Earnings Call: H1 2019

Aug 2, 2019

Dear ladies and gentlemen, welcome to the presentation of the H1 Results 2019 of Anzib AG. 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. I now hand you over to Doctor. Wolfgang Leipner, CEO, who will lead you through this conference. Please go ahead, sir. Thank you very much. Good morning, everybody. Welcome to our half year results. Yes. And overall, I think we are reasonably satisfied with this second quarter and the first half. I think we have performed quite well in many areas. Obviously, there are business there's one business area where certainly cannot be satisfied. Although this is not specific for Inuits, but this is the automotive industry and its suppliers that clearly are in a more difficult situation. To start on Page three. Group order intake with about €2,000,000,000 It's the second highest quarterly order intake in our history. So clearly, we are very happy about it. We had an excellent order intake in Pulp and Paper across all divisions, not only Pulp but also biomass, power, also paper quite good. We had a reasonable order intake in separation. And hydrant metals on the lower side, hydro stapled lower side metals also. Sales increased to about €1,600,000,000 strong increase in Pulp and Paper. Hydro and Metals are down. On a year on year basis, in Hydro, we see on the sales side the shrinking order intake over the last several years now being translated into sales. EBITA at €95,000,000 practically unchanged. So the EBITA margin, 6%. A good margin development in Pulp and Paper, clearly unsatisfactory in both parts of the Metals and Hydro and Separation okay level, I would say. On Slide five, just to give details for the order intake. On the left side, in the second quarter and on the right side, in the half year, the quarterly order intake is up 18%, Pulp and Paper up 55%, the other areas down, Hydro 10% down, Metals 4% down and Separation 17% down. Also separation Q2 twenty eighteen has seen a large project being booked of €45,000,000 or the €179,000,000 that we see here for Q2 twenty nineteen are still a very good order intake. On the right side, first half year, up 13% on an organic level, up 4%. Similar picture, Pulp and Paper up substantially, 63%. The other business areas down. If you look on Page six, quarterly development, you see the development since Q1 twenty fifteen. And you see also that the €2,047,000,000 order intake in Q2 is the second highest, was only surpassed by Q4 twenty fifteen with €2,250,000,000 Regional split on the right side, Europe and North America, slightly above 50% as is typical. But then you see that South America is up substantially from 5% to 20%. These are the pulp contracts basically. And correspondingly, China down from 21% to 11% and Asia a bit slightly down from 15% to 11%. Yes, overall, also Clarion with about €111,000,000 on very good track. On the safe side, Slide seven, basically the same picture. Pulp and paper, up substantially. The other business areas, slightly down. Separation is up 11% in sales for the half year and 4% for the first quarter for the second quarter, sorry. On a half year basis, overall 11% up growth coming from acquisitions on an organic level, flat sales. Slide eight shows the development of the service business, sales and service, good trends last two years basically. And see also that the percentage has now grown to about 40%, 41% of total sales. And on the next page, you see the split for the four business areas. So in Pulp and Paper, we have now already more than half of our sales come from service from the aftermarket. Separation traditionally has had a high share of aftermarket, close to 50%. And Hydro and Metals being in the high 20s share of Service business. Yes, more or less stable. In Metals, we are increasing. We have acquired knife company for the steel industry that certainly has increased our service sales there. On Slide 10, order backlog has been growing continuously since 2017, so last two years. We're now at €7,700,000,000 nearly a record high order backlog, again, mainly driven by Pulp and Paper. Hypers additionally has a high order backlog, so the two of them account for threefour of our total order backlog. Moving on to earnings on Slide 11. In absolute numbers, flat, 94,700,000.0 in Q2, slightly up for the first half from 166,000,000 €177,000,000 percentage wise, Q2 down from 6.4% to 6% and for the first half year, down from 6% to 5.8%. Now we had in the first half, we had about €8,000,000 nonrecurring costs, which we did not show separately. If we would separate that, the first half year would also be in the range of 6%. So relatively stable profitability for the first half year. If you look at Page 12, the profitability by business areas, you see three green arrows and one red one. So Hydro is up compared to the first half year twenty eighteen. Pulp and Paper, slightly up. So when I was quite a disturbed the market and I said at the first quarter presentation that I cannot guarantee a continuation of the very higher margins in Pulp and Paper, you see they're still very high. Separation is also continuing to improve, 105.3% for the first half. Metals clearly is a low point. Unfortunately, both parts of metals are have problems with the profitability, but we'll get to that in more detail in a few minutes. Slide 13, very positive good development of our net working capital in the second quarter, mainly driven by Pulp and Paper. You see here, Hydro is still slightly up, as I've indicated also that we expect a slight increase for the next two to three quarters in Hydro. Pulp and Paper is substantially down by €79,000,000 Metals down, separation is down. So overall, we could reduce our net working capital compared to the end of last year from $160,000,000 to $80,000,000 so nearly cutting half, which obviously is a very good development. Slide 14, cash flow development. Good cash flow also. You see the main contributors. Obviously, the yes, you see the details here. We have done increase in contract liabilities. This €98,000,000 of cash flow positive to our operating cash flow comes from €138,000,000 increase in contract liabilities, dollars 35,000,000 for the other direction, increase in inventories, decrease in trade receivables, increase in advance payments made, decrease in contract assets some other smaller changes. So overall, our cash flow from operating activities of two seventy two million dollars is clearly good. Free cash flow, we estimate at around 150,000,000 €156,000,000 Slide 15 shows you the bridge gives you the bridge from EBITDA to net income from an EBITDA of $263,000,000 depreciation EUR 85,000,000, IFRS three, the amortization of intangibles EUR 44,000,000, some small impairment of EUR 4,000,000, gives an EBIT of €129,000,000 financial results 20,000,021 million euros consequence of higher interest expense due to some additional bonds, basically Fuchsia and Dalen and lower net cash position, lower interest rates also totaled minus €21,000,000 EBITDA of €108,000,000 and income tax, 29.9%. That brings it down to €76,000,000 or 2.5%. On the next slide, summary of the figures. I think we have covered everything, more or less capital expenditure at €62,000,000 of that, about €7,000,000 coming from the newly acquired companies. IFRS 16, leasing, accounting obviously has had quite a sizable impact. Our total asset number went up by $221,000,000 EBITDA went up by €26,000,000 depreciation went up by €23,000,000 EBITDA, therefore, plus €3,000,000 interest up by €2,600,000 as effects of IFRS 16 leasing accounting. Moving on to the four business areas on Slide 18, Hydro, still weak market. You see the order intake is still low. We see a few larger projects around. We do not expect any substantial increase or improvement. We continue with our adjustment of our capacities. And as I said in the first quarter, we continue to consider or to see the hydro business area in the hydro market as attractive but at a lower level than it used to be some five years ago. Slide 19, see the results. The order intake, 600,000,000 in the first half year and sales at $675,000,000 So we are approaching now sales are approaching quarter intake and EBITDA margin 8.9% and EBITDA margin 6.5%, splits more or less half of developed markets and emerging markets. Pulp and paper, obviously, the brightest spots in our universe. Very good activity in pulp, reasonable activity in paper, very good activity in biomass, boilers, especially Asia, Asia, Japan and well, a stable competitive environment. On Slide 21, you see some specific projects that we received from Arauco where we build better part of the pulp mill. Currently, we received maintenance contracts nine years for the complete mill, including the equipment that is being supplied by our competitor. We will, according to IFRS, we will book this order intake in annual installments. And this has been the biggest and longest term maintenance contracts we have ever received. It's certainly a landmark for activities in this field. It strengthens our aftermarket activities, gives us a long term presence. And with one of our larger customers who, until recently, has been predominantly buying equipment from our competition. So also that is a very good achievement. And we received about half the mill from Chabin. Pulp mill, this has been booked in the second quarter. And we received large additional pulp mill order that has been booked partially in Q2. And a large part will also be booked in Q3. So that is not yet fully reflected in our first half year quarter intake. Overall, very good development. We are clearly technologically appreciated for our customers. On Slide 22, you see the numbers for the intake up substantially, obviously. Sales are up and EBITDA margin 12.4%, up two points and EBITDA margin slightly up from 9.2% to 9.4. Yes, think that's very modesty has added to that also in sales, 113,000,000. Sierra is on good track as we had hoped. And we see a lot of mutual support between Clarium and our existing aftermarket activities. So we are also we have said, we do not expect substantial growth from within the carrier business because it's a mature business. We still think that is correct. But still we are optimistic that one or the other change we should have to either gradually improve profitability further or create one or the other So the low point is on the next page, 23, Metals. In Forming, which is Schuler, we have received a few large orders, but overall, still a very moderate project activity and very low activity in Europe. Still a lot of uncertainty in China. And also in the traditional metals processing part, we still suffer from some individual order events. And we see a substantial slowdown in the project activity this field. So we are more cautious on this metals processing side as a consequence, obviously, very tough price competition. We have stayed away from one or the other project because we were not willing to reduce our price as much as some of our competitors. On Slide 24, I'm sure you have read our ad hoc release beginning of this week, I think. So we have and as we have announced in our first quarter communication, we have been analyzing the situation during the second quarter and have now come up with a plan. The plan is to reduce our workforce in Germany by approximately 500 employees, predominantly manufacturing, but to a certain extent also in the other areas. We will take in the third quarter a one off charge of €85,000,000 Europe plus we'll book an impairment of goodwill of approximately €25,000,000 predominantly from Yadon a company in China that has been acquired by Schuller a few years ago, to a small extent, to another acquisition in the tooling and parts area. Obviously, Germany is takes some time until you can really go ahead with surplus reductions. We hope, given the situation, that practically all participants in the automotive supplier industry have to adjust to the new situations and have to reduce their workforce. We hope for a rather quick agreement with the workers' representatives with the unions because I think there is no question that the market has changed and will not change back quickly. And so but we do expect that to see the first positive effect in the second half of next year and then the majority of the effect until the 2021. We hope that we have already had started last year restructuring program. So the two combined, we expect savings of approximately €60,000,000 from 2022 onwards. Slide '25, Greek history. Of Schuller, we acquired Schuller, we acquired it at approximately 4.2x EBITDA. At that time, we already communicated it has been year with the highest sales and the highest profit. So we expected some reduction over the years. If we look at the six years after the acquisition, we had an EBITDA excluding extraordinary items of €676,000,000 including the one off charges of €610,000,000 So in hindsight, the price we paid was five times EBITDA, still a very reasonable multiple for our global market leader. We as we have said, I think we've this acquisition of Yadon has been very important, although we have now a certain impairment in terms of the short term outlook of the Chinese market, but it has helped Schuler a lot to increase its competitiveness. We are optimistic that once we have adjusted the structure of Schuler to the market and to where the markets are, meaning Asia predominantly but also South And North America, It should be back to good profitability and be an important part of our overall business. On next page, you see the numbers. So in EBITDA, we had in the first half year a loss of 6,900,000 which was basically evenly split between Metals Processing and Metals Forming. So on a percentage basis, Metals Processing has performed worse than Schuller. So we need to have a close eye on Metals Processing, not so much in terms of restructuring, but in terms of order execution, in terms of finishing this low margin or negative margin orders. You remember this strange case of customs protect order protection in The U. S. With a wasp nest in one of the boxes to its supply. This is still ongoing, so we have increased the provision for that. Hopefully, we can resolve it until the end of this year. Schuler, obviously, is fighting with under absorption and utilization, but that should be taken care of once we can proceed with the restructuring program. Slide 28, separation. Overall good development. Good activity improving profitability. Overall good development in spite of the fact that order intake is down 5%. But remember that the $389,000,000 in the first half of last year in order intake included the $45,000,000 $47,000,000 order intake of large projects. So net of that, order intake would have increased, and we continue to be optimistic for the full year. EBITDA margin up from 4.3% to 5.3%. So much to the four business areas and on the last page, 31. Guidance is unchanged. We continue to expect good increase in sales compared to 2018 based on the order backlog. Also, the large orders we booked in the first half of this year will contribute only very little to this year's sales. And profitability EBITDA margin, we expect to reach the level of 2018, obviously excluding extraordinary effects from the restructuring predominantly Schuler. So much for my presentation, and I look forward to your questions. Ladies and gentlemen, we will now begin our question and answer session. Session. The first question received is from Sven Weier from UBS. Your line is now open, sir. Yes. Thanks for taking my question. Good morning, Doctor. Leitner. I ask them one by one. The first question is regarding M and A pipeline. Obviously, we've all seen the bankruptcy of Eisenmann. And I guess in the old days, that would have been probably an interesting target for you. And I was just wondering, given the situation at Schuller and the difficult situation in the auto industry, if you have absolutely zero appetite for something like that or whether you could give us any color? That's the first one. First of all, we do not comment individual M and A projects. Having said that, I would say very limited appetite and we always look at opportunities, but our main goal is to further first of all, we have made large acquisitions last year, so we have said we will be rather we're definitely cautious on acquisitions this year, concentrating on integrating Specialty Xeria, making sure it develops favorably. And overall, we see our the more attractive areas in the aftermarket with a continuing business, which comes in small pieces and not very big ones. This doesn't mean that we are saying nothing is of interest, but do not expect any great things this year from us. Okay. Thanks. The second question would be just on metals. I was just curious the order intake volume you had in the first half on the one hand. And if you look at your pipeline on the other hand, is that something that the pipeline would also support for the second half? And also wondering, you obviously talked about the restructuring at Schuller, if you could have give us some trajectory on the EBIT margin development for Metals until 2022 when the full savings should be up to speed? When I take Basically, we don't see any simply if the question was whether it would go down or whether it would up, think this is a similar level as we are seeing in the first half, if I understood the question correctly. Yes, indeed. And the second question was margin development in Metals overall. Yes, I mean, it will be still it will stay low on an operating level this year. But and for sure, I think we've said we hope to see some beginning improvement second half of next year. Metals Processing, we hope to see an early improvement, but we are cautious and would like to see a confirmation of that rather than being too confident on short term improvement on margins from Metals Processing. But do you see more of a steady improvement or really very back end loaded in those years? For Schuller or for For Metals as a whole. Well, I mean, Schulla is about twothree in metals processing. It's about onethree of total metals. Roughly speaking, metals processing should be improving as I said earlier during the second half of this year. Clearly, Schuller will stay difficult second half of this year because we cannot really do a lot before we have found agreement with the unions. So Schuler will start to see some improvement gradually from probably second quarter of next year, starting from second quarter of next year. Not back end loaded, but I would say then from then on in more or less same inclination. Okay. And the third question, last question is on pulp. First of all, I was wondering, Valmetz was mentioning that June was showing some weakness. And we obviously heard that comment from other industries. And wonder if you had any comment on June, particularly in your business, especially in pulp? And then also in terms of greenfield awards, I mean, many do you still see pending decision makings in the near term? Well, I cannot comment to Jo. I mean, clearly, the pulp market has broken down basically since February, I would say, or something like that, where the prices have really been falling been in free fall probably by several impacts, substantial price increase to an unsustainable level end of last year, high production buildup of a huge inventory and shipping to China and storing in warehouses in the ports in China, which obviously was noticed by the Chinese consumers. And that with that, clearly, the price turned around and went down to basically as low as it has ever been, in the range of $500 That so the market for pulp clearly is in big difficulties. On the project side, we still see very good project activity. Now we have to separate. There are two actually, are three pulp markets. The one is for long fiber, which is in the Northern Hemisphere. The second one is for short fiber, which is in South America predominantly where we have just talked on the price. And the third market is for dissolving pulp, which goes into viscose fiber, which then go into textiles. In this viscose fiber, there's some sizable investment activity. Lansing has announced they want to build something on the short fiber market. There's also some sizable activity. Now we have developed a technology where it can produce both types of pulp with the same equipment that has been attractive for our customers. And but also on the pure short fiber pulp, I mean, Japan has announced they want to ahead with the second pulp mill in Uruguay. So on the project side, we still are optimistic. Will these projects be really realized? It's always a question. UPM has confirmed it in July that they want to go ahead. Maintain, in principle, has confirmed they want to go ahead but have not made, let's say, stronger decision as UPM. So from my standpoint, without caution, but I think I don't think the orders we have seen being that have been placed in the first half of this year have been the last for this year. I think we will see one or the other additional order in the second half of this year. And these weak price fundamentals you mentioned has also not impacted your more short cycle business in parts or service or brownfield or whatever. So it's basically the whole pulp equipment business that is doing strongly or any differences? I think companies certainly are getting more cautious. I don't want to say that regardless where the pulp price is and where it stays, does it have an effect? Yes, it will have an effect. I think currently, the participants have a certain confidence that or expectation that it will recover, not immediately but in a within a reasonable period once additional or let's say, the surplus in inventory has been consumed. Susana, is a leading producer, has announced they will cut back production from a potential 11,000,000 plus tons to 9,000,000 to 9,500,000 tons. So that should help, I would say. Okay. Thank you, Doctor. Leitner. Thank you. The next questioner is Andreas Willer Willi of JPMorgan. Your line is now open, sir. Yes. Good morning, Doctor. Leitner. Have two questions, please. The first one on hydro, where the first half order intake is probably a bit lower compared to the one point four billion one point five billion euros level needed for this to be a stable business. Are you still confident that we can kind of get to stability on order intake at that $1400000000.01500000000.0 euros despite the weak first half? And maybe on the Metals Processing and the issues on the orders in the backlog or the orders in execution now, you said that should that may start to improve in the next few quarters. Could you just elaborate a bit more in terms of the number of projects and the specific issues? I mean, you mentioned earlier The U. S. Project that's causing the problems here. Yes. With regard to Hydro, it's always very difficult to be confident on order intake because that's something if you don't have it yet, so you cannot be overly confident. But I think there is a good chance that second half should be better than first half. Will it be will it reach this 1,400,000,000.0 to 1,500,000,000.0 level you are mentioning? Would not be too confident. It's going to be a stretch, but it's not impossible. But I think I can be confident that second half should be better than first half. On Metals Processing, yes, this was impacted first half year was impacted by an increase of the provisions for this U. S. Contract. We had a few other continuing smaller cost overruns, which were unfortunate, which were not particularly reassuring for looking forward. Clearly, the commitment of the division is that it should improve. There is it's overall, it's a handful or not quite a handful of orders. Let's see how it develops. Expectation is it should improve, but I would like to see the real numbers before being too confident about that. Thank you very much. The next question received is from Robert Davies from Morgan Stanley. Line is now open, sir. Morning. Thank you for taking my questions. Actually a couple of them have been covered. But perhaps just on hydro, if you could give us some more color on the growth dynamics between pumped storage and large hydro through this particularly sort of, I guess, through this sort of second half of the year? Just be interested to see how those different bits of business are moving. The other one was just on the large pulp mill order that was booked in 2Q. Guess I thought that was coming in 3Q. I just kind of wanted to double check how much of the large Pulp and Paper order came in the second quarter. Thank you. To start with the second question, you're right. The bigger part will be in Q3. The smaller part has been booked in Q2 because they were staggered, the bigger part came into force only in July. And on the hydro side, yes, pumped storage is important. I mean it's our main business in China. But also outside China, it's important. We hope to book another order in pumped storage in Q3 or Q4 of this year. So it plays an important role on securing a reasonable order intake level in Hydro. Okay, great. Thank you. The next question we received is from Sebastian Growe of Commerzbank AG. Your line is open, sir. Yes, good morning, everybody. First question is on Pulp and Paper and here on Cerium on the integration progress. Can you just update us a bit on what has happened so far in terms of how things are going on the cost side of things and eventually also comment on potential sales synergies? I've realized that, obviously, the quarter on quarter sales were slightly up. And can you also just break up what the contribution of Clarion was to EBITA in the second quarter? And the other question I have is then on working capital. And obviously, there's been a reassuring trend in the second quarter. Can you also here give us some comments on what you believe is further trajectory from here? I think on the quarter one call, you indicated that you might see an improvement by about up to, you said, I think, a higher double digit number. Is it still a firm and valid assessment? And can you just really elaborate especially on the inventory side of things and then receivables side of things, how you make progress here? Could you repeat the second question? This did not get. This was for Pulp and Paper and increasing double digit number or The second question was related to working capital for the group as So a irrespective really of Pulp and Paper or any specific segment, it was more really the question where you think you can land on the working capital improvement side in 2019 because you said on the last conference call, high double digit, I think, was your aspiration level for the full year. And particularly, I'm interested on the specific measures undertaken for particularly, I think, the trade receivables collection. And yes, any update there would be appreciated. Yes. Okay. Sorry, clear. On Kerium, we see development as planned. So we are taking out costs, 10,000,000,000 to €15,000,000,000 range. This is being achieved. On the sales side, obviously, we had not only the hope that we can grow somewhat, also very limited, as we said, but we had also the challenge of some overlapping customers where we and Clarium were the main suppliers and the risk that they wanted to have a real second supplier, which would have meant that one of the two of our group would have declined. We saw some of that, not as much as we had expected. So that's also on the positive side. And going forward, the integration, the atmosphere is very good. So I think we see many soft synergies in terms of cooperation, in terms of being able to combine certain things. This is nothing that we will push now from month to month, but we will let it grow. So overall, we see continuing business slightly growing on the Clarium side. Margins are the same as in the past. Obviously, we are amortizing the intangibles that we have included here. Also some of the inventory we've taken over. So that will have, let's say, a limiting effect on the EBITA. But so far, everything is going on plan. On the working capital side, I think with the good order intake, we are obviously making good progress. So the high double digits, we have already achieved. We have obviously, we hope to achieve more. This program that we have on the payable side is getting started. It takes time until it really is running, and we see the first effect. So I think that should be something we should see some effect end of this year and then next year. With a good order intake, I think we have no reason to believe that it would swing back the net working capital. Maybe we can continue to increase somewhat. So we are quite happy with the developments and are reasonably optimistic that this is not a this should not be a onetime event. Okay. That's helpful. And if I may just ask one quick follow-up on the metal side, especially on the commentary around processing. You said that there's some kind of price competition that you walked away from some projects. Can you just give us a sense of what the magnitude behind those potential lost volume is? And separate to that one, if I take your words that you made before on the split between forming versus processing, then obviously, the processing part is around 500,000,600 million euros on an annualized basis. So should we expect simply that the business is coming down structurally, so speak, because you are deliberately walking away from those very contracts? No. I think we are our capacities have been adjusted to this level. We don't see a substantial further decline. You never know. I mean if everything stops, then obviously, that would also go down. But currently, we would not expect that. And it's Methods Processing is really driven by this handful of projects, which are the result of a very tough price competition plus some new technologies, first time orders for us, which we have booked two years ago, which now are in the final stages. Typically, if you book an order at a low price, low margin, it's the chances that it will further deteriorate are much higher. And if book an order at a good margin, the chances it will further improve is also very high. So that's unfortunately the rule in the project business. And but again, it's not only this tight cost calculation, but as we have explained in previous communications, it's very first time reference project in the aluminum side in the high highest quality, high strength steel galvanizing side. So we hope to benefit from that in the future. But currently, project activity is very small. And as I said, from especially one of the projects we have walked away, but it was just the price was not required to accept it. Okay. That's helpful. Thank you. The next question received is from Joerg Andre Finke of HSBC. It's now open, sir. Yes. Thanks for taking my questions. The first one, I'll take them one by one as well, related to pulp again. Mentioned UPM project and also the lancing and Duratex JV in your comments. Are you in a position to confirm the client of that order that you announced? Am I in which position to? I mean, you haven't disclosed the details on the customer from your latest big order on the Postal network. That has that changed? Can you disclose the No, no, no. If you make a few phone calls in Brazil, I'm sure you will hear it, but we are committed not to disclose it. Good. Then maybe a more general question. What is the reason that it seems that more EPC orders are taken again in pulp? Is there any change to the tender processes in recent quarters that you experienced? No. I mean we have been doing what we call Island EPC projects in Brazil since February, basically, last eighteen, nineteen years. We have also had two projects in Uruguay, but that was in maybe one project in Chile. But and we try to stay away. It is basically an established business model for Brazil. We have a lot of experience. We have been doing this type of projects in Brazil continuously for the last nearly twenty years. But in other countries, we are either don't do it or are very hesitant to do it or only do it in a very limited way. So it is we do not have a strategy to expand EPC. We have a strategy to make sure that we leverage our technology position in the pulp production field. And if that includes EPC projects in Brazil, that's fine. If that would include outside EPC outside Brazil, for example, in Asia, we would not do it. Okay. Very clear. And then coming back on Schuller, you talked about the restructuring plans and the reduction of FTEs in Germany. To what extent will there be an offsetting effect by building excess capacity and potentially FTEs in, say, China or other low cost countries? Any plans for that? To which extent would it be offsetting what? By building up capacity in other countries like China or Yes, yes. I mean currently, we are not building up anything anywhere. But ultimately, it could lead to some buildup. But we have enough capacities. Although we are currently tight in China, but we think we are have enough capacities on a global scale also. So we will shift products, but we also need to shift from in sourcing to outsourcing. And we have some in our opinion, we have enough capacity. So we would not expect a substantial increase in workforce or manufacturing capacity in other areas, maybe limited one years, but not very much. Okay. And the last question is really on your comments that you repeated in your initial elaborations, margins of 10 in pulp, which you indicated were not sustainable in the first quarter call. Is there any, let's say, change to that assessment? Or would you still see that as a pulp as a peak margin and expect some gradual decline in the next quarter? I mean it's there are two things several it's always the same effect. We have now a very good order intake on the capital side, large projects. Obviously, large projects are capital with a lower margin. So if the share of capital goes up and share of service goes down, that would have a downward pressure on the overall margin. On the other hand, if capital projects, even at a lower margin, come on top of a regular level, they would go one on one from the top line to the bottom line. So I think as I said, we have seen some extraordinary effects in 2018. Therefore, one that we cannot always add up only the positives. Obviously, CRM is a positive. On the other hand, this one off effect will not be repeated this year and on next year, most likely. We never know. So I think we are not expecting a substantial downward pressure, but to a more promise that we will reach or exceed the 10%, no, I would not want to do that now. Okay. Thank you. Very clear. As there are no further questions, I hand back to Doctor. Leitner. Thank you very much for participating. Thank you much for the questions, and look forward to our next meeting in Q3 or for Q3. Thank you very much. Thank you. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.