Metals Processing. Metals Processing a little bit, but not dramatic. We are ahead of where we want to be in terms of reduction, and substantially more should be seen until the end of next year. More should be seen in the first quarter of next year, and then to a lesser extent over the following quarters. As we have always published, that will be done by the end of 2021 with a very, very small part left for, I think, H1 2022.
Okay.
This is not-
Yeah. No, go ahead, sorry.
Yes. Sorry. No, please, go ahead. Sorry.
The other question I will ask differently, simply of the intended savings, which eventually would equate, in a perfect world at least, a one-to-one way the personnel cost. The question is, how much of the intended savings so far have already come through? Would you say that until now there has been a very limited impact?
Yeah, we have two effects. We have seen a sizable effect from short work week compensation or unpaid reduction of work time, let me put it that way. Let's say it's probably for forming a range of EUR 20 million-EUR 25 million this year. That will need to either continue next year, which to a lesser extent will be the case. We have to, whatever they said, to get it from temporary saving to permanent saving, meaning that we have to reduce our workforce by that amount. Unless we think that the volume will pick up substantially, which we do not. We think we will stay on this level for the purpose of sizing the company or sizing our German activities in this case.
Yeah. Okay. Makes perfect sense. When it comes to processing, when you said that it was a smaller part, obviously, of the so far performed headcount reduction, can you give us a sense of the restructuring needs there? Because it seems really that the business has obviously come under pressure, both on the volume side, but clearly also on the pricing side as you also put it into the slide deck. Where are you standing roughly in terms of volume and then also profitability, if you were so kind to give us at least a certain indication?
It was profitable, but it was below the regular profitability. Regular profitability has always been below average group profitability. We typically had 5% EBITDA roughly, and it has been less than that recently. Restructuring expenses, I don't know, but I would say it's single-digit million EUR.
Okay. That's helpful.
No, that was EUR 5 million. Yes.
Okay, fine. I would move on to Separation. Obviously we have seen now a pretty strong margin recovery also for the last two quarters. It seems really that the business is going beyond what you had earlier, I think, envisaged as the margin target being the 7%-8%. Can you just update us on where you stand there and what sort of the current best guess sort of from your perception is?
I mean, first of all, we have struggled for long enough with regards to profitability. At that time, I said we need to turn it around first to reasonable profitability, then we can decide whether we keep it or sell it. We have achieved now a good profitability. As I've said in the introduction, I think we feel comfortable with it. We want to keep it, and we want to develop it. We continue to see good growth opportunities. We think we set our profitability goal, yeah, it should be not much below the 10% that you mentioned. I think for the time being that we would say, what is the guidance, Michael, say to guidance for Separation profitability?
It is around 8%.
Seven to eight and a half? Yeah, seven to eight and a half. I think, I would hope that we can deliver this upper end of this range. So far, no confidence that we increase the guidance.
Okay. That is clear. The final one on Hydropower. We have seen obviously also there pretty much of restructuring going on now for the last two years, three years even. It seems really the business is bottoming out at around EUR 1.2 billion or so run rate orders on a last 12-month rolling basis, that is. Would you say that the restructuring wouldn't necessarily say have gone too far, but that there is a good chance now with the volumes eventually going even a bit higher than the EUR 1.2 billion, that we should have seen definitely the worst in Hydropower with then also margins crawling up towards the former target of up to 8%?
No, we definitely have not done too much restructuring. I think we should have done a little bit more. Therefore, I think we need to do a little bit more of that. I would not agree with you that, let's say, the base level should be EUR 1.2 billion. I think we have a chance to be at EUR 1.4 billion roughly. That I would think it should be a reasonable level. Profitability, I think obviously, we are now below what we have given guidance, so we need to first get into the range that we have given the guidance. Can we execute a higher level of business? Yes, always. We always have a lot of flexibility. In our business, it is not that we are running machines that have a maximum production per day. It's a people business.
A lot is outsourced in purchasing. No concern whatsoever that we could not accommodate a higher volume.
Okay. That's very helpful. Thank you so much.
Thank you.
The next question is from Will Turner, Goldman Sachs. Your line is now open. Please go ahead.
Good morning. You've answered many of the questions that I had, which is good. I just have one left. Could you give us an estimate of what the value is or how much of the costs that you have saved from these kind of temporary cost benefits, whether it be the reduced working hours or lower marketing? Also, is it concentrated in any one division that we should rule out?
Yeah. A very broad question. If we take a look at our gross expenses and the effect of much lower travel costs, et cetera, and subsidies and so on, it probably was in the EUR 100 million range, yeah. Cost tailwind.
Okay. Sure. Was it concentrated on any one of the divisions?
I'm sorry. Not really, no. We had short work week subsidies in Central Europe, we had these temporary furloughs in the U.S., for example, we had sales, what do you say? Paying, basically, what you lost in sales in Canada, for example. They were very different things. That probably wasn't in that range. Yeah.
I know it's a bit early now, do you have any estimate of how much of these will come back next year? I know you've discussed about wanting to turn some of them into permanent savings, I can understand that, for example, travel expense, that would be quite difficult to become permanent in some cases, given that this has resulted in some low sales overall. How much of it do you think would reoccur next year, at the moment?
Our goal is very little. We will reduce our global workforce by 2,000, 3,000 employees. 2,000+ , I would say. It's always not so clear on our side, because we also have these clearly project-related people that are hired for a site, so that's not really a permanent reduction. In this range, obviously we have reduced our temporary workforce also quite substantially. We are reducing. I would say a certain smaller part definitely will come back, but I would feel quite confident that a bigger part of that should be permanent.
Does that mean that we should be expecting higher restructuring charges or some increased restructuring charges at some point in the next year, in 2021?
No, not next year. I think, as I said, we certainly should expect a sizable charge in Q4 of this year. Our goal is to put everything into this year, and as much as we see, as much as we consider to make sense. We are not having a limit on our restructuring costs because we don't want to incur more, but the only limit is what makes sense and what can be executed. The goal is that next year we can do without restructuring or with very little restructuring costs. Obviously, the effect will be seen next year on this.
Okay. That's very clear. Thank you.
Okay.
The next question is from Peter Rothenaicher, Baader Bank. Your line is now open. Please go ahead.
Yes, hello. Good day. I would have likely more flavor on the Pulp & Paper business. With the Q3 margin of 10.2%, this was really surprisingly positive, even considering that you mentioned lower service business and with the execution of the big pulp plant orders, normally profitability is lower. Perhaps can you give us here some flavor what was so positive to be able to generate this strong margin?
My two colleagues on the executive board that are running Pulp & Paper are not here, so all I can say is it was excellent management. No. You are right. I think we are running these projects, these orders, professionally with all the hiccups that are unavoidable. I think overall they are in good shape and are running well in spite of COVID and all that. Xerium is developing very nicely, above our expectations. Yeah, I think that's it. I would say it's a combination of Xerium plus improved profitability on the capital side of the Pulp & Paper business, which has overcompensated the drag on average margin because of the higher share of capital revenues.
Can we then have the hopes that in the next year, you're benefiting then additionally from better service business, that this margin level of 10%-plus is sustainable?
I'm happy that our main competitor has increased his profitability guidance to 10%-12%. History shows it takes them a few years until they reach it's good to know that your competitor has a higher margin goal. Am I confident this 10% can be maintained? Again, I made a mistake a few quarters ago that I said it cannot be permanent. I'm not saying that this time, but it is a high probability. Clearly, we have the goal to stay in this level, but I cannot feel like it doesn't make sense to say it will be 10% and not 9%. I think it'd be optimistic that we can continue on a very good profitability. If your competitor is on a similar level, that's a good sign, provided your costs are competitive.
Yeah. With the pulp project, you have still a strong order book, you are working it down. When do you expect is the peak sales level achieved? On the other hand, regarding the project pipeline, do you see the chance to get additional big pulp projects perhaps in 2021, to avoid here a stronger decline, let's say, from the year 2023 onwards and so on?
No, there are a few projects around. We expect, let's say, at the absolute minimum one, but most likely two of these large greenfield or brownfield projects to go ahead next year being booked. As I said, nonwoven, as I said before, is we expect it to continue on a level, not as high as this year maybe, but substantially above the, I would say, regular level. We are not dramatically pessimistic on new orders. With these large orders, you cannot say. It's a digital decision, yes or no, and depends on the project decision and on the supplier decision. We are not overly pessimistic with regard to the market development for next year.
Okay. You have not the fear that we will see perhaps in 2021 or 2022 a peak in Pulp & Paper sales, and from this level it will go down then?
No. Specifically, we don't have that. We don't plan for that, no. We had obviously a peak order intake of EUR 3.6 billion, I think, or EUR 3.7 billion last year, for Pulp & Paper as a whole. If that is converted into EUR 3 billion sales for Pulp & Paper, this could be a peak where sales would go down somewhat again. As I said, there are large projects around and there's no reason why we should not be confident that we also can maintain approximately this revenue level. Order intake will always have peaks and valleys, obviously.
In recent days, we have seen several messages regarding nice orders. You did not make the information how big these orders are, but in several areas, also hydro, Pulp & Paper. Can you comment what is then your expectation regarding order intake for the fourth quarter?
We will not be as specific, but I would say we are not desperate. Meaning it should be not a very bad quarter.
We have no further questions at this point. I hand back to you, Mr. Leitner, for closing remarks.
Thank you much. Thank you very much. Thank you.
Bye-bye.
Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.