Dear ladies and gentlemen, welcome to the presentation of the H1 results 2019 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. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone keypad for operator assistance. I will now hand you over to Dr. Wolfgang Leitner, 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. 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's one business area where we certainly cannot be satisfied, although this is not specific for Andritz. 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 EUR 2 billion. It's the second highest quarterly order intake in our history. Clearly we are very happy about it. We had an excellent order intake in Pulp & Paper across all divisions. Not only pulp, but also biomass, power, also paper, quite good. We had a reasonable order intake in Separation and Hydro and Metals are on the lower side.
Hydro stable at lower side. Metals also. Sales increased to about EUR 1.6 billion. Strong increase in Pulp & 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 EUR 95 million, practically unchanged. The EBITA margin 6%. A good margin development in Pulp & Paper. Clearly unsatisfactory in both parts of the Metals and Hydro and Separation. On an okay level, I would say. On slide five, you see the 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 & Paper up 55%. The other areas down. Hydro 10% down, Metals 4% down, and Separation 17% down.
Separation Q2 2018 had seen a large project being booked of EUR 45 million. The EUR 179 million that we see here for Q2 2019 are still a very good order intake. On the right side, the first half year, up 13% on an organic level, up 4%. Similar picture. Pulp & Paper up substantially, 63%. The other business areas down. If you look on page six, quarterly development. You see the development since Q1 2015. You see also that EUR 2.047 billion order intake in Q2 is the second highest. Was only surpassed by Q4 2015 with EUR 2.25 billion. Regional split on the right side. Europe and North America, slightly about 50% as is typical. You see that South America is up substantially from 5% to 20%. These are the pulp contracts, basically. Correspondingly, China down from 21% to 11%.
Asia slightly down from 15% to 11%. Overall, also Xerium with about EUR 111 million on very good track. On the same side, slide seven. Basically the same picture. Pulp & Paper up substantially, the other business areas slightly down. Separation is up 11% in sales for the half year and 4% for the second quarter. On the 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. See also that the same picture has now grown for business areas. In Pulp & 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. More or less stable. In Metals, we are increasing. We have acquired a nice company for the steel industry that certainly has increased our service sales there. On slide 10, order backlog has been growing continuously since middle of 2017, so in the last two years. We're now at EUR 7.7 billion, nearly a record high order backlog. Mainly driven by Pulp and Paper. Hydro traditionally has a high order backlog. The two of them account for three-quarters of our total order backlog. Moving on to earnings on slide 11. In absolute numbers, flat EUR 94.7 million in Q2. Slightly up for the first half from EUR 166 million to EUR 177 million.
Percentage-wise, Q2 down from 6.4% to 6%, and for the first half of the year, down from 6.0% to 5.8%. Now, we had in the first half, we had about EUR 8 million non-recurring costs, which we did not show separately. If we would separate that, the first half of the year would also be in the range of 6%. Our relatively stable profitability for the first half of the year. If you look at page 12, the profitability by business areas, you see three green arrows and one red one. Hydro is up compared to the first half year of 2018. Pulp and Paper, slightly up. When I disturbed the market and I said at the first quarter presentation that I cannot guarantee a continuation of the very high margins in Pulp and Paper, you see they're still very high. Separation is also continuing to improve.
Now at 5.3% for the first half. Metals clearly is a low point. Unfortunately, both parts of Metals 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, EUR 79 million. Metals is down. Separation is down. Overall, we could reduce our net working capital compared to the end of last year from EUR 160 million to EUR 80 million. Nearly cutting it in half, which obviously is a very good development. Slide 14, cash flow development. Good cash flow also. You see the main contributors.
Obviously, you see the details here. The increasing contract liabilities. This EUR 98 million of positive operating cash flow comes from EUR 138 million increase in contract liabilities, EUR 35 million. The other, in the other direction, increase in inventories, a decrease in trade receivables, increase in advance payments made, decrease in contract assets, some other smaller changes. Overall, our cash flow from operating activities of EUR 272 million is really good. Free cash flow, we estimate at around EUR 150 million-EUR 156 million. Slide 15 shows you the bridge from EBITDA to net income. From an EBITDA of EUR 263 million, depreciation EUR 85 million. IFRS 3, the amortization of intangibles, EUR 44 million. Some small impairment of EUR 4 million gives an EBIT of EUR 129 million. Financial results, EUR 20 million-EUR 21 million. A consequence of higher interest expense due to some additional bonds. On the next slide, a summary of the figures.
I think we have covered more or less capital expenditure at EUR 62 million. Of that, about EUR 7 million coming from the newly acquired companies. IFRS 16 leasing accounting obviously has had quite a sizable impact. Our total asset number went up by EUR 221 million. EBITDA went up by EUR 26 million. Depreciation went up by EUR 23 million. EBITA, therefore, plus EUR 3 million. Interest up by EUR 2.6 million 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.
As I said in the first quarter, we continue to consider or to see the Hydro business area and the Hydro market as attractive, at a lower level than it used to be some five years ago. Slide 19, you see the results. The order intake, EUR 600 million in the first half year sales at EUR 675. We are approaching now. Sales are approaching order intake EBITDA margin 8.9% EBITA margin 6.5%. Split more or less 50/50 developed markets and emerging markets. Pulp & Paper, obviously the brightest spot in our universe. Very good activity in pulp. Reasonable activity in paper. Very good activity in biomass boilers, especially in Asia, China, and Japan. Well, a stable competitive environment. On slide 21, you see some specific projects. We received from Arauco, where we built the better part of the pulp mill.
Currently, we received the maintenance contract for the next 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. Yeah, this has been the biggest and longest maintenance contract we have received. It's certainly a landmark for activities in this field. It strengthens our aftermarket activities, gives us a long-term presence with one of our larger customers, who until recently has been predominantly buying equipment from our competition. Also that is a very good achievement. We received about half the mill from Klabin. Pulp mill. This has been booked in the second quarter, and we received a large additional pulp mill order that has been booked partially in Q2. A large part will also be booked in Q3.
That is not yet fully reflected in our first half year order intake. Overall, very good development. It's really technologically appreciated for our customers. On slide 22, you see the numbers. Order intake up substantially, obviously. Sales are up and EBITDA margin 12.4%, up two points. EBITA margin slightly up from 9.2 to 9.4%. Yeah, I think Xerium obviously has added to that also in sales EUR 113 million. Xerium is on good track as we had hoped. We see a lot of mutual support between Xerium and our existing aftermarket activities. Also we have said we do not expect substantial growth from within the Xerium business because it's a mature business.
We still think that is correct, but still we are optimistic that one or the other chance we should have to either gradually improve profitability further or create one or the other growth area. 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. Very low activity in Europe. Still a lot of uncertainty. Traditional metals processing part, we still suffer from some individual order events. Can we see a substantial slowdown in the project activity in this field? 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. Slide 24.
I'm sure you have read our ad hoc release beginning of this week, I think. 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 EUR 85 million, plus we'll book an impairment of goodwill of approximately EUR 25 million, predominantly from Yadon, a company in China that has been acquired by Schuler a few years ago, to a small extent to another acquisition in the tooling and parts area. Obviously, Germany takes some time until you can really go ahead with workforce reductions.
We hope, given the situation, that practically all participants in the automotive supplier industry have to adjust to the new situation 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. We do expect to see the first positive effect in the second half of next year, and then the majority of the effects until the end of 2021. We already had started last year restructuring program, so the two combined, we expect savings of approximately EUR 60 million from 2022 onwards. Slide 25. Quick history of Schuler. When we acquired Schuler, we acquired it at approximately 4.1 or 4.2 times EBITDA.
At that time, we already communicated it has been the year with the highest sales and the highest profit. 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 EUR 676 million, including the one-off charges that were EUR 610 million. In hindsight, the price we paid was five times EBITDA. Still a very reasonable multiple for a global market leader. As we have said, I think this acquisition of Yadon has been very important, although we have now a certain impairment because of the short-term outlook of the Chinese market. It has helped Schuler a lot to increase its competitiveness.
We are optimistic that once we have adjusted 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. In EBITDA, we had in the first half year a loss of EUR 6.9 million, which was basically evenly split between Metals Processing and Metals Forming. On a percentage basis, Metals Processing has performed worse than Schuler. 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 and Border Protection in the U.S. with a wasp nest in one of the boxes that we had to 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, underutilization. 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%. Remember that EUR 380 in the first half of last year, with the intake included the $45 million or $47 million order intake of large projects. 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%.
Much for the four business areas, and on the last page, 31, guidance is unchanged. We continue to expect a good increase in sales compared to 2018 based on the order backlog. The large orders we booked in the first half of this year will contribute only very little to this year's sales. Profitability, EBITDA margin, we expect to reach the level of 2018, obviously excluding extraordinary effects from the restructuring, predominantly Schuler. Much my presentation, 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 speaker, please dial zero 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 is answered before it's your turn to speak, you can dial zero 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. The first question received is from Sven Weier from UBS. Line is now open, sir.
Yeah, thanks for taking my question. Good morning, Dr. Leitner. I ask them one by one. The first question is regarding M&A pipeline. Obviously, we've all seen the bankruptcy of Eisenmann, I guess in the old days that would have been probably an interesting target for you. I was just wondering, given the situation at Schuler 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&A projects. Having said that, I would say very limited appetite, and we always look at opportunities. First of all, we have made large acquisitions last year. We have said we will be rather, or definitely cautious on acquisitions this year, concentrating on integrating, especially Xerium, making sure it develops favorably. Overall, we see the more attractive areas in the aftermarket with a continuing business which comes in small pieces and not the 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? Also wondering, you obviously talked about the restructuring at Schuler. If you could give us some trajectory on the EBIT margin development for Metals until 2022 when the full savings should be up to speed.
In order intake, physically, if the question was whether it would go down or whether it go up, I think the guess is a similar level as we are seeing in the first half, if I understood the question correctly.
Yep, indeed.
The second question was margin development in Metals overall. It will stay low on an operating level this year. For Schuler, 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 a short-term improvement of margins from Metals processing.
Do you see more of a steady improvement or really very back-end loaded in those years?
For Schuler.
For Metals as a whole.
Well, Schuler is about two-thirds and metals processing is about one-third of total metals, roughly speaking. Metals processing should be improving, as I said earlier, during the second half of this year. Clearly, Schuler will stay difficult second half of this year because we cannot really do a lot, before we have found agreement with the unions. Schuler will start to see some improvement gradually from probably second quarter of next year, starting from second quarter next year. Not back-end loading, but I would say then from then on in more or less same inclination.
Okay, thank you. The third question, last question, is on pulp. First of all, I was wondering, Waldemar was mentioning that June was showing some weakness. We obviously heard that comment from other industries, and wonder if you had any comment on June, particularly in your business, especially in pulp. Also in terms of greenfield awards, how many do you still see pending decision-makings in the near term?
Well, I cannot comment to June. I think clearly the pulp market has broken down basically since February, I would say, or something like that, where the prices have really been in free fall. Probably by several impacts, a substantial price increase to an unsustainable level end of last year. High production, build-up 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. With that, clearly the price turned around and went down to basically as low as it has ever been, in the range of $500. 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 there 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 knocked on the price. The third market is for dissolving pulp, which goes into viscose fiber, which then goes into textiles. In this viscose fiber, there is some sizable investment activity. Lenzing has announced they want to build something on the short fiber market. There's also some sizable activity. We have developed a technology where we can produce both types of pulp with the same equipment. That has been attractive for customers. Also on the pure short fiber pulp, UPM has announced they want to go ahead with their second pulp mill in Uruguay. On the project side, we still are optimistic. Will these projects be really realized? It's always a question. UPM has confirmed it end of July that they want to go ahead.
Lenzing, in principle, has confirmed they want to go ahead but have not made, let's say, as strong a decision as UPM. From my standpoint, with all caution, but I don't think the orders 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.
These weak price fundamentals you mentioned has also not impacted your more short-cycled business in pulp, so service or brown field or whatever. 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, doesn't 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 within a reasonable period once the additional, or let's say, the surplus in inventory has been consumed. Suzano as a leading producer has announced they will cut back production from a potential 11 million-plus tons to 9 to 9.5 million tons. That should help, I would say.
Okay. Thank you, Dr. Leitner.
Thank you.
The next questioner is Andreas Willi of JPMorgan. Line is now open, sir.
Yeah. Good morning, Dr. Leitner. I have two questions, please. The first one on Hydro, where the first half ordering intake is probably a bit lower compared to the EUR 1.4 billion-EUR 1.5 billion level needed for this to be a stable business. Are you still confident that we can get to stability on order intake at that EUR 1.4 billion-EUR 1.5 billion despite the weak first half? Maybe on the metals processing and the issues on the orders in the backlog or the orders in execution now, you said 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? You mentioned earlier the U.S. project that's causing the problems here. Thank you.
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, you cannot be overly confident. I think there is a good chance that second half should be better than first half. Will it reach this EUR 1.4-EUR 1.5 level you're mentioning? I would not be too confident. It's going to be a stretch, it's not impossible. I think I can be confident that second half should be better than first half. On Metals processing, first half, it 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, and which were not particularly reassuring for looking forward. Clearly, the commitment of the division is that it should improve. 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. Your line is now open, sir.
Yes, morning. Thank you for taking my questions, actually, a couple of them have been covered. 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, I guess through the second half of the year, just be interested to see how those different bits of the business are moving. The other one was just on the large pulp mill order that was booked in 2Q. I guess, I thought that was coming in 3Q. I just wanted to double-check how much of the large Pulp & Paper order came in the second quarter. Thanks.
All right. 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, and the bigger part came into force only in July. 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. 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.
Good morning, everybody. First question from Pulp & Paper, and here on Xerium and 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. Can you also just break up what the contribution of Xerium was to EBITDA in the second quarter? The other question I have is then on working capital. Obviously, it has been a reassuring trend in the second quarter. Can you also here give us some comments on what you believe is the 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. It's still a firm and valid assessment. Can you just really elaborate on the key drivers, especially on the inventory side of things and then receivable side of things, how you make progress here? Thank you.
Could you repeat the second question? I did not get. This was for Pulp & Paper and increase in double-digit number, or?
Sorry. The second question was related to working capital for the group as a whole. Irrespective really of Pulp & 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 digits, I think, was your aspiration level for the full year. Particularly, I'm interested on the specific measures undertaken for, particularly, I think the trade receivables collection and, yeah, any update there would be appreciated.
Clear. On Xerium, we see development as planned. We are taking out costs, EUR 10 billion-EUR 15 billion 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 Xerium were the main suppliers and the risk that they want to have a real second supplier, which would have meant that one of the two, our group, would have declined. We saw some of that, not as much as we had expected. That's also on the positive side. Going forward, the integration, the atmosphere is very good. 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 us to months, but we will let it grow. Overall, we see continuing business likely growing on the Xerium side. Margins are the same as in the past. Obviously, we have included here also some of the inventory we've taken over, that will have, let's say, a limiting effect on the EBITDA. 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. The high double digits we have already achieved. 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.
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. We are quite happy with the developments and are reasonably optimistic that this should not be a one-time event.
Okay, that's helpful. If I may just ask one quick follow-up on the Metals side, and especially on a commentary around processing. You said that there's intensified 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? Separate to that one, if I take your words that you made before on the split between Metals Forming versus processing, then obviously the processing part is around EUR 500 million-EUR 600 million on annualized basis. Should we expect simply that the business is coming down structurally, so to speak, because you are deliberately walking away from those very contracts?
I think our capacities have been adjusted to this level. We don't see a substantial further decline. You never know. If everything stops, obviously that would also go down. Currently we would not expect that. Metals 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, the chances that it will further deteriorate are much higher. If you book an order at a good margin, the chances it will further improve is also very high. That's unfortunately the rule in the project business.
Again, it's not only this tight cost calculation, but as we have explained in the previous communications, these were first-time reference projects in the aluminum side, in the highest quality, high-strength steel galvanizing side. We hope to benefit from that in the future. Currently, project activity is very small. As I said, from especially one of the projects we have walked away, because the price was not worthwhile to do it, to accept it.
Okay. That's helpful. Thank you.
The next question received is from Jörg-André Finke of HSBC. It's now open, sir.
Yes, thanks for taking my questions. The first one, I take them one by one as well, relates to pulp again. You mentioned UPM project and also the Lenzing and Duratex JV in your comments. Are you in a position to confirm the client of that order that you announced?
You mean, in which position?
You haven't disclosed details on the customer from your latest big order.
Yes.
-pulp mill. Has that changed? Can you disclose the-
No. If you make a few phone calls in Brazil, I'm sure you will hear it, but we have committed not to disclose it.
Good. 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. We have been doing what we call island EPC projects in Brazil since 2000, basically. Last 18, 19 years. We've also had two projects in Uruguay, that was it. Maybe one project in Chile. 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 20 years. In other countries, we either don't do it or are very hesitant to do it, or only do it in a very limited way. 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. If that includes EPC projects in Brazil, that's fine.
If that would include EPC outside Brazil, for example, in Asia, we would not do it.
Okay, thanks. Very clear. Coming back on Schuler. 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? Is there any plans for that?
To which extent would it be offsetting what?
By building up capacity in other countries like China.
Yes. Currently, we are not building up anything anywhere, but ultimately it could lead to some build-up, but we have enough capacities. Also, we are currently tight in China, but we think we have enough capacities on a global scale also. We will shift products, but we also need to shift from insourcing to outsourcing. In our opinion, we have enough capacity, so we would not expect a substantial increase in workforce or manufacturing capacity. Now, there is maybe a limited one, yes, but not very much.
Okay. Thank you. 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, structural change to that assessment? Or would you still see that as a peak margin and expect some gradual decline in the next quarters?
There are two things. It's always the same effect. We have now a very good order intake on the capital side, large projects. Large projects take our capital with a lower margin. 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. I think, as I said, we have seen some extraordinary effects in 2018. For one, that we cannot always add up only the positives. Xerium is a positive. On the other hand, this one-off effect will not be repeated this year and next year, most likely. We never know.
I think we are not expecting a substantial downward pressure. Do I want to promise that we will reach or exceed the 10%? No, I would not want to do that now.
Okay. Thank you.
As there are no further questions, I hand back to Dr. 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.