Earnings Call: Q1 2020

Apr 30, 2020

Dear ladies and gentlemen, welcome to the conference call of Amrat Reiki. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Doctor. Leitner, who will lead you through this conference. Please go ahead. Yes. Thank you very much. Good morning, everybody. Welcome to our first quarter twenty twenty conference call. I hope all of you are safe and have been able to get through this, I would say, and certainly challenging times reasonably well, times where we get every evening the news an update on the mortality rates in various countries. And I informed that everybody is expecting the deepest recession since the Second World War. Obviously, causes a problem and a challenge going forward because I think what we have seen so far is that the supply side has been holding up very well, But the supply side makes all the sense to hold up when and if the demand side is there and is recovering. And I think there is it would be very important to not change the atmosphere in the mood and become more optimistic and as a prerequisite for increasing and improving the demand side. Now let's come to Andwydd. Before we go into the presentation, a few short remarks on a more general level. From our standpoint, first quarter results have seen obviously the impact from the corona crisis, first in China, February and in the March in Europe. Effects on the sales side so far has been minor. And as you probably have seen, order intake developed basically in line with the trend and the market conditions prevailing during the previous quarters, meaning solid market development for pulping equipment, challenging and very competitive markets for both metals forming and metals processing, continued rather slow market in hydro. However, and I will come back to that with what we think are good chances for second half of this year. On the earnings side, group profit primarily was hit by Schulda, which suffered from capacity under absorption and aggressive pricing, including Schuller's pricing due to the very weak automotive market. Here we expect some improvement during the coming quarters as the cost savings measures gradually and when I say gradually keep in mind this is Germany, the country of social plans and very complicated negotiations with workers' representatives as these cost savings measures gradually will start to bear fruits in the next several quarters. And Pulp and Paper remains our bright spot with solid earnings and profitability performance both in capital and in service. Liquidity of the group continues to be solid in cash flow and also net working capital remains stable at good levels. So far my general introduction and now if we move on to the presentation and also to Jens to some cautious words on the outlook as you probably would expect. On Page three, yes, Q1 at a glance. Group order intake, 1,900,000,000.0, good level, satisfactory level, but very different picture depending on the business area, very good in pulp and paper, thanks to booking a large order from European for Uruguay. Metals in booking, that's the only bright spot for metals, metals solid and hydro continuing weak. For the backlog, very high, 7,900,000,000.0. I think it's the third or second or third highest backlog in our history. Sales at €1,500,000,000 basically unchanged to first quarter of last year. No major so far, no major sales impact from the COVID-nineteen crisis. EBITDA is significantly down, as already said, due to Metals, mainly fuel oil, Pulp and Paper, continuing good profitability and profit EBITDA margin down to 4.6% after 5.6% in Q1 of last year. Some details, Page five, order intake, very good, plus 12%. But on the right side, you see plus 34% in Pulp and Paper, plus 4% in metals caused by a very weak and low order intake in Q1 twenty nineteen for Schuller, so a slight growth. And negative development in hydro minus 22% and separation minus 11%. But for both hydro and separation, we are not concerned about the order intake for the balance of this year and I will get back to that later. Slide six, quarterly development. You see last four quarters we had two very high quarters, Q2 and Q3 of last year, both about €2,000,000,000 thanks to our two large pulp projects in South America last year and this year, this will be more than for South America. I think that's probably on the regional side, on the right side, thanks to this large South American order, South America has gone up to onethree of our order intake, but that's driven obviously by one order. The rest is, as you know, pretty stable with a few percentage points variation from quarter to quarter. Slide seven, sales, flat sales plus 1%. Here, clear picture, Pulp and Paper increasing, the other three business areas decreasing overall balancing out. Slide eight, Service business continuing good development. We need to compare Q1 sales with Q1 sales in 2019. So it's flat, basically flat sales, minus 2%. We had a big jump in 2019 compared to 2018. The better part of that first time consolidation of Clarion, but also a very good otherwise a very good quarter. So services continues to develop quite well. Also, there is obviously an impact of COVID on the service business in regards to the field services. If traveling is between countries is no longer possible, if plants shut down their gates to people coming from the outside, Field service obviously has a difficult time that is definitely negatively affected. But overall, service is certainly expected to show a substantial higher stability in comparison to the capital business. Overall, Service is a growth story on our side. So the year is 10% per year growth rate. And due to the growth in sales, about slightly lower total percentage of 38% total sales. Business area quite different, Pulp and Paper 45%, for 52% even separation, hydro 33% and that is the lowest 23% on Slide nine of that. Slide 10, for the backlog, I think we have covered that very high with Hydro and Pulp and Paper accounting for the majority of this backlog due to their longest execution times, especially the larger workers. Slide 11, EBITDA down, holding up in Pulp and Paper, substantially down in Metals. Hyperl slightly lower and separation also slightly lower. With regard, I think, Pulp and Paper, no need to excuse anything or explain anything. It continues to be nicely profitable, above the market profitability. Hydro, we still continue to be above market profitability. But obviously, the shrinking market, the declining order intake, which gradually is translating into sales, has led to, I would say, a more challenging order backlog with regard to price quality. And that shows in this profitability, We expect Hydro to continue to be slightly profitable, to be a bright spot within the Android universe. But again, it's has become somewhat more challenging and we're doing our best to make sure that we execute the orders very precisely, avoiding erosion, and also if and when and where it's needed to continue to adjust capacities in various countries consolidating into lower number of countries' activities to make sure that we maintain a competitive cost base. Separation, I have no concerns. I think profitability this year should be at least as good as last year as last year, sorry. Slide 12, EBITDA bridge to net income. I just need to give you the breakdown graphically also. So from an EBITDA of 7.5%, 112,000,000 depreciation, 42% to an EBITDA of EUR 70,000,000 and IFRS three amortization, 16,000,000 financial results, 9,000,000 and tax rate 31% to the EUR 30,000,000 net income. Cash flow, Page 13, stable. You see the comparison comparable figures of last year. So depreciation, especially amortization has come down to €59,000,000 provisions similar to last year. And the other is I think is smaller changes. On the next page, 14, our financial position, gross and net cash. Gross cash, 1,500,000,000.0. Very happy that we have always had the policy to make sure we have a lot of cash. We obviously have to pay for that with the negative spread in interest rates. But with that position, we definitely have not to reserve any time for discussions with the banks to make sure that we can maintain our liquidity. Net cash has gone down slightly from €245,000,000 to $2.00 8,000,000 Quite a substantial part of that is exchange rate losses, It's part of that in Brazil due to the weakening of Brazilian real where we have a lot of cash in connection with the execution of the orders we have there underway. Page 16, summary of the key figures. The highlight is cash flow from operating activities completely same as last year. And compared to last year, obviously, net working capital has improved substantially compared to end of last year. It has been more or less stable. Can I move on to the business areas? And I think a lot of that probably resets. Pulp and paper, very good. Good order intake, good profitability. Service business, very important for that. And we expect, obviously and this applies to all of the four business areas. We definitely expect some impact on the capital order intake as a consequence of corona. And but we also expect an impact on the service order intake, but we expect this impact on service to be substantially less than on capital. And obviously, any impact on the capital order intake is translated into sales only over the next one to two years, let's say, one year. So the sales effect definitely will be smaller and lower than the water intake effect. So much about Pulp and Paper. Yes, here's a nice story. Think we have some two years ago, we have acquired a company in Italy, not in Lombardy, but in Pescara, the middle of Italy that is producing machines to produce diapers. And if you remember, we acquired that because we are very strong in the production step before that, meaning production of non woven fabrics. And in the beginning of this corona crisis, we converted the pilot machine or one of the pilot machines we have there into a machine that can produce face masks. And we have been successful to obtain also the raw material, are three or four different types of nonwoven fabrics and are starting to produce these face masks, and we have already started to sell this production equipment. These are not these are low single digit millions per production line, so don't expect huge impact on our group top line. But we have already sold several lines of that and hope to sell a few more as many countries have decided to start up domestic national production for these face masks. We are just in the process now of completing the development of this project products, getting the certifications that are needed. This would be this chiarurgical masks. So I think it's nice head on to what we have had running for a longer time. On Page 19, you see where it fits into the overall, let's say, chain, raw material, one of the raw materials is also cellulose. It was one of the reasons why we went into that. The nonwoven fabrication is what I just described, converting this production of, among other things, diapers, but also pads for face cleaning, etcetera, and then retail and distribution where we are not involved. So this was easy part, pulp and paper. Now we go to the difficult part, metals. Order intake has developed recently, but clearly, it's both segments, both the regular steel industry, but also and especially Schuler with the automotive industry are heavily impacted negatively impacted. I think I don't need to talk about the automotive industry, a very difficult situation. And question is certainly, is our restructuring plan from middle of last year that extended over twenty four to thirty months? Is it still sufficient or do we need to restructure more? Based on what we know today, from a financial side, it should be sufficient. We have some flexibility within these provisions. We are redirecting and reorienting certain of these actions. We have to adjust some areas a little bit more. But so far, we are within the original plan. Obviously, we would have preferred to be faster with these actions. But once you have agreed on the social plan, you have agreed on the plan and you don't want to reopen it, So we you will see from quarter to quarter from now on reduction of costs. But on a year on a full year basis, the majority of these earnings will be visible only next year. But from the third quarter of this year onwards, we should see some effect of these cost reductions. So much about metals. Hydro, have a challenging market environment. How is it affected by corona? Basically comparable to the other business areas, so quite substantial differences between the different countries, substantial differences between customers. Some are accelerating their refurbishments, some are asking to stop construction sites. It's really a lot of difference that can be seen there. Now being in renewable energy, obviously, it's an advantage. Looking at the energy consumption forecast for this year that assume minus 10% for North America, minus 10% for Europe. Globally, think it's minus 6%. Obviously, we'll not create a substantial push for additional investment. On the other hand, if governments decide to increase their investments from government side, renewable energy is a very good way to do that and still are in line with this sustainability plan of the European Union with the commitments for CO2 reduction. And actually, renewable energy consumption will continue to grow this year. So I think there is a we don't have to be too concerned, but I would not expect a huge jump in demand for hydro power. And again, as I said, yes, profitability is slightly lower than last year, but we expect it to stay solidly and attractively profitable in the foreseeable future, probably including or after some additional restructuring on the capacity side. Some of that is going on already. Some of that will be addressed once these limitations caused by short work week rules in various countries can expire. Slide 22, separation. Recent performance, order intake down compared to last year last quarter, first quarter of last year, but I expect good order intake for the second quarter of this year. So order intake is not maybe hit, maybe impacted by corona, but for, let's say, the first half of this year, it still looks quite good. Sales are slightly down, profitability also, but I would be negatively surprised if this year's full year's profitability would be below last year's, but subject to corona development and absent any second dip into lockdowns or something similar. Yes, outlook, obviously, we are affected by corona on Slide 24. We had a few temporary shutdowns, but we also managed to continue to run many of our production plants, including Northern Italy, through this crisis, but at a lower production with spread shifts so that people don't meet each other with partially short work weeks, vacation consumption, all the tools that governments or that are available to mitigate lower sales with lower costs. We clearly expect lower order intake for the coming quarters as I've said, more impact on capital than on service. What are we doing? We optimize short term cost reduction while keeping an eye on medium term requirements with regard to capacity containment, capacity reduction. So in many countries we have implemented short work weeks. We have as a certification phase, time credits have been consumed. All our global management group, including the Executive Board, has taken 20% pickup for at least the second quarter, maybe to be extended to the third quarter depending on how the situation develops. Obviously, we have had from the beginning of the year actually a higher increase and we will look into all our discretionary expenses into our contract personnel, etcetera, to adjust our cost base short term, we have very ambitious goals already for the second quarter. Whether we really achieve that remains to be seen, to be honest. It's we are in special times and you cannot extrapolate experience of the past and it's also a lot depends on some decisions on the national level so that we have as I said, we have ambitious plans, but let's see how much of that we can implement. Medium term, we need to follow very closely the order intake in the coming months because that will define the capacity needs for next year. And if we see the substantial impact on the order intake next two quarters, we certainly will adjust our permanent structure still this year to be in good shape from our expenses, our costs starting from the beginning of next year. Are we going to change our the principles of our strategies? No, we are not. We work we feel we are in overall in good positions. We work very closely with our customers. We have some very good results on the large construction sites. We have gone in some cases through two week shutdowns. But we are back in work in many of them, not in all of them, but in many of them. So so far, it looks reasonable, but things can change very quickly if one event happens in a large construction site, which leads to a complete shutdown there. So overall, interesting times. But we I think we have very clear plans. We have clear policies how to address that. And but obviously, it's too early to give any accurate numerical guidance for the balance of the year. I think we have been very early with pulling back our guidance and admitting that there will be effects and we will continue with this policy as soon as we see have some solid information, solid basis to give some guidance, whatever that could be, we certainly would do that quickly. So much for my presentation, and I look forward to your questions. Thank you. And we will now begin the question and answer session. If you have a question or a speaker, please dial 01 on your telephone keypad now to assist you. Once your name has been announced, you can ask a question. If find your question is answered before there's the option to speak, you can dial 02 to count your questions. If you're using speaker equipment today, please leave a hand up before making your selection. A moment please for the first question. And the first question we have received is from Sven Wyatt of UBS. Please go ahead. Your line is now open. Yes. Good morning, Doctor. Leitner, and thanks for taking my questions. The first one is on pulp and the announcement from Violet yesterday regarding the MetSafe project. I was just wondering if you could give us some color on why you have not been involved in this project in terms of getting some of the project? Is it because your backlog is full and you were not so kind of, let's say, desperate to win another one? Or what do you think has made the difference in this project? And do you think that now we basically have a relatively empty pipeline of bigger greenfields? That's the first one. Thank you. Yes. Good morning and thank you for your question. To answer one part of your question, we are always open for business. We are never we never shut our doors because we are full or we are overly full. Secondly, I ask for understanding, I don't want I want to continue with our policy not to comment in detail on individual projects. But what I can say here is that we have been in technical discussions. We have never had the price negotiation. And we learned from the newspaper that the order has been placed with VarmNet. So it's I'm sure the customer has good reasons for that. I don't know what they are, but it has been a somewhat unusual procedure, would say. Are we desperate that we have lost this order now? Because as you know, we have lost a complete bulk mail in February, I think, whatever in the first quarter from UPM. Having been less interested, no, we also I think we were technically fully accepted. But I don't want speculate what might have happened there, but that's as much as I can say. Is the pipeline empty with regard to large greenfield orders? Towards short term, I would say, yes. And there are always sizable orders and projects around for sure. So I'm not concerned about the order intake for this year. But obviously, this was for sure the main and most likely project to go ahead this year after the UPM decision in the first quarter. Does that answer your question? Yes, yes, Doctor. Leitner. The second one is also on pulp. I was just wondering on those greenfield projects you have already in the execution. I mean, you see clients asking for delays? Or are you seeing them pushing them a little bit to the right because of the corona uncertainties? Or I mean, notwithstanding the fact that, of course, there are supply chain issues maybe, but just in terms of the client will, so to speak, to go ahead quickly on time on these projects, do you see any deviation there? No, no. I think the larger projects, once they've been started, obviously, the interest costs are running. Any delay or shutdown costs a lot. Therefore, we are working very closely with the customer on the East construction site where we are and we are if we're also involved there to keep the work running. There are challenges every day, shutdowns of the roads, shutdowns of the village next to it, shutdown of the construction sites because they need to establish, how should I say, provisions for the health of the workers, which obviously is always the most important thing. But customers are fully committed to continue with the project. I think from China, we see a lot of deliveries obviously come from China to projects in South America, for example, or in Europe. I think that has recovered very nicely from the again, from the supply side. So we saw the shutdown in February. We saw a catch up substantial catch up in March. We see, let's say, a few weeks of delay in deliveries from there. We see an increase in costs for containers. We see a big increase in air freight costs. But things are running, and I think that will not be the bottleneck in the coming months. We'll have some impact, but will not be a serious bottleneck. And so far, we have not seen, I don't think, any request to spread the execution time because the customer would not want the delivery. I mean, obviously, what customers are doing is they are they had to shift some shutdowns from the first or second quarter to the second half of the year because they could not nobody could enter the mills. They probably have to take some more downtime depending on which paper grades, for example, they produce. And the tissue at time, as you have heard probably, new tissue gold, I think it was called. Obviously, newsprint crafting paper suffer definitely. But yes, I think that answers your question. Thank you for that. And the last question I have, Doctor. Leitner, is just on metals. You've been issuing the kind of lower margin contracts here. I mean, how should we look at that? I mean, have basically all the contracts that have been awarded in the last twelve, eighteen months had kind of a lower margin? Or is it more ring fenced to individual projects? How should we look at that situation? I mean, clearly, last year in terms of order intake and also in terms of market situation for Schuller has been difficult. So we had some aggressive pricing to get some volume for sure. Will that I mean, Schuler has a service business, which was slow in the first quarter of this year. This was one of the reasons for this loss in the first quarter. That should recover to a certain extent. Do I expect now we have as you know, we have been able to sell this body panel part of this tooling business and parts business, which obviously helps a lot. We still have a substantial part of tooling, because we think that's a good fit that is suffering. A lot depends on what happens what will happen on the OEM side. If they now start up production, if they come out with new models, if there is a demand, a growing demand for cars, obviously, Schuller, including the tooling part, would benefit, I would expect rather quickly. If we have another year of double digit shrinking global automotive market. Obviously, it will stay difficult for this year also with regard to the margins in order intake, which would translate in a low margin backlog for next year. But I think it may be driven by angst or by hope, but the industry obviously thinks that there can be a subdued demand for cars for months, maybe for two years. But at some point, the demand not only gets back up, but there will be a certain recovery and catch up effect also. And so therefore, medium term, I'm not particularly concerned about the automotive industry because as you remember, Schuller is not very exposed to these conventional engines. It doesn't matter whether the car is electric or conventionally driven. Schuler will participate in both segments. So medium term, I'm not concerned. But I would for the next two, three quarters, I would not expect a substantial improvement in the price quality. Thank you, Doctor. Ladden. It is not a question of individual orders having showing huge cost overruns. It's really across the backlog. You, Doctor. Lad. Thank you. Now we go to the next question. It is from Andreas Willi of JPMorgan. Please go ahead. Your line is now open. Yes. Good morning, doctor Lightner. Thanks for your time. My first question is on on the impact of the virus, shorter term in terms of disruptions, extra costs, site access issues, etcetera. Could you rank the four businesses from kind of least impacted to most impacted as you see it currently in April or basically last week's and your expectations for Q2 where we could see the biggest impact? And a follow-up on Schuler, if we look back at 02/2009, obviously, the business was substantially loss making in the downturn? When you look at the savings coming in and your expectations, what would be a reasonable timeframe for the business to basically return to black and reach breakeven? Is that a sensible target for next year? Or is that already earlier is that already possible earlier in terms of the run rate? Earlier than next year? No. I think next year would be the hope that we are at least breaking even, hopefully more. Depends on, as I said, development of the order intake and then price quality in the next three quarters. On yes, now we can speculate on a quarterly basis how the fourth quarter of this year will be, but I rather would not want to do that, to be honest. Yes. Thank you. And in terms of the ranking of the businesses? Ranking, sorry. The ranking, difficult to separate the virus from. You have surely had a difficult situation before, but before the virus. And obviously, that has been aggravated for customers by the virus, and therefore, it has also been aggravated for Schuller. So that certainly is most heavily hit. It's also most heavily hit because the service share of total sales is the lowest compared to the other four business areas. Pulp and paper benefits a lot from the backlog plus nearly 50% of service business. And as long as execution is continuing on a reasonable level, not the full level, but a reasonable level, the impact will be very moderate, very moderate. Hydro, again, has started with a shrinking order intake with a challenge to reduce the cost in line with the speed with which the low order in the shrinking order intake translates into shrinking sales, which was certain time lag in between. Again, that has been aggravated by the virus. But you could say this low order intake in Q1 is consequence of virus. It's basically not. And we are we continue to be optimistic for Hydro for the order intake for this year, full year. There are a few large projects around that so far we have no reason to believe that they would not be realized where we are in very good positions, have done a lot of work, etcetera. So with regard to the order intake for hydro, I would rather see that trough of the order intake was last year, maybe last four quarters, including the first quarter of this year. But for the full year, I think there is some hope that it would be better, thanks to orders. Now that again would take some time, a few years to be converted into sales, would be go step to step. In separation, no impact on the environmental part of the business, no impact on the food part of the business, no real impact, quite substantial impact on minerals mining. And yeah. So I think I'm not sure there was a ranking, but at least it's also a description of the effect. No. That was helpful. Thank you very much. Thank you. The next question is from Andreas Finker of HSBC. Please go ahead. Your line is now open. Yes, good morning. Thanks for taking my questions. Noted has been answered already. Maybe one follow-up on the restructuring plan, so the short term cost measures you indicated and also the ongoing restructuring and Schuler. On the short term measures, should we expect any significant cost related to that in the course of this year or early next year? That's my first question. Significant what? Extraordinary. Extraordinary. Extraordinary. Extraordinary expenses. No, as I said, based on today, I think we will have some restructuring expenses across the business areas because obviously, we as I have said, now we have concentrated on short term temporary measures. But as we go through the second quarter, we see weekly how the order intake develops. And in the third quarter, it's time to conclude, okay, so we where would we be by the year end? And how much of these temporary measures, cost reduction measures do we have to convert into permanent. And that obviously would cause some restructuring expenses. Based on what we see today, it would not be dramatic, it would not be substantial because obviously there are many countries where it is not very expensive, others where it is expensive. Schuler has said, based on today, we should be we should have provided everything we need for the restructuring. But again, I think in three months, four months, we know more. And clearly, we want to be early and conservative with regard to how much permanent cost reduction we want to at least initiate still this year. Okay. Thank you. My second follow-up relates to the restructuring that is running at Schuler. Is there any kind of risk of delays because of COVID-nineteen, because you can't negotiate with employees in the way you used to be, etcetera? So is there any risk that potential layoffs and related cost savings might be delayed? No, it's rather the opposite that we have agreed in a complicated negotiation second half of last year on the social plan, on a schedule for employment reduction. It would be very risky and delaying if we would reopen this discussion wanting to accelerate it. So we stick with the plan. Obviously, natural attrition, natural fluctuation is zero currently. So in this regard, it may be a slight delay because obviously we almost assume a certain natural turnover. But otherwise, this what has been agreed upon is executed actually slightly ahead of the schedule. Perfect. Many thanks. Thank you. The next question is from Sebastian Roeber of Commerzbank. Please go ahead. Your line is now open. Yes. Hi, good morning, Mr. Leidner. Two questions from my side. The first one, sorry, is around hydro. And here, the question is, you in the past always indicated €1,300,000,000 €1,400,000,000 should be eventually floor level when it comes to the orders. And I think your comments on the order pipeline for a larger project would suggest that floor value might hold. So maybe you could just confirm that. And just for completeness, can you just remind us of what is really the recurring revenue level, I. E, what is really coming from the brownfield, etcetera? And what is the part usually when we think about €1,300,000,000 €1,400,000,000 related to greenfield? And then on working capital, obviously, another good quarter here in keeping the working capital stable. But given what we're currently seeing in the end market deterioration, and you mentioned the early part of quarter two, April having been a weak month in orders, can you just share with us what you're currently seeing in the negotiations with customers? Is there any deterioration in payment terms, etcetera, that we should be Yes. With regards to Hydro, I can confirm your first question. Yes, it should be the trial. And with regards to and what is the level of I mean, one of the reasons for the shrinking of the intake in hydro over the last several years has been substantially lower volume of large projects and in one or the other year also lower market share of Androids in these large projects compared to other to our competitors. So if you look at the order intake last few years, it has not been they have not benefited a lot from large orders. On the other hand, obviously, need from time to time, so it's difficult to say recurring is nothing. Everything has to be fought for and has to be secured. And I think we also the service business is really a refurbishment business and it's a project by project business. Compact business has suffered, for example, quite substantially the last compact hydro business last two years because of certain country issues like Turkey, like Brazil, others, but also because of heavy subsidies for solar and wind, especially for the small projects. So I would not I cannot say what is what I can say is that I don't believe don't think that the order intake will drop more than it has dropped last four quarters. On the comment that you made around yes, maybe just quickly on compact hydro because you mentioned then also solar and particularly wind taking, obviously, a fair share of that prior market for compact hydro. Is that now really close to zero? Or how should we think about that activity in particular? No, it's not close to zero, but it's again, it's a mixture of in house issues plus the market, but clearly, the market has dried up somewhat. Fine. But it's almost compact has never been a substantial part of our sales, so it's a single digit percentage of our sales in high growth. Second question, payment terms, etcetera. No. I think we have made to the contrary, we've made good progress on our program to concentrate on net working capital. There, we have done, I think, quite well. So in this regard, is no change in so far, no change in the environment. Obviously, we we have received also a few letters from customers' purchasing departments that write us that life has become difficult and they ask for a general discount of 15%. This has happened also in 02/2009, but I think this is not what is happening in these industries, and this is also not what will happen in these industries. Okay. That's helpful. If just may comment to Metals very, very quickly. And I know it's maybe a theoretical question even, but nonetheless, you have been guiding in the past for 6% to 7% long term margin. I know there's a lot of things in Flux volume being the first part of it. And then you also mentioned the tooling stuff, e, mix related issues within metals. But can you just, if we would circle back to the Capital Market Day in 2019, give us your high level thoughts around what you would have assumed in kind of stable mix? And then what's the volume to get there? I could pass it on to Norben at this time now, but I'm not sure he has an answer. Now what we have said is I think Schuler at that time was about $1,200,000,000 1,300,000,000.0 and the old Metals part was about $500,000,000 so it was about $1,800,000,000 Now obviously, we are sizing Schuller to a lower level on the cost side. The other part of Metals, I mean, on the steel industry side, situation has not really changed. So we cannot say that we now expect a substantial pickup in new projects in the steel industry or, let's say, aluminum industry. If you look at the aircraft industry, I think that will stay difficult. So obviously, I could argue that maybe 100,000,000 or 200,000,000 top line could be we could miss. Profitability, think the key is Schuler. We need to find the right capacity. And especially, we need to find the right capacity in Germany. It is not so much an overall capacity issue, it's issuing capacity in Germany. And obviously, it surely depends on the automotive industry. And Pat, to a large extent, are it's not 100%, I think we have a chance to bring it down to 70%. But if people stop buying cars, we would have a problem with Schulla. Makes sense. And sorry for for the drastic follow-up. And the final one, I promise. On the agreement that you struck with the unions in 2019 for the layoff at Schuller, the 500 staff affected, is there any sort of length of period related to it so that you are not allowed to come up with the next plan within a certain time period or anything like that? No, no. I'm not aware of that. Thanks, Petrone. I would knowing myself, I would never agree to that, and I'm not aware that anything of that has been negotiated. Okay. Good to hear. Thank you so much. Thank you. The next question is from Daniel Lyon of AltaCorp. Please go ahead. Your line is now open. Yeah. Good morning. Thanks for taking the question as well. I would have two more to add. One would be the impairment risk for sure, especially, of provision going forward. And the second would be, of course, it's currently, it's very hard to to predict for the automotive business. Developers in the month end is is is hard to assess. But but still, do you have any negotiations with your with your major clients towards especially in Europe, towards the c o two penalty scheme, will be played out both from next year on? The impact maybe from there, I guess, prices should come down from your EV cars and demand could could rise. So what's your view generally? And what what will be the support you could expect maybe from the market side starting from next year, maybe in the first quarter? Obviously, I have hopes. I think you're there is also discussion starting on this up rack premieres or should I say, bonus of the government if you scrap your existing car and buy a new one, efficient one, maybe an electric car, maybe a hybrid. Discussion is starting in Germany. Discussion is also in Austria that I think if Germany would do something, Austria would follow. My personal opinion, this is just an opinion. So that obviously would help a lot. This penalties of hundreds of millions, I think, based on average CO2 production of the fleet of these OEMs should be an incentive to again to price new models with a very low consumption or no consumption of oil or of gas. So you would think it's better to spend it on subsidizing cars than to pay it to the European Union or to the I think it's European Union or to the German government or not. So I think there is some ups and as I said in the beginning, think you could, you know, in these times, people, I don't think they are overly eager to share public transportation every day or every weekend. So I think the individual car probably has increased in value and the footprint of the carbon dioxide footprint may be less important. But on the other hand, as long as it cannot stay in force, which also is not guaranteed but probably will be the case, market could pick up here. And this would maybe skew a bit towards the end of this year? Or how the discussions with with the major OEMs on this this morning as an assessment on a weekly basis of how to how to move on? Or are there any any plans that could go beyond, let's say, a month or a quarter? You know, I don't want to say that the OEMs also don't know how the sales will be in the fourth quarter, but at least they are not in regards to what they think. And then, honestly, I think it's it's a you cannot find an analytical a solid analytical approach to how these car sales will develop. At some point, they will pick up for sure. I think this is I would bet on that. And but when that will happen, I think there's a chance. I mean, there are many people, including many of our our doctor managers of our for our product companies that are quite optimistic for the fourth quarter. Would I want to bet on that? No. I think we will closely we'll watch it closely and want to see tangible evidence if that substantial pickup really is happening. Okay. Right. Alright. Thank you. About the impairment risk? Sorry, impairment is cooler. Obviously, need to look at it. I cannot say we have a huge headroom, but clearly, there was no reason for any impairment in the first quarter. Perfect. Thank you very much. You. Yes, there are no further questions. I would like to hand back to you, Doctor. Lanham, for some closing remarks. I don't have any closing remarks other than stay healthy and start thinking about buying a new car. Thank you, everybody. Thank you. See you next time. Bye bye. Thank you for your attendance. This call now has been concluded. You may disconnect.