Traton SE (TRATF) Q2 2024 Earnings Name Transcript

Traton SE (OTCPK:TRATF) Q2 2024 Earnings Name July 26, 2024 4:00 AM ET

Firm Individuals

Ursula Querette – Investor Relations
Christian Levin – Chief Government Officer
Michael Jackstein – Chief Monetary Officer

Convention Name Individuals

Klas Bergelind – Citi
Daniela Costa – Goldman Sachs
Hemal Bhundia – UBS
Nicolai Kempf – Deutsche Financial institution
Virginia Montorsi – Financial institution of America
Forbes Goldman – Pareto
Michael Aspinall – Jefferies
Jose Asumendi – JPMorgan
Hampus Engellau – Handelsbanken
Shaqeal Kirunda – Morgan Stanley

Operator

Girls and gents, welcome to the Traton Q2 First Half 2024 Outcomes Convention Name. I’m George, the Refrain Name operator. [Operator Instructions] The convention should not be recorded for publication or broadcast. Right now, it’s my pleasure handy over to Ursula Querette. Please go forward.

Ursula Querette

Thanks, operator. Good morning, everybody and welcome to Traton’s second quarter 2024 earnings name. My title is Ursula Querette and I’m Head of Investor Relations at Traton SE. With me on the decision in the present day are Christian Levin, our CEO; and Dr. Michael Jackstein, our CFO and CHRO. Christian will kick off the presentation with the important thing outcomes and highlights of the second quarter and Michael will information you thru the monetary efficiency and outlook in additional element. As at all times, we’ll conclude the decision with a Q&A session, the place we welcome questions from monetary analysts, traders and media representatives. To deal with potential media inquiries through the Q&A session, Camilla Dewoon, our Head of Company Relations, can also be current.

This session might be recorded and a replay might be made accessible on our Investor Relations web site as quickly as attainable after the decision. You may as well discover our half yr monetary report, which we revealed this morning and the slides to this name on our IR web site. Earlier than we begin, let me remind you of the disclaimer with respect to forward-looking statements on Web page 3 of our presentation. With that, I hand it over to Christian.

Christian Levin

Thanks very a lot, Ursula and welcome, everybody, additionally from my facet. Thanks for becoming a member of. So you’ll be able to see the general image on this slide and we observe up the second quarter with a extremely good consequence, identical to within the first quarter, concluding a powerful first half of the yr. And from the left, we begin with the order consumption scenario and you may see that we additional managed to develop our orders to nearly 59,000 automobiles. Stated that, the general image is that clients have gotten extra cautious, particularly in Europe and North America and we see markets are normalizing from the previous 2 very robust years. Brazil and Latin America, nonetheless, are transferring within the different course and we see a extremely constructive market improvement there with good order consumption as a consequence.

If we glance to our gross sales in Q2, we’re down 5% in comparison with final yr to 79,000 automobiles, nonetheless a strong stage, particularly considering that we’ve had a extremely robust short-term provider situation occurring at our worldwide model, Navistar within the U.S., the place fireplace hits our provider of rearview mirrors, which sadly is a single source. So in Escobedo simply neighboring our personal plant, there was a complete loss. Now this, in fact, closely influenced negatively our supply figures for North America, whereas truly impacting all our key figures in Q2. We, nonetheless, anticipate to have the ability to full the vehicles, they’re constructed and we’ve a further line and a further shift as much as full with mirrors and ship them and the overwhelming majority we anticipate to ship all through the second half of this yr.

Now, if we transfer on to the money move, that is what has been particularly hit by this short-term impact in Navistar so a minus of €374 million within the quarter. However keep in mind additionally that that is the quarter the place we pay out the dividend and we did double the dividend payout €750 million this yr. In the event you look then again to the third field, gross sales income, you’ll be able to see that regardless of 5% decrease automobile deliveries, we did 1% minus on gross sales revenues coming to an excellent €11.6 billion income, primarily defined by an excellent worth self-discipline in all of our manufacturers, but additionally a great regional and product combine. So, trying then to lastly to our outcomes, it’s an 8.8% return on gross sales, one other robust quarter, displaying once more that our strategic ambition of reaching 9% in 2024 is certainly properly inside attain.

Alright. Michael will, in fact, take you extra into the monetary particulars later on this presentation. So let me as a substitute transfer you into the following slide and take a look on a number of the most vital strategic highlights from the second quarter, beginning with Scania and an vital announcement made that we’ve established and launched an organization referred to as Erinion. It is a firm that can provide turnkey depot and vacation spot charging tools to our clients. We’ve got come to comprehend that, in fact, charging alongside the highways is vital, however completely 100% of the purchasers first require depot and vacation spot charging. And that is the place they anticipate to make the vast majority of their charging occurring.

Strategically vital and attention-grabbing is that we had been by no means into the vitality provide of consumers earlier than with some only a few exceptions, gas playing cards and different options. However that is – and can proceed to be 30% to 40% of the client pockets. So a small step taken in the direction of a giant goal of reaching 40,000 charging factors already and by that supporting additional the transition into the mobility options.

However – and transferring to MAN regardless of shifting to the remission automobiles, the demand for conventional combustion engine automobiles stay robust and an important gross sales arguments stay, discount of gas and with that comes, in fact, discount of CO2. MAN introduced the launch of the brand new extremely environment friendly D30 engine. So after the tremendous comes the S13 in Navistar and D30 in MAN, all are based mostly on the CB1 engine, gearbox and after remedy system being the primary Traton modular answer for all of our manufacturers. However MAN has taken that one step additional, made additional enhancements with a brand new brake era and with a number of aerodynamic measures, having the ability to promise reductions by as much as 4% to their buyer base and deliveries of this driveline will begin within the subsequent calendar yr.

Again to battery electrical automobiles and worldwide model within the U.S., the place an enormous effort has been made to organize the supplier and repair community for the electrical automobiles, each vehicles and buses. We’ve got discovered in Europe that you just want a big effort to organize the employees and Navistar has chosen the trail to organize 100 out of the – round about 300 sellers of worldwide each vehicles and IC buses for electrical an vital step to have the ability to tackle, particularly the varsity buses which might be popping out first.

In Volkswagen Truck & Bus, we select to spotlight the internationalization technique that we’ve talked about for this strategic interval the place on this quarter, a brand new manufacturing facility was opened up in Argentina in Cordoba. There might be 5 fashions introduced into the native manufacturing available in the market after which available in the market, the place Volkswagen Truck & Bus is current since greater than 25 years. However should you look to the outcomes available in the market, you’ll be able to see that IVECO and Daimler are the predominant gamers as they do have native manufacturing. So we anticipate vital enchancment in gross sales figures for Volkswagen Truck & Bus, due to this transfer. So two of those strategic initiatives immediately pay into our electrification journey which is transferring momentum.

And on the following slide, you’ll be able to see our key figures, order consumption and deliveries of full electrical automobiles all through the primary half of the yr. And you’ll see that momentum is rising. Buyer curiosity is absolutely excessive. greater than 1,700 orders is a transparent enchancment over the primary half of 2023. We selected the image right here of an MAN electrical bus – electrical metropolis bus as a result of we’re tremendously proud to be truly the market chief in Europe for electrical metropolis buses. You might need thought that was a Chinese language producer however it’s not. It’s MAN that’s primary within the European metropolis bus market, due to a superb product that you may see right here, the MAN Lion Metropolis E. However as you understand, we even have an ideal lineup from Navistar with college buses, the largest bus phase within the U.S. and we see momentum build up, particularly on the providing facet for vehicles.

Unit gross sales are going backwards, 605 solely. After which you must know that that is partly because of the truth that the MAN e-van was discontinued on the finish of final yr, and therefore, that’s out of the supply figures for this yr. After which there’s a robust pipeline of electrical vehicles coming into the market within the coming quarters. We see an increasing number of clients having the ability to make a constructive TCO calculation. We see enhancements within the charging infrastructure [indiscernible] as we’ve already instructed you about, Erinion that we talked about in the present day, but additionally MAN strategic collaboration with EON, the place they’re electrifying all the workshop and supplier shops.

However as typical, I name out to the governments, particularly in Europe however around the globe, to ensure that the TCO parity is improved by means of no matter means accessible to them and for us to have the ability to attain the CO2 emission discount wanted to achieve the Paris settlement. And with that, let’s go away the emission automobiles, transferring to the following slide, and I offers you an outline of the market scenario.

So that is our international each deliveries and orders in a single slide over time. And as you’ll be able to see, there’s a decline in unit gross sales in Q2 because of a continued normalization in our massive market areas, each Europe and North America. MAN is very hit by the weak point of the German market, however each Scania and MAN Europe are impacting by weaker demand out of East and Europe.

However, we proceed to have a powerful order guide in each our European-based manufacturers. Additionally within the U.S., we see the inexperienced figures, and that is primarily coming from the on-road Class 8 automobiles, whereas we truly see development in Class 6, 7 and within the extreme phase. And as you’ll see in a while, we make no change to our steering. We persist with it. We imagine that each one the market areas might be as we forecasted for this yr.

South America continues like in Q1 to be actually robust in Q1. It was predominantly Scania that benefited because the heaviest a part of the market grew quickest. However on this quarter, you additionally see a really constructive improvement for Volkswagen Truck and Bus, whereas the lighter and medium-duty segments additionally began to develop. However apart from the whole market results, I would like to say once more the extra hit that the Navistar took along with his fireplace on the provider of mirrors.

Powerful for our workforce that work so exhausting with restructuring and getting the corporate again on observe, getting this drive majeure, taking their deliveries down with 23%. So, blended image between the manufacturers, however all in all, that takes us to a decline of 5% within the quarter. Order consumption, we truly managed to extend 4%, as already talked about, primarily due to North and South America and particularly due to Brazil.

And subsequently, you see a really robust order consumption enchancment, particularly from Volkswagen Truck & Bus rising 36%, but additionally Scania benefiting this improvement, being a giant participant in Latin America and likewise rising order consumption within the first half yr. This takes us to a unfavourable book-to-bill ratio or a book-to-bill ratio beneath one, I ought to say. We’re a 0.75 a slight sequential enchancment.

And as a consequence, improved or if you want, decrease lead occasions so if we discuss within the completely different market areas, we at the moment are all the way down to slightly regular supply occasions round about 3 months on common in Europe, whereas in South America, lead occasions are rising as much as 6 months relying on model and utility. And with Navistar within the U.S., we’ve the longest lead occasions as a result of primarily of this provide chain situation now mirrors.

However as you keep in mind and recall from earlier than, we even have body rail points, clear guide points, etcetera. So there, that you must depend between 3 and a minimum of 6 months relying on specification. In order that’s attempting to color an image total image of the market and with this, let’s bounce into the monetary figures, and I hand it over to you, Michael.

Michael Jackstein

Thanks very a lot, Christian and naturally, a heat welcome from my facet as properly. Christian simply spoke in regards to the market tendencies that affected our unit gross sales, whereas we nonetheless profited from a great order guide. He additionally referred to the brand new EU common security regulation, which, on the one hand, created some market momentum within the second quarter. Alternatively, the applying of the regulation got here with a mannequin change at MAN and therefore, with a sluggish supply.

The Navistar mirror provide situation and the respective transitory impact on truck unit gross sales in Q2 was additionally talked about. Unit gross sales of buses at Navistar had been nonetheless down year-on-year within the second quarter, though deliveries of the brand new college bus mannequin at the moment are ramping up. Whereas unit gross sales decreased by 5% within the second quarter, gross sales income remained nearly secure, which is a outstanding achievement.

This resulted from a good geographical and product combine, due to our diversified enterprise mannequin. It was additionally because of our good order guide and worth realization. Moreover that, we benefited from a continued excessive demand for our automobile providers, given age truck fleets and excessive utilization. Let’s transfer to the following slide with our profitability improvement.

As you’ll be able to see right here, within the second quarter, the adjusted working consequence decreased solely barely, leading to a continued robust adjusted return on gross sales of 8.8%. This exhibits as soon as once more how our price construction and total resilience have improved, particularly as a result of constructive affect from the MAN realignment program and regardless of the unfavourable results that we’ve already mentioned.

We reached a profitability of 9.1% for the primary half of 2024, which meets our 9% adjusted return on gross sales ambition. Nevertheless, our IRS steering stays unchanged with a spread of 8% to 9%. This takes under consideration ongoing cautious market expectations for Europe and North America and potential dangers from additional provide chain disruptions and geopolitical uncertainties.

Allow us to now look into the person efficiency of our manufacturers on the following web page. So Web page 12 exhibits how our group advantages from having diversified manufacturers, markets and merchandise. So regardless of the Navistar provide situation and softer markets in Europe and North America, gross sales income of commerce and operations remained nearly secure year-over-year.

The corresponding return on gross sales even elevated barely by 0.4 share factors to 10.2% within the second quarter of 2024. As proven on the slide, Scania was the primary driver of the commercial income development. Its gross sales income went up by 8% to €4.8 billion, primarily as a result of robust development of its heavy-duty truck enterprise in Brazil. Additionally, Scania’s income advantages from the rising supply of vehicles outfitted with the Scania Tremendous powertrain in addition to the continuing robust demand for its automobile providers enterprise.

With this, Scania once more improved its adjusted return on gross sales, each quarter-over-quarter and year-over-year, reaching a really excessive 14.7% within the second quarter. MAN reported €3.6 billion in gross sales income, which is a decline of two%. As talked about, MAN suffered from the weak demand in Germany. The income development was additionally affected by the brand new EU security regulation.

Nevertheless, this was partly offset by rising bus and van gross sales revenues. However, the adjusted return on gross sales improved by 0.8 share factors to outstanding 8.5%, clearly demonstrating the constructive outcomes from the profitable realignment at EMEA. As said, Navistar’s deliveries had been considerably affected by the hearth at its mirror provider and subsequently, gross sales income declined by 21%.

As a consequence, we noticed a drop in Navistar’s working revenue and the adjusted return on gross sales got here in wanting expectations. We made a tough calculation. If all vehicles produced within the second quarter had been delivered to clients, the Navistar return on gross sales would have are available in considerably larger, roughly round 7%. Even when this drop pushed by a drive majeure is unlucky, we’re assured to ship the overwhelming majority of the backlog to clients within the the rest of the yr.

We anticipate that this and total manufacturing will assist to considerably enhance profitability at Navistar within the coming quarters. Volkswagen Truck & Bus elevated income by a really spectacular 41% year-on-year. This was pushed by robust market [indiscernible] and a greater product positioning and unit worth realization, therefore, based mostly on a superb product providing and a number one place in a rising market, Volkswagen Truck & Bus additional elevated its adjusted return on gross sales to 12.6% within the second quarter.

Subsequent to commerce and operations. Commerce and Monetary Providers elevated its income by 22% within the second quarter. This got here largely from a bigger portfolio quantity and the continued nation rollouts for MAN clients. Nevertheless, this had a unfavourable impact on the profitability of our Monetary Providers enterprise in Q2, together with larger funding prices.

Return on fairness got here in at 11.9% within the second quarter. And I ought to point out that final yr’s return on fairness was decrease due to the sale of Scania Finance Russia. Let me finish this slide on a constructive be aware. We’re constantly executing on our technique. We leverage the strengths of our 4 manufacturers, whereas constructing out the commerce modular system and rising collectively as a gaggle, and we’re ramping up our captive monetary providers providing for all our buying and selling manufacturers.

With that, let’s transfer on to Web page 13 and our current web debt improvement. Right here, you’ll be able to see that the web money move of commerce and operations was considerably affected by a powerful buildup of working capital, largely inventories. That is predominantly associated to the talked about scenario at Navistar, the place as a result of lacking mirrors, we couldn’t end and ship our vehicles as deliberate within the second quarter.

Based on our chilly calculation talked about earlier than, the commerce and operations web money move would have been roughly €700 million larger if the mirror provide situation had not occurred. An elevated CapEx additionally weighed on our web money move. However let’s take this as a constructive because it clearly pays into our future competitiveness. Our dividend fee of €1.50 per share in June resulted in a further money outflow of €750 million.

Our robust working efficiency couldn’t totally offset the talked about results. So the web debt of commerce and operations, together with company gadgets, rose by €1.2 billion within the first half of this yr. This must be a short lived occasion as our prime aim to delever our steadiness sheet stays totally in place. We anticipate working capital to assist us within the second half of this yr particularly from the reduction of semi-finished stock and stock in North America.

As we’ve stated many occasions, we’re aiming at a stand-alone investment-grade score by additional decreasing our web debt. This may make our financing extra versatile. With this, let me transfer over to our full yr outlook. As I stated earlier than, we maintained the commerce and operations web money move steering in a spread between €2.3 billion and €2.8 billion.

I additionally reiterated the Traton Group return on gross sales steering vary of 8% to 9% for the total yr. Primarily based on our robust first half of the yr and unchanged expectations concerning the truck and bus markets, we additionally affirm our group unit gross sales and gross sales income forecast for 2024. We anticipate each efficiency indicators to develop in a spread from minus 5% to plus 10%. On the following slide, you’ll be able to see that we didn’t change our truck market forecast offered within the annual outcomes convention.

So now earlier than we begin the Q&A, I’d like to say two vital milestones. We celebrated this quarter. We had been very pleased to see that Traton joined The Index, which tracks the efficiency of the 50 largest corporations in Germany outdoors the [indiscernible]. This not solely displays our robust monetary efficiency and better market capitalization, but additionally enhances our visibility and credibility within the monetary markets.

This quarter additionally marks the fifth anniversary of Traton on the inventory market. Over the previous 5 years, we’ve made nice progress on the Traton method ahead and have created worth to our shareholders. I need to take this chance to thank our traders, staff and companions for his or her help alongside that method. And with that, I hand over again to Ursula.

Query-and-Reply Session

A – Ursula Querette

Thanks, Christian, and Michael. I already see fairly some questions lined up from the viewers. However earlier than we begin, let me rapidly reexplain the principles. [Operator Instructions] Now allow us to take the primary query, which comes from Klas Bergelind from Citi. Klas, please go forward.

Klas Bergelind

Thanks. Hello, Christian, Michael and Ursula. Klas, Citi. My first query is on the gross margin, which is down a bit quarter-on-quarter. I assume that is primarily by the due to the temporaries at Navistar, there isn’t any worth price drag but, appropriate. And simply to place this into context, trying into the second half and into – and within the context of different OEMs speaking about worth stress now in Europe this week. What’s the danger Christian of a better affect from pricing than simply worth price normalization to EBIT within the second half. We all know that the carryover from pricing will develop into smaller and smaller, however are you now seeing extra unfavourable pricing coming into the order guide for second half deliveries. I’ll begin there. Thanks.

Ursula Querette

Okay. Gross margin query. Really, Klas, the gross margin was at 21.2%, and truly, it was not down from final quarter.

Klas Bergelind

Quarter-on-quarter.

Ursula Querette

Quarter-on-quarter additionally nearly a really, very small downturn from €21.8 million to €21.2 million. So possibly that already solutions the gross margin query, nothing spectacular occurred right here.

Klas Bergelind

Okay. Sure. My query is to Christian on the worth price normalization into the second half, please.

Ursula Querette

Let’s take it from that perspective. Thanks, Klas for clarifying.

Christian Levin

Sure. Hello, Klas. And it’s a great factor you requested for gross margin. That’s the very first thing I checked once I get within the month-to-month figures. And I’m actually happy to say that the worth self-discipline that we’ve put in on this group based mostly on the historic Scania mind-set is absolutely paying off. And you’ll see that we’re not participating in loopy offers.

So I don’t worth options. I do see some loopy offers as at all times, when the market begins to go south available in the market, we’re not participating on this. And that’s in all probability what you picked up from in contrast. Sometimes, these are the large fleets the place folks see an opportunity to fill order books with quantity however with out a lot revenue. So we don’t see that. We see, nonetheless, a great price improvement over a number of areas, which is to our profit.

We see the pricing energy of the tremendous drive line in Scania and the S13 then in Navistar serving to. As I introduced earlier right here, we additionally now lastly get it into the MAN vary as from subsequent yr, that may even have a rustic impact. So I really feel fairly assured regardless of that, as you say, the order guide based mostly on the acute years is progressively being delivered. I see honest worth realization, I see good price improvement, and I’ve no worry that we are going to a minimum of not within the short-term. endure gross margins. So I hope that solutions your query.

Klas Bergelind

Sure. Very clear. Thanks for that. My second one is on Navistar and the hearth on the provider. Thanks for that underlying margin, Michael of seven%. Of what number of items trying to gross sales that we’re speaking about right here that can return into the third and fourth quarter. And may you please speak about different capability points right here on the body facet, you had some difficulties additionally ramping on the brand new college buses. And I’m attempting to grasp, I imply, usually, as an orders as a result of I get that unit gross sales takes a success from the provider situation, however I’m curious why orders had been weak in Navistar. Is that this weaker heavy-duty demand quarter-on-quarter. Or is it additionally a results of that you may’t kind of ramp? You don’t need to construct the order guide, etcetera? Thanks.

Michael Jackstein

Sure. Thanks very a lot for the query, Klas. Possibly let me begin with the query in regards to the different provide chain points. You’re totally proper once I referred to the primary quarter name that we had, then I discussed that we sadly nonetheless had the body rail matter as we referred to as it virtually your complete final yr. In order that was, if you wish to say, a spillover impact in January and February. So that is, at this level, fully overcome. We don’t see any points right here concerning this provide chain situation after we discuss in regards to the frameworks.

Then you definately talked about the bus ramp up, which is – which was the second matter within the first quarter after we checked out Navistar. And there, the ramp-up has clearly improved. So we’re catching up right here, and we anticipate for the total yr that we are going to ship, sure, a big extent of the quantity that we’ve misplaced right here within the first quarter or within the first half. So good progress right here on the bus ramp-up, which is the second matter.

Then you definately requested, usually, in regards to the provide chain. I imagine I can reiterate what I’ve talked about within the first quarter usually, provide chains aren’t as secure as they had been earlier than the pandemic. And after we differentiate right here concerning the areas, then we are able to say that in Europe, provide chains are extra secure within the meantime. In North America, there are nonetheless some slight hiccups, I might say. If we examine that to Europe, total, extra secure, clearly.

However there are sometimes, I might say, minor points within the provide chain, however not closely affecting right here what’s happening at Navistar at this cut-off date. However, you heard me additionally concerning our ROS steering that we’re right here cautious considering the expertise from the availability chain. This is without doubt one of the explanations for our vary. to place this into context right here.

Then concerning virtually your first query concerning the quantity. Let me simply say that we imagine that we are going to additionally catch up right here the quantity of vehicles to a really giant, possibly even to the total extent within the second half of the yr. It’ll probably not occur all within the third quarter, we’ll in all probability want the third quarter and the fourth quarter as a result of now we’ve a big extent of semi-finished items, which we translate them first into completed items. So this may take a while and the quantity quantity you requested that’s within the ballpark of just about 8,000 items.

So that is the ballpark. Then you definately talked about yet one more matter, if I recollect it accurately, and that was the order scenario at Navistar. As Christian was into when he talked in regards to the completely different lead occasions within the areas, he talked about that the lead occasions in North America are a bit bit longer. And this, in fact, goes again to, on the one hand facet, the slower ramp-up within the bus scenario, as talked about, after which as properly goes again to the hearth right here at our provider with the mirrors. That’s why the lead occasions in North America at Navistar are longer. And I can say subsequently, that the order guide is kind of properly stuffed and there’s not an excessive amount of room left, let’s say, to fully fill it for your complete yr. That’s why we’re right here total fairly constructive after we have a look at Navistar and the order guide scenario.

Klas Bergelind

Very clear. Thanks. Sure, very clear. Thanks.

Ursula Querette

Okay. Then the following query comes from Daniela Costa from Goldman Sachs. Daniela, please go forward.

Daniela Costa

Hello, good morning. Thanks for taking my questions. I’ve two questions as properly, however I’ll begin with one which is extra simply by way of technique, I assume, we’ve seen a number of provide chain issues throughout the trade. We’ve seen now the mirrors situation, reflecting on these and as we take into consideration kind of your progress, significantly on Navistar going ahead, does that kind of make you suppose on any modifications which might be kind of wanted to the manufacturing system and twin sourcing? And the way ought to we take into consideration the longer margin goal on maybe on the again of that, however would have an interest to listen to from you on this.

Michael Jackstein

Sure. Possibly, Daniel, if I’ll bounce in right here immediately. Sure, in fact. I imply, we’re trying on the scenario. And possibly I can say right here very concrete after we discuss in regards to the [indiscernible] instance, within the meantime, we’ve three suppliers right here. So in fact, there’s a classes discovered. And while you have a look at the historical past of Navistar, I might say, for a great cause. The corporate labored with single sourcing. However you’re totally proper. And as I indicated additionally, the scenario concerning the availability chains have modified after the pandemic and on this sense, we adapt. And naturally, we glance the place we’ve essential elements and also you requested about our provide chain technique the place we imagine that it is sensible to go for twin sourcing as a substitute of single sourcing, we clearly think about this.

Daniela Costa

Thanks, after which…

Christian Levin

Let me add the larger image since you requested about your complete manufacturing system. And I believe we took over an organization that has had a number of issues, however that they had a brand new manufacturing facility facility in Texas in San Antonio however we had been stunned to search out that there was no systematic work enchancment work in any respect ongoing. And we’ve moved a number of our prime tip each from Europe and from Brazil up and over two U.S. and Mexico to help now, we’re beginning revamping your complete manufacturing system, together with the availability chain.

So there’s truly no shock that we take these hits. There’s additionally no shock that had been misplaced in-line with the suppliers as a result of we’ve been the one who’ve had the hardest relationship with the suppliers based mostly on our poor monetary final result and at all times being underneath stress. So that is one thing that we’re progressively engaged on. It’s not solely about whether or not we go single or double source. It’s actually about one other method of working in transparency and alongside the availability chain all the best way all the way down to second, third, fourth tier suppliers.

However it is a work that can take time and it’ll always enhance. And it was, in fact, very, very unlucky that in a time of fine enhancements in Navistar, and Michael, you talked about that we had lastly solved a number of the larger points. We received this drive mature fireplace which actually set us again. In any other case, we might have seen a extremely good outcomes out of Navistar.

However once more, there might be extra hiccups, however we’re progressively bettering the scenario we’re in with Navistar.

Daniela Costa

Thanks. After which a follow-up, persevering with on the U.S. I assume kind of a few months in the past, there have been a number of questions concerning EPA and the potential prebuy kind of as we head up into the ‘27 deadline. However now we had this Chevron ruling overturn. Do you continue to suppose that there’s any chance of any prebuy? And in that case, when and to what significance may that affect €25 million.

Christian Levin

Sure. Ought to I take that Urusula?

Ursula Querette

Sorry, Christian, sure, I believe that’s for you, sure.

Christian Levin

Sure. So let me say that we’re as soon as once more then reviewing what EPA has come out with right here. And to this point, we a number of occasions, we’ve answered that, sure, we imagine there might be a prebuy, and that’s based mostly on a slightly costly expertise wanted as a way to attain the proposed ranges query is, in fact, if that’s going to face and it’s additionally when is that going to occur. And beforehand, we’ve stated that that is in all probability going to occur already within the second half of subsequent yr. However let me say that with the ruling that you just referred to, and with the dialogue ongoing, I believe it’s a bit bit untimely to offer you a transparent steering. So at this level, I might truly chorus from providing you with a forecast. We’ve got to observe the scenario and hopefully, it clarifies within the upcoming quarters.

Daniela Costa

Acquired it. Understood. Thanks.

Ursula Querette

Thanks. The subsequent query then comes from Hemal Bhundia from UBS.

Hemal Bhundia

Good morning, Christian and Michael. And likewise thanks for taking my questions. My first query on Scania. Stable margin factors within the second quarter. I simply wished to grasp the dynamics a bit extra. Would it not be honest to say {that a} better mixture of South American truck gross sales increase margins? Was it development in automobile providers or predominantly pricing? And I’ll observe up with my second query after.

Ursula Querette

Okay. I believe that’s the query for Christian in his position of CEO of Scania.

Christian Levin

Sure. Thanks, Hemal. Sure. So we’ve each within the European manufacturing system within the Latin American and Brazilian manufacturing system. Very related setups the place we run manufacturing in a single course of, and we’ve the identical product, which is exclusive, I might say, in our trade. So it’s an identical. We may ship any product anyplace, which additionally implies that the price scenario, half from, in fact, labor price variations and likewise some import restrictions into Brazil stays just about the identical.

So once I look to our margin realization, it’s regardless of the fairly weak Brazilian reals and a giant quantity in Brazil, it’s just about comparable so should you would have requested a few years in the past, it will have been an issue for us to have such a giant a part of gross sales in Brazil, however that’s not in any respect the case. Would the Brazilian Actual admire I don’t know if that can occur, however that will be truly very constructive for us. However already at this stage, we see actually robust margins. So truly, each manufacturing system delivered robust gross margins. I hope that clarified a bit your query.

Hemal Bhundia

Thanks. After which I assume simply on the German truck market. What have you ever heard from clients to this point in July? And on that for MAN, how lengthy does your backlog at present provide you with go to earlier than? And what does the combo of that backlog seem like? Thanks.

Christian Levin

Sure. So what we hear from the German market is a number of curiosity, so very excessive stage of provides, each in an and Scania, however low closings. So clients hesitate and identical to in massive elements of Europe, maybe besides the South, it’s actually about monetary price, which generally is a fairly small a part of the whole price of possession for logistics operator, however it has grown and it has grown loads. And should you add the [indiscernible] will increase from the start of this yr, it’s like some clients as simply an excessive amount of. Now we have to see the rates of interest actually coming down bolster the price scenario. So hesitation is what we see in Germany, and I assume the type of unfavourable outlooks in – across the trade usually does not likely assist the sentiment.

In order that’s what we hear from clients. You requested in regards to the order guide, and we’ve a strong order guide for MAN even when we even have open manufacturing slots as we stated, a time round about 3 months. So for this yr, we really feel fairly snug however we’re, in fact, utilizing the pliability measures that we’ve so as to have the ability to adapt the manufacturing fee to the order consumption and ensure that prices are in-line with our revenues. In order that’s a bit in regards to the order guide. I don’t know if you wish to add one thing there, Michael.

Michael Jackstein

Possibly I can simply add that I might say it’s fairly apparent that MAN will face in all probability if we examine with our manufacturers, then essentially the most difficult scenario within the second half of this yr, additionally main a bit bit in the direction of the monetary scenario right here. I imply, as we talked in regards to the markets, you’ll be able to perceive if we have a look at our manufacturers that there’s good tailwind for Scania and Scania is properly balanced right here. So that is clearly constructive. We talked about Navistar, the place I imagine we had been fairly clear that we’ve a catch-up race to do, however with potential as a result of this was actually simply the transitory impact with the mirrors. So we anticipate, in fact, that the second half is significantly better in comparison with the primary half Volkswagen Truck & Bus. I imagine it’s apparent that there we’ve the tailwinds from the markets.

After which as Christian was into, the order guide has normalized, however the scenario within the European market, particularly within the German market is difficult. And due to the publicity, you’ll be able to in all probability anticipate that will probably be probably that, let’s say, the margin that you just see right here from MAN within the first half that this might be underneath stress within the second half. Thanks, in fact, to the couple of occasions talked about realignment program and the resilience of MAN. We don’t see a big drop, however I might point out that will probably be fairly probably after we have a look at the market that we are going to see a barely completely different margin at MAN within the second half of the yr, considering the market circumstances, the order guide and the order consumption scenario in an entire.

Hemal Bhundia

Thanks. And sorry, only a fast follow-up. The backlog combine, would you say that’s extra buses and vans weighted than vehicles? Or is it very completely different from that?

Christian Levin

Sure, I can take it. Simply total, what we see is a really constructive improvement on buses the place we’ve a extremely robust development so as consumption, each in Europe and Latin America. However as you understand, the bus proportion of our whole gross sales is low. So it doesn’t have a serious affect. However the order guide of buses is definitely rising and particularly in MAN, it’s rising quick with the success of the zero-emission buses and likewise the normal buses.

Hemal Bhundia

Thanks a lot.

Ursula Querette

Okay. Thanks for all this extra coloration. Let’s take the following query, which comes from Nicolai Kempf from Deutsche Financial institution.

Nicolai Kempf

Sure. Hey, good moring. Nicolai right here from Deutsche Financial institution. Thanks for taking my query. Let me begin first with Scania. Once more, glorious quarter, and also you’re in all probability proud to beat your Swedish friends right here. Sometimes, in Q3, it’s important to sum up break, would you anticipate that the summer season break may very well be extended this time, simply provided that European demand is a bit muted going into H2?

Christian Levin

I assume that’s for me Ursula?

Ursula Querette

Sure, please.

Christian Levin

Sure. Thanks, Nicolai. No, we’re not – I imply we’ve flexibility measures that we are able to use in our European system in Scania, however we aren’t planning to extend the summer season break in manufacturing. We run in response to our regular manufacturing schedule. We do the upkeep we want, after which we begin up once more right here in second week of August. And I believe if I ought to broaden a bit on the Scania Q3 scenario, we had been a bit bit held again with our deliveries in Q2 as a result of cyber safety regulation that got here into the market on the seventh of July, the place we weren’t totally prepared and would have anticipated a bit bit excessive supply figures. We do suppose that, that – I imply, we do know that these vehicles might be delivered in Q3, and I believe that can bolster the impact of what you usually have a considerably decrease quantity in Q3 due to the summer season holidays. However let’s see, that’s a bit little bit of crystal ball.

Nicolai Kempf

Okay, sounds good. Thanks. And only one follow-up on MAN. I admire the colour you’ve given and truly additionally the – you’ve proven to this point in Q1 and Q2 additionally makes one other peer view look slightly gentle. However you could have talked about that H2 might be softer. What ought to we anticipate right here that we’re going again to beneath 5% or may very well be secure of the 5% margin line at MAN in H2?

Michael Jackstein

No, let me simply say, I imply we don’t give a exact forecast right here. What I simply wished to point is that the primary half at MAN while you have a look at the RoS determine was actually robust., and naturally, an outflow of the actually new resilience that we’ve at MAN. You additionally may recall that we talked about a few occasions within the earlier calls that after we discuss in regards to the results of the realignment program that you will notice for the primary time the total impact of the realignment program in 2024. And that is let’s say, a part of the brand new resilience. I simply wished to point that you shouldn’t extrapolate the actually tremendous strong margin right here, an excellent margin of MAN into the second half of the yr as a result of we see the headwinds, that are simply consistent with our market steering and expectations. And subsequently, we imagine that there might be some stress on the margin and that we are going to probably come out weaker than for the primary half of the yr, considering the circumstances as we see them proper now. As Christian talked about, we don’t have the crystal ball, I simply wished to point that we are going to probably not preserve the margin stage at MAN as we see it within the first half, however you shouldn’t anticipate a drop, let’s say it to former occasions. Let me put it like.

Nicolai Kempf

Okay. Understood. Thanks.

Ursula Querette

Thanks. Then let’s take the following group of questions from Virginia Montorsi from Financial institution of America.

Virginia Montorsi

Good morning and thanks for taking my query. Simply going again to Navistar and the order consumption, contemplating all the availability chain points that we’ve mentioned, is it – is my understanding appropriate that you’d nonetheless anticipate some enhance in orders whatever the supply enchancment within the second half? And will you give us a bit little bit of coloration on how lengthy does your present backlog cowl on Navistar? Thanks.

Michael Jackstein

Sure. Possibly I can a minimum of begin it, Christian, and I don’t know if you want so as to add one thing. So, speaking in regards to the backlog, once more, we’re I can say, nearly offered out for your complete yr. There are a few slots left for this yr concerning the manufacturing, however we imagine that we are going to fill that slightly quickly in order that very probably after we meet once more then for the decision of the third quarter, then the order guide ought to very probably lead already into the following yr. So, that is the order backlog scenario right here. And sure, in fact, I believe that I, in a method answered your first a part of the query as properly. We anticipate, regardless of the scenario we’ve right here, that we see a rise of the order consumption within the upcoming months.

Virginia Montorsi

Thanks very a lot.

Christian Levin

Nothing so as to add from my facet. Good cowl that reply, Michael.

Ursula Querette

Virginia, do you could have a second query?

Virginia Montorsi

No. Thanks.

Ursula Querette

Excellent. Thanks. So then, the following query comes from Forbes Goldman from Pareto.

Forbes Goldman

Sure. Hello. Thanks for taking my questions. Only one on monetary providers, and you might be seeing larger prices with the mixing actions and so forth. How lengthy do you anticipate that to be a headwind for you?

Michael Jackstein

Possibly I can or Christian, do you need to?

Christian Levin

Properly, I can begin. I imply it is a challenge with a number of dimensions. So, on one hand, we in fact, do anticipate synergies popping out of utilizing a again workplace for 4 manufacturers as a substitute of 1 model. However however, short-term, as you might be into, we could have integration prices after we are taking on the enterprise within the U.S., Canada, Mexico and in Europe for MAN. So, the challenge to take over MAN will take additionally the total of subsequent yr. So, we add market-by-market. And subsequent yr, we additionally take over Volkswagen Truck & Bus. Navistar is finished and mustn’t carry any extra prices. So, now I’m once more a bit within the crystal ball, however I anticipate already all through subsequent yr, maybe in the direction of the tip that we see synergies overtaking prices when volumes are coming in the direction of us. Nevertheless it’s possibly one thing you may give extra element on, Michael.

Michael Jackstein

I believe you place a superbly superb. So, we’re within the ramp-up section. As we talked about, we constructed our captive monetary providers enterprise. You in all probability observe the rollout of the markets that Christian simply talked about, particularly for MAN monetary providers around the globe. And subsequently, this yr and likewise subsequent yr, we’ll see prices from the ramp-up section, but additionally then because the synergies kick in. Nevertheless it takes a while, in fact, to ramp up the enterprise to construct the captive. So, it would actually take fairly some extra time, however the synergies then kick in, and that is why we’re doing it. So, in fact, take it as an funding that can repay them in a while.

Forbes Goldman

Nice. Thanks. And only a second one, if I’ll. It’s on the European market. Do you think about 2024 to be a trough yr after which to return to larger whole volumes in 2025, should you may present a remark that will be actually useful?

Ursula Querette

Possibly let me kick in right here as a result of that’s possibly CMD materials. We’ll discuss a bit about the long term market outlook on the first of October. So, let’s go away it with that.

Forbes Goldman

Alright. Thanks.

Ursula Querette

Then I might take the following query from Michael Aspinall from Jefferies.

Michael Aspinall

Thanks. Hello Christian and Michael. I’ll begin with one on orders in Scania and MAN. What if issues have stabilized a bit in the previous couple of quarters in what are weak markets on your clients. Are you able to simply characterize the varieties of clients which might be persevering with ordering? I’m simply inquisitive about if you’re seeing any orders from smaller clients in any respect or if we should always think about that buyer phase as zero in the mean time.

Ursula Querette

Christian, can you are taking that one?

Christian Levin

Sure. Thanks Michael. Sure. So, Scania is seeing one other development in orders this primary half yr, and Scania is predominantly working with the smaller and medium fleets, as you might be properly conscious. So, it’s while you hear that the smaller ones are hesitating greater than the bigger ones. I imply that’s not fully true. But when I look to the order portfolio right here extra not too long ago, it’s true that the smaller ones are extra hesitating. So, let’s see how this develops. I believe the smaller ones are actually those who’re extra susceptible to fluctuations additionally within the transport market. I believe we didn’t point out that, however each in Scania and MAN with our fleet administration programs, we see a strong demand for transport. So, I believe once more, I shouldn’t be too fearful in regards to the European market going rather more south. I believe it’s actually a normalization that we see. And in our steering, we see a market of the plus 16 tons someplace near 300,000. And truly, the primary half of the yr, we’re properly above that if we simply have a look at the registration, six months. MAN is a bit bit extra depending on bigger clients as they’re depending on the DACH area to a bigger extent. And there, we’ve an even bigger lower so as consumption, truly, so it does not likely observe the logic big-small, I believe it extra follows the logic of the place is almost all of your gross sales. As you understand, that Scania’s market share are extra evenly unfold out over all of the European markets the place MAN has very, very robust market shares in Germany, Austria, Switzerland and a bit weaker within the surrounding massive market, one thing, by the best way, that we work closely on to enhance MAN’s place in France, Spain, Italy and the UK. So, I don’t totally – I might say sure, there’s a little bit extra hesitation among the many small clients, however it’s not like that market with extra specialised vehicles is disappearing.

Michael Aspinall

Okay. After which only one follow-up then, you simply talked about your fleet administration system the place you get fairly good visibility into your clients’ operations. Have you ever seen any type of enhance in utilization in the previous couple of months in Europe to type of provide you with a way that you’re seeing some stabilization and enchancment?

Christian Levin

So, we’ve not seen any enhance in utilization. We’ve got seen a leveling out on a stage that’s round about 13% decrease than the pre-pandemic ranges. And that has been very secure this yr, your complete yr, so no. Then should you look into particular person purposes, you’ll be able to see ups and downs. However should you look to the whole mileage of the vehicles, it’s truly very, very secure.

Michael Aspinall

Okay. Good. Thanks.

Ursula Querette

Thanks, Michael. Then the following query comes from Jose Asumendi from JPMorgan.

Jose Asumendi

Thanks very a lot. And sure, nice to see the useful resource of Scania, I imply unbelievable margins there. Simply a few questions, I believe I might actually admire should you may give us some steering on the subject of revenues second half versus first half throughout the completely different divisions. However I do know a selected steering. However some coloration throughout the completely different divisions and whether or not we should always see a pronounced seasonality in income second half versus the primary half? After which second, we’ve seen a few of your friends firming up with some Chinese language counterparts, I might admire should you may give us a short replace on the subject of your footprint in China. Thanks.

Christian Levin

Possibly, Michael, on the primary, I can take with China.

Michael Jackstein

Sure. Let me begin with the primary one. I imply you requested in regards to the revenues right here. And I imply clearly, the primary half, as Christian talked about through the presentation, the primary half or particularly the second quarter was affected concerning nearly all our core KPIs after we discuss in regards to the mirror matter at Navistar, as we stated, transitory impact. So, we’ll see the catching up within the second half of the yr. That’s a bit bit concerning the revenues. After which after we speak about our RoS steering, then I imply, let me simply reiterate yet one more time that sure, we persist with our steering, the 8% to 9%. And you’ll sometimes not extrapolate what occurs within the first half into the second half. There was the query earlier than concerning the holiday season, which is a legitimate one as a result of sometimes, on historic phrases, the Q3 is a bit bit weaker due to the holiday time. So, that’s one facet that we see. We additionally see the difficult markets, as talked about a few occasions in North America and in Europe. So, total, as I used to be in to earlier than, we affirm our steering. And we additionally persist with what we’ve stated earlier than. You shouldn’t learn the 8% to 9% steering that we purpose for the midpoint. We’ve got put the 9% goal within the capital markets in 2022, and nothing has modified in comparison with Q1 and in comparison with our annual press convention, we purpose to achieve the 9% on this yr, so the higher finish of our steering.

Christian Levin

Sure. So, Jose on China, and by the best way, thanks on your reward of Scania. However on our China technique, so you understand that we’re establishing the third industrial hub inside Scania in Rugao, outdoors of Shanghai. We try this for 3 primary causes. The primary is to broaden Scania model capability. The second is to realize higher footprint within the Chinese language market, which even whether it is at present depressed, we estimate will stay the largest truck market on the earth. And third, and that is maybe an important cause is to be a part of the Chinese language expertise ecosystem. So, maybe not trying to conventional combustion engine vehicles the place we’ve amongst the Europeans a transparent expertise lead on the earth, additionally in China. However while you look to the digital transformation that’s occurring, the Chinese language gamers are coming at a really quick tempo and really strongly. You see that on the passenger automotive facet as properly. And it’s very, very precious for us to be with our personal employees unbiased in China, working with Chinese language colleagues, in fact, out of Chinese language universities, but additionally Chinese language suppliers, Chinese language researchers to develop on the identical tempo pace and with the identical preconditions as our Chinese language rivals. And in a while, in fact, that is legitimate additionally as soon as battery electrical automobiles or see remission automobiles with different applied sciences goes to make it into the Chinese language heavy truck market. So, our technique is to construct on that manufacturing license that we’ve that’s fairly distinctive within the sense that we don’t have to have a three way partnership accomplice. That is – it’s solely us, Tesla and Hyundai, who’ve been in a position to get these licenses, everybody else must work in a partnership 50-50 with a Chinese language producer ought to they be allowed to fabricate inside China. So, we proceed alongside that line. Our manufacturing licenses for 50,000 items. That provides us a fairly good flexibility on the way to use that capability. And proper now, we’re aiming at a market introduction in the direction of the tip of subsequent yr, starting of ‘26. So, that’s a bit about our China technique. I hope that clarified your query.

Ursula Querette

Thanks. Then the following query comes from Hampus Engellau from Handelsbanken.

Hampus Engellau

Thanks very a lot. Two questions from me. Possibly first query is on, when lead occasions now are normalizing in Europe and you’ve got your points with – within the U.S. I used to be attention-grabbing should you may speak about manufacturing changes provided that lead occasions are normalized. And have you ever began to scale back run fee for MAN and or are you the place you ought to be? And on Scania, how do you anticipate to type of handle that given you might be extra strong? That’s my first query. Second query is extra should you may replace us on the captive lending [ph] program and Navistar and the way we should always take into consideration that going ahead? Thanks.

Ursula Querette

Christian, do you need to take manufacturing flexibility and second one?

Christian Levin

Sure. Thanks Hampus. So, sure, the lead occasions are normalizing. That’s not a foul factor. Really, it’s been very, very nerve-racking to have these massive order books and never realizing precisely the place you might be, when to ship and what price positions you’ll find yourself in, etcetera. So, I’m actually pleased that we’re coming again to a normalization each in Scania and MAN. However what does that imply, properly, it implies that we have to play the conventional recreation of adjusting the price base in manufacturing, one of the simplest ways we are able to. And as you understand, we can’t use the identical devices in all geographies in all authorized restrictions, and we’ve completely different agreements in place. So, should you ask them for MAN, have we began, the reply is sure. We’ve got began to regulate downwards in our manufacturing, each in Germany and in Poland as a way to billion line price smart with the considerably decrease output that Michael additionally described. In Scania, we’ve not adjusted downwards. We’ve got to this point been accelerating on this yr, however we see that we additionally in Scania, in Latin America that we have to do every little thing we are able to to get our additional truck out. However in Europe, we have to adapt to this considerably decrease output that we anticipate additionally for Scania in the direction of the tip of the yr. And the instrument that we use in Scania is that we use cease days and use coaching days as a substitute. And that’s a minor change, and that’s what we expect is required and that’s what we’ve determined to this point. So, from September onwards, we’ll begin to take cease days when wanted. After which, in fact, that is one thing we consider each month after we look to the order consumption versus the manufacturing in the direction of which geographies, etcetera. So, that’s one thing that may then have to alter. However that’s the place we stand at present with Scania manufacturing changes. That was the primary query. The second query was on the rollout of the frequent based mostly engine. And also you particularly requested about Navistar, sure. However I can cowl it as I believe it is a essential a part of the Traton story. So, Scania is now approaching 60% of their quantity, our quantity on the CB1. Navistar actually began gross sales final yr, however we began ramping manufacturing this yr. And we’re aiming to cowl the 13-liter phase that’s round about half of the whole market within the U.S., the remainder of the gross sales we’ll cowl with the Cummins X15. And we’ve – we’re a bit underway, however we don’t anticipate this yr to return above 10% of the whole gross sales, however someplace round about 8% to 10%. After which, in fact, we hope that with good buyer suggestions that we already see from the primary deliveries that we are able to proceed to develop that in the direction of additionally for us round about 50% of the gross sales within the Class 8 phase. On the identical time, we intend to develop. Navistar, as you understand, I’m of the opinion that we may come again to market share as properly about 20%. And with that, that will imply that we predominantly develop with the Tremendous driveline the place we stay secure with the 15-liter phase and within the – additionally within the smaller segments the place we use different provided engine from others suppliers. So, that’s a bit in regards to the engine technique after which additionally mentioning MAN coming in 2025 with a D30 being their by-product of the CB1. Including quantity and subsequently, gaining price with the provider base on all of the frequent parts on not solely the engine, but additionally the gearbox, the after remedy, the management system and the rear axle. I’ll cease there, Hampus

Hampus Engellau

Sure. Thanks.

Ursula Querette

Thanks. Then let’s take the final query. I hope he’s nonetheless there from Shaqeal Kirunda from Morgan Stanley.

Shaqeal Kirunda

Hello. I used to be nonetheless on the road. Good morning. Shaqeal from Morgan Stanley. Thanks for taking my query. Clearly, nice outcomes this quarter. Only a fast one for me, so how ought to we take into consideration the second half margin for Scania? Sturdy efficiency in H1. Energy in Brazil ought to proceed. Europe stays underneath stress. Does the Scania combine in Europe help margins, or will it’s impacted like MAN will?

Ursula Querette

Christian, can you are taking that one?

Christian Levin

Sure. I imply we aren’t guiding on margins, however we’re fairly assured that we are able to proceed to carry out in a great way. Let’s put it like that. In Scania, the combo might be moved in the direction of Latin America, which as I used to be into, in my earlier reply, it’s not a foul factor these days. We’ve got good revenue margins over there. We’re assured that we’ve an order guide that carry us properly into subsequent yr. We’ve got an elevated quantity of tremendous engines. I discussed 60%, that means we’ve a method to go to achieve 100%, which is giving us actually good worth place. After which, in fact, you could have the market in Europe, and let’s see what sort of headwind that’s giving us. So, that’s a bit the darkish cloud, however it’s truly the one darkish cloud I can see proper now on the horizon.

Shaqeal Kirunda

Nice. Thanks a lot.

Christian Levin

Thanks Shaqeal.

Ursula Querette

Thanks. Then I might say that is concluding our occasion. Thanks, Christian and Michael for explaining and discussing the commerce and technique and the monetary outcomes. Thanks, everybody, for becoming a member of us in the present day. Our Capital Markets Day is our subsequent vital occasion on our monetary calendar. It’ll happen in Munich on first of October. We despatched out the official invites already, and we’d admire should you may affirm your bodily attendance as quickly as attainable. For individuals who are unable to affix us in particular person, we’ll provide a stay webcast through the occasion and the replay afterwards. So, let you understand. Please attain out to me or Camilla or our respective groups and Investor Relations and Company Relations if in case you have additional questions on this quarter.

With that, we want you all a pleasant remaining day. Goodbye.