Swiss Steel Holding AG

SIX:STLN

Earnings Call Transcript 2018-Q2

[Operator]

Ladies and gentlemen, good morning or good afternoon. Welcome to the SCHMOLZ + BICKENBACH Q2 2018 Results Conference Call and Live Webcast. I am Alice, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions]The conference must not be recorded for publication or broadcast.At this time, it's my pleasure to hand over to Mr. Ulrich Steiner, Head of Investor Relations and Corporate Communications. Please go ahead, sir.

[Ulrich Steiner]

Thank you, Alice. Good morning, ladies and gentlemen. Welcome to SCHMOLZ + BICKENBACH's Analyst and Investors Telephone Conference on the figures for the Second Quarter of 2018. The results will be presented by our CEO, Clemens Iller; and our CFO, Matthias Wellhausen. The media release, interim report and the following presentation on the second quarter and first half of the year have been available for download on our website since 7 a.m. this morning.During today's conference call, we will make forward-looking statements as described in the disclaimer on Slide 2. These are based solely on our expectation or forecasts of future developments and may differ materially from future results, performance or achievements.With these comments, I now hand over to our CEO, Clemens Iller. Please.

[Clemens Iller, CEO & Chairman of Executive Board]

Yes. Thank you, Mr. Steiner. Good morning, ladies and gentlemen. Thank you for dialing into the conference call for the second quarter results today.At the beginning of the presentation, I will comment on the most important figures of a pleasing first half year and explain you where we stand today in the integration of Ascometal. My colleague and CFO, Matthias Wellhausen, will then explain the results of the second quarter. Before finally starting with the Q&A session, I will talk about our assessment for the current market situation and also the reasons why we are able to raise our guidance from the current fiscal year from EUR 200 million to EUR 230 million, now to EUR 230 million to EUR 250 million.Let me start with a summary of the most important figures for the first half of the year on Slide #5. As you can see on the table, we achieved double-digit growth in sales volume, revenue and adjusted EBITDA. Compared with the first half of 2017, sales volume rose by 17.3% to EUR 1.125 million (sic) [ 1,125 kilotons ] and turnover by 23.4% to EUR 174 billion (sic) [ EUR 1.74 billion. ] The biggest contribution to growth came from Ascometal, which was fully consolidated in the results now since February 1. And also without Ascometal, the group has grown on a like-for-like basis.The high growth on the top line led to a 14% increase in adjusted EBITDA to EUR 155 million. EBITDA has improved less strongly than revenue, as Ascometal did not yet make a significant contribution as expected and as forecasted. Nevertheless, it should be noted that the new business unit was slightly in the black at EBITDA level in the first 5 months. I will return later in more details with the integration of Ascometal.Net income rose to EUR 96 million, almost 4x that of the same period of the previous year in which EUR 26 million were recorded. Even without the badwill of EUR 46 million included in this figure, which had a positive impact in earnings, net income would have doubled. However, the high momentum in our business had its price, which is reflected in free cash flow. Strong demand, higher raw material prices, the acquisition of Ascometal and the usual seasonality led to a significant decline in free cash flow, which amounted to minus EUR 171 million in the first 6 months. Also for seasonal reasons, however, cash flow will improve significantly again in the second half year.The main reason for the pleasing results in the first half of the year was the continuing positive market environment and the healthy condition of the customer market. This is shown on the Slide #6. With the exception of scrap, brisk demand led to further rise in raw material prices in the second quarter. The trend of the last quarters thus continued as a sequential increase could already be observed in the first quarter compared to the fourth quarter of 2017. The price of nickel rose again by 9% after 14% in the first quarter, ferrochrome by 2% after an increase of 3% in Q1, while the price of scrap metal consolidated and fell slightly compared to Q1 and slightly means just a few euros after increase of 13% in the first quarter. What applied to alloying metals also applied to the oil price, which rose by 14% in the second quarter.Our most important end markets also developed favorably throughout the first half of the year. Industry data from recent months show a substantial good mood, with solid growth in mechanical and plant engineering, the automotive industry and the oil and gas segment.Let us move to Chart #7, which shows the regional breakdown of sales. All regions contributed to the strong revenue growth. In the first half, revenue increased by almost 1/4 or exactly 23.4%. Here too, the above-average growth of 25.8% in the core region of Europe reflects the gain achieved by Ascometal. Growth in Asia and Africa, Australia was only slightly lower than in Europe. with 22% increase in sales. On the other side of the Atlantic, growth of 10.4% in North America and 5% in Central and Latin America was far less dynamic than in the rest of the world. In the United States, this was due to the structural market change in the area of fluid ends, that is the steels used for pumps in the oil and gas business, which was already visible in Q1 and we reported that. In Latin America, we traditionally do not have a strong presence, but we intend to slowly develop the region with our new sales offices. In Argentina, Chile and now recently in Columbia, we have opened a new one. In the first half of the year, sales in Central and South America amounted to EUR 21 million. Following this overview now, the most important figures for the first half of the year, I would like to take a closer look at the integration of Ascometal. I've already shown you the next Chart 8 with the rough schedule for the 3 phases of the integration, so I won't explain much more about that. It is important to understand that we have invested a lot of time to stabilize Ascometal. We are making good progress in harmonizing processes and aligning them with the platform of the SCHMOLZ + BICKENBACH Group. Now in the third step, we have begun the phase of industrial integration. So what have been achieved in the first 5 months in which Ascometal is part of our group, this I will explain you with a few examples on the next Chart #9.The integration into the group is divided internally into 8 subprojects. There are many other activities beside the yellow and the white ones. Let me turn briefly to the activities printed in yellow. For example, we have achieved important milestones in the industrial subproject, which deals with the implementation of the long-term industrial concept. We have validated our concept, created a detailed overview of the operational processes and developed medium- to long-term goals for the site now. We can now track the degree to which targets have been achieved with individually defined performance targets and key figures for each plant and location. Based on these KPIs, we'll make any necessary adjustment to our production network. In this process, it may well be the single production plants will be closed down. Such decisions require time, which we allow ourselves in order to ideally position the group in the long term.We've also made important progress in purchasing and in the commercial area. Thanks to the financial stability of SCHMOLZ + BICKENBACH, Ascometal is again supplied on normal terms of payment, and the suppliers do not ask for advance payments anymore. With regard to our global sales and service network, we have integrated most of the Ascometal sales locations into the sales and service business unit in the respective countries. Compliance, of course, is another important issue in our industry. Ascometal has already been included in this process in order to avoid possible conflict. Our finance and IT specialists have also worked hard. Thanks to the migration from Ascometal to the group wide reporting platform into SAP, we now have the transparency required to manage the business unit.All these processes are supported by an intensive exchange between the colleagues from, for example, Ugitech, who have long been part of the group and the French colleagues at Ascometal. This ensures that the best practices can be quickly adopted and implemented. These examples show you that integration is being driven forward in a targeted manner.We are on the right track. Even so, our operating performance still has quite some room for improvement. I will explain this in more detail on the next Chart #10. Also, Ascometal's financial result at EBITDA level has, so far, roughly met our expectations. We are not satisfied with the operating performance. Especially the locations in Fos-sur-Mer and Hagondange and maybe to a lesser extent, Les Dunes are not performing as well as we would expect and as they could. All conditions for this would be in place. The technical possibilities coupled with the good market environment would allow significantly better results. Now in order to further improve these prerequisites for an increase in operating performance, we have already decided on 13 major investments amounting to almost EUR 7 million. More will follow.These will help to achieve the performance we expect after an in-depth analysis of the industrial concept. The sites now have sufficient time to reach these KPIs. Where this will not be the case, we must talk about relocating production to another location in our network, which can produce more cost efficient and effective and reliable. Accordingly, we are pursuing a dual strategy for the foreseeable future, which will allow not only the operation of our Ascometal plant but also relocation to existing locations of SCHMOLZ + BICKENBACH. Fortunately, this process is now closely followed and implemented by a completed business unit management. We are happy and proud that on the 1st of August, we succeeded in adding an experienced CEO from the steel industry to Ascometal's executive board. The conditions are therefore good now for Ascometal to find its way back to its former strength.So in summary, I can say that in a favorable market environment, we have had a very pleasing first half year. The figures are strong, and Ascometal is progressing rapidly and as planned, despite the issues we are not unexpectedly confronted with.With that said, I would hand over then to my colleague, Matthias, to explain the figures for the second quarter.

[Matthias J. Wellhausen, CFO & Member of Executive Board]

Clemens, thank you very much. Ladies and gentlemen, a warm welcome to today's conference also from my side. Thank you for taking the time.Clemens commented already on H1 KPIs and as usual, I will now give some more granularity and drill down on the financial results and developments on a quarterly basis. Before doing that, let me remind of a couple of facts. Firstly, this is the first quarter where Asco is fully consolidated for all of the months of the quarter, because in the previous one, in quarter 1, that was only 2 months, just to remind that. Secondly, as before, we don't restate previous year's figures for Asco, it's the historical numbers of SCHMOLZ + BICKENBACH. And thirdly, reminding that Asco is specialized in engineering steels and is being in transformation. That means their financial ratios and also like average sales prices deviate from the average of the group. I'm saying that because this bears some mathematical effects that crawls through all of the slides that we will be discussing now.Yes, looking and coming to Chart #12 as the first one, where we display the operating figures on crude steel, sales volume and order backlog. Can say proudly, crude steel production stood at 650,000 tons for the quarter. That was actually the highest the group has ever achieved. It was an increase by 21.5% for the quarter compared to previous year's period and this was entirely driven by the consolidation of Ascometal. Without this contribution, production remained roughly constant. That is quite pleasing, because in Q2 2017, we were already at a very good capacity utilization. I may remind that we measure the utilization usually compared to the peak production in 2014, which represents a practical capacity for us.So in Q2, we were at approximately 94% of that value. We had no major technical incidents in the upstream, went very smooth. Utilization was particularly high in the plants of Swiss Steel and of Ugitech here in France. Finkl in the U.S. was improving production compared to 1 year ago. The only one showing a slightly lower load was the plant in Siegen in Germany.Even though Ascometal accounted for the overall growth in production, we see significant further potential to increase the output here, as demand for the products was very good. Clemens alluded already to that, that we were here production constrained rather than market constrained. However, overall, the work then is on track, and he explained that very happy to have the executive management team with [indiscernible] and Olivier Eberhard and Philippe onboard now. They are really at the work now.Now turning to the sales volumes. We see approximately the same development, that is a growth of 23.4%, driven by the consolidation of Asco. The old parameter, so to say, was at the same level than the previous year. We sold a total of 580 KT. We can say that this was despite the fact that we streamlined the Steeltec portfolio compared to last year. You remember that we shut down certain facilities in Scandinavia, which reduced that -- those sales by 8,000 tons, which we practically made up through additional sales in the other units, more profitable ones.In terms of product groups, we see the growth concentrated in engineering steels, whereas tool steel and stainless are rather at the same level as previous year. Then the order book remains strong. We see a small decline compared to Q1. Yet this is partially due to a normal seasonal slow into the summer months. Remember that most plant and also many customers go to a standstill for their yearly maintenance. That is not only for the steel industry but also for our customers. And partially, this is due also to a prudent order intake. A prudent order intake means, in this case, that we focus on assuring good customer service with respect to an on-time delivery, which is currently the challenge at the given levels of activity. The underlying momentum in the market demand remains completely unchanged and positive. Clemens will later address the outlook. Let me, nevertheless, at this point, remind that the first half is seasonally always the stronger one, and has proven over the past 4 years that we can count that 53% to 54% of total year's volumes are being sold in the first half of a year, and we do expect that this pattern will also hold this year.Yes, coming now to Chart #13 on revenues and average sales prices. Again, revenue follows the pattern of production and sales volumes. However, they were even up by approximately 30% versus Q2 2017 and stood at EUR 908 million. This was supported by the further increases in the average sales prices. They were up by approximately 5% versus the previous year. The positive development applies to all product groups. The most pronounced, this was in engineering steel.Now the 5% improvement includes the adverse mathematical effect of the structurally lower prices of the engineering steels that Ascometal added to the revenues. The average sales price of engineering steels, roughly speaking, is approximately EUR 500 per ton below the average of the group. If you adjust for this mathematical effect, the momentum of price rise stands at an increase of almost 12%, not 5%. If you adjust, it's 12%. Indeed, we had the eighth consecutive quarter of up rise in this favorable market. Price increases were due to base prices as well as increased alloy and scrap surcharges.Yes, coming now to Slide #14, the bottom line. Adjusted EBITDA actually in the quarter was the best quarterly result since 2011, so we had to dig quite deep. We could improve it by 22% to almost EUR 85 million compared to the already strong prior year quarter. Now, on top of the favorable development on the sales prices, we saw also the effect of our profit improvement program #2 which targets EUR 12 million sustainable improvements for this year. You remember that we have this follow-on project after the 2-years program that we had from 2016 to 2017. For '18 we've launched a new one, targeting EUR 20 million. Out of this, we could already achieve the half year EUR 12 million, and we do expect that we are really very well underway for this one.Yes, looking at the profitability ratios, we see again the same mathematical effect working here from the Asco consolidation. Asco only has a marginal EBITDA contribution during the transformation, so hence, the EBITDA per ton and the EBITDA margin get diluted from this effect. Hence, both ratios are down, slightly down. EBITDA per ton by EUR 2 per ton to EUR 246 million and EBITDA margin by 0.6 points to 9.3%. Again, if you adjust for Asco, the values would have been 10.5% on the EBITDA margin and EUR 175 per ton for the EBITDA per ton.The once-off integration cost for Asco during the quarter amounted to around EUR 3 million. As you know, the positive net effect of the EUR 46 million badwill for Asco, which was recorded in Q1 and the cumulative integration cost for Asco over time, it will be more or less balancing. And we take these impacts out of the reported EBITDA and so in the adjusted EBITDA, you don't have these 2 effects included, so in order to have a better transparency on the operational performance.Yes, net income for the quarter was up to EUR 37 million after EUR 10 million in the prior year quarter. Now, when you look at the last 12 months, this means that the continued positive results have strengthened our equity position and the balance sheet by approximately EUR 150 million during this past year. So quite a pleasing development adding to our stability.Coming to -- point to Chart #15, the cash flow side. The important development here is a further increase of -- by EUR 110 million compared to Q1 in the working capital. The ratio stood at 28%, the ratio of net working capital revenue, which is an increase of 0.6%. That is completely seasonal. This reflects the inventory stock-up towards the planned yearly maintenance standstill in most of our plants during the summer now, so that further increase of the ratio was purely seasonal. However, the ratio is also up compared to 1 year ago, when we stood at 26.9%. Now, this deterioration reflects a buildup of buffer stocks for electrodes. These have been in high demand over the past month, as you know, and the market continued very tense up until today after some relaxations in between, but it's still tense. However, we are now in the position of quick coverage not only in stocks but also in terms of contracts. Going forward, it will now be possible to relax these buffers, buffer stocks again over the next 2, maybe 3 quarters.A second impact, extraordinary impact is the -- is coming from Ascometal where the efficiencies and the improvement process are not yet fully achieved. Clemens alluded that we're making good progress on the payment terms with our suppliers. However, this is not completely accomplished yet and also, we see some overstockings in some areas. The -- both effects together amount approximately to EUR 40 million of, let's say, temporary increase. This temporary increase will be largely eliminated until the end of quarter 1 2019. Yes, we had a slightly higher ratio in combination with a strong revenue growth drove the working capital and impacted the cash flow accordingly, the free cash flow was EUR 68 million negative in the second quarter. It included also further payments of the purchase price for the Ascometal assets of approximately EUR 11 million. Hence, these payments are now practically completed, so purchase price for the assets is paid, cashed out. The CapEx were EUR 21 million for the quarter, slightly above previous year's level. Together with the first quarter, that makes EUR 36 million.Now, we shall see a significant up rise of CapEx in the second half. We will have additional investments there for our large project in Swiss Steel, the walking beam furnace, you know that one, and Ugitech, the net cap certified furnace, you know that one also. But especially the transformation and integration of Asco, we'll now start to figure the additional investments, which have been announced upon the acquisition. We expect the total of the year to be in the range around EUR 140 million for the CapEx.Yes, coming to my last slide, that is the debt side of the business. The negative free cash flow is, of course, accordingly reflected in the development of our net debt in Table 16. The net debt rose further from Q1 by EUR 69 million to now EUR 626 million at the end of Q2. The leverage increased marginally to 2.6. Overall, we expect that the free cash flow will be modestly positive in the second half, so the net debt will be at the -- towards the end of the year, slightly below the quarter 2 figures with some seasonal fluctuations. Also more to -- so to speak, the higher CapEx in second half, that I just mentioned, will be more than balanced by lower demand in working capital.During the quarter itself, we increased our long-term financing capabilities by tapping our existing bonds, which we had issued a year ago. On June 25, we successfully placed EUR 150 million of additional senior secured notes, bringing the bond volume overall to EUR 350 million, a good size. The proceeds from this were primarily used to repay borrowings under the syndicated revolving credit facility that we had utilized in connection with the acquisition of Asco. With this step, with this additional EUR 150 million bond, all credit lines are totaling now more than EUR 1 billion. The unused lines and funds were brought to EUR 460 million at the end of quarter 1. We can say, in other words, we have reestablished the same headroom to the level prior to the acquisition of Asco on a long-term basis. Yes, overall, really a very pleasing quarter, and we are very well on track on what our target is concerning. And Clemens, I may hand back to you for the outlook.

[Clemens Iller, CEO & Chairman of Executive Board]

Yes, thank you, Matthias. Ladies and gentlemen, before I come to the current market environment and to explain you why we have raised our guidance for the fiscal year 2018, let me just make a few comments on punitive tariffs and trade barriers. The 25% punitive tariffs imposed by the U.S. have very limited direct effects on our business. We said that in the past, this is because it affects a maximum of 3% of our revenue or less than 50,000 tons. Actually, however, this will be even less the case as many of the products we export to the U.S. are not produced there, and customers are accordingly prepared to bear the additional cost.Products that are no longer purchased by customers due to punitive tariffs are currently being sold in other markets. By contrast, the provisional countermeasures introduced in response to the U.S. punitive tariff of the EU could affect our Swiss units, Swiss Steel and Steeltec. However, the possible effects cannot yet be quantified and depend on various factors. For example, the question of whether these provisional measures will only apply for 200 days, will be introduced permanently or whether Switzerland will be exempted in the future after all. This would be, from our point of view, only logical since the increased import quotas in recent years are not attributable to Swiss Steel producers.The biggest risk, which would not only affect us but the entire steel industry is a further increase in escalation of the trade conflict. The consequence could be a slowdown in global economic growth, which would, of course, affect many companies operating in cyclical sectors. But there, knock on wood, we see no signs of a softening in our books so far.This brings me to the end of the presentation and the outlook on Chart #19. Political risks have continued to increase since the end of the first quarter, and I have just said, news and announcements of punitive tariff, trade barriers and countermeasures changing at a rapid pace at the moment. Nevertheless, the synchronized global economic upswing remains intact. Currently, we do not see a fundamental slowdown in our end markets. We therefore expect the special long steel industry to continue to grow in 2018, both in sales and in the value of its products. We expect a further shift towards more demanding production and steel applications. This is reflected in an unchanged high order backlog as of June 30, which is lower than the end of the first quarter but only due to seasonal factors. As far as the development of raw material prices is concerned, we expect continued high volatility, which will, however, remain supportive for our business. By contrast, cost inflation, which has built up in a good market environment in recent months, could have an unfavorable effect. In order to absorb this inflation, we will continue to apply, and Matthias talked about it, cost discipline as we have done successfully in the past. These facts and assumptions allow us to raise our forecast for the fiscal year 2018 today. We now expect adjusted EBITDA in a range between EUR 230 million and EUR 250 million after previously assuming EUR 200 million to EUR 230 million.Ladies and gentlemen, with this outlook, I close the presentation and give you the opportunity now to ask questions.

[Operator]

[Operator Instructions] The first question comes from the line of Mr. Rochus Brauneiser from Kepler Cheuvreux.

[Rochus Brauneiser, Head of Steel Research]

A few questions from my side. The one is around the safeguard measures in Europe. Can you give us a sense, how the imports into the EU for your category of product has developed over the last 3 years? And can you also give us a bit of -- do we have any sense for the time line until you would have clarity about a potential exemption of Switzerland regarding those safeguards? Second question is on the comments you made on the performance in -- at Ascometal. Can you describe a bit more in detail the nature of the problems? And what would be the time frame until you would decide about relocation of production or even plant closures? And then thirdly, how do you assess the developments in your global competitive arena? Particularly, what can be observed is that your Japanese competitor is obviously accelerating consolidation, acquiring Ovako and Sanyo in Japan? How do you assess this to impact your business in Europe? Maybe let's limit it to this year.

[Clemens Iller, CEO & Chairman of Executive Board]

Okay. Thank you very much. Let's come first to the safeguard measures, first part of the question. So far, the import into Europe for the 2 categories that affect us, which is this Categories 12 and 16, you have not seen a big increase in that. Now, how does it affect us? First of all, the issue is that this is a provisional measure, yes? So it's for 200 days. At the moment, there is no effect for us. There is a quota defined. Now, unfortunately, this was done in a very short time and not discussing with all the participants in this market. So the quota that has been defined is more or less filled in a first-come, first-served manner. It would have been more -- from our point of view, much more, let's say, productive if this would be by country. And then I can only say when you talk also to the different groups involved like EUROFER, for example, in Brussels, they have also recommended the European Union and Commission to make this kind of quota per country. Because, as you know, in Switzerland, we have only 2 manufacturers, and these 2 manufacturers are not even our competitors. We are in different segments. We are not -- at least from our side, if you see the time that the European Commission refers to, in this period, we have not increased our imports into the EU. So we are definitely not part of any problem, any worry they have. And it also has been unofficially said to me by different people from the political side that Switzerland was never the problem and never the target. But unfortunately, Switzerland is now in the big group of outside-EU suppliers, so we are in the same category like India, Russia, China, whatever. So here, we have to make now for the time after these 200 days, and this is what we are working on right now in Brussels but also here with our Swiss politicians that we can make sure that we need a Swiss quota, because I think then it's much more -- for us at least, much more better than what has happened now. So therefore, right now, everybody can deliver against this quota, but you don't know actually when this limit has been achieved, yes? So we expect somewhere at the end of this period of 200 days, which will be December, January, then next year, but we will see.

[Matthias J. Wellhausen, CFO & Member of Executive Board]

If I can talk?

[Clemens Iller, CEO & Chairman of Executive Board]

Yes.

[Matthias J. Wellhausen, CFO & Member of Executive Board]

Nature of problems, the one that was on Asco. This is mainly reliability problems on certain key facilities, and that is very much linked to the back of specialists in some areas, the hiring and the education and training is already ongoing. We're very confident that we will achieve here fast progress.

[Clemens Iller, CEO & Chairman of Executive Board]

And on Japan, I can only say that we have -- I mean, definitely, consolidation will be helpful. Therefore, we have no problem with Japanese. And in this case, it's Nippon Steel. And as I see that has bought Ovako, and I think you're talking about the consolidation they are planning there also with Sanyo. But for us, this is certainly helping, so therefore, no issue on that. The situation is not changing. Ovako is a competitor -- was a competitor, is a competitor, and for us, the thing that we have to do is to improve the performance in Ascometal, because Ascometal clearly has the toughest competition with Ovako. And if we can get back to reliability, I think we have a good chance also to take some of the market share back that deserves Ascometal.

[Rochus Brauneiser, Head of Steel Research]

Okay. Maybe allow me to follow up on this issues. Maybe I misunderstood your comments wrongly before. So actually, I guess, you were saying that depending on the progress you're making at the various Asco facilities -- or the lack of progress there could end up with plant -- production reallocations and closures. Can you maybe specify what the idea is behind so what time frames are we talking about and what would be the kind of milestones you expect to avoid that?

[Clemens Iller, CEO & Chairman of Executive Board]

I think what also Matthias was trying to explain is, in our industrial concept we have lined out already where these areas are. And what we are doing at the moment is, and this is also, of course, related to the favorable market situation, we do both and we can do both. That's the good thing, actually. So for example, we are just investing in a new furnace in Witten, so that in the future -- and this is one of the big measures that will be the next big milestone for us next year, end of January. We will definitely stop the purchase and the supply from Ascoval, this melt shop that we have not taken in North of France. And then this volume will be shifted to our Witten plant. So we are, at the moment, doing the investment in this furnace in order then to be ready to -- so this is a parallel, a dual strategy at the moment. Same, we are, as you know, from our industrial concept, we have looked to the melt shop in [indiscernible]. And we have seen that there is -- the performance is poor, so we have now given -- also invest possibilities to the [indiscernible] melt shop area in order to improve the reliability. And then see, in the next 1 or 2 years, that we will need and this is what we do in parallel. We will do the homologation with our customers, so that at the day, in -- maybe in 3, 4 years from now, we can go to our customers, offer both homologized production supply routes and then look which is better for us. So we will use -- further use and improve the reliability in [indiscernible] and in the same way, prepare the homologation with our customers to use the production with Germany, France to the customer.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions at this time.

[Ulrich Steiner]

So thank you, Alex. If there are no further questions, I now thank you very much for taking part in today's conference call and your interest in SCHMOLZ + BICKENBACH. If you have any further questions or comments, please let us know. We look forward to continuing the dialogue with you. Thank you very much and goodbye.

[Operator]

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.