AB SKF (publ) (SKFB) Earnings Call Transcript & Summary

A warm welcome to this call focusing on SKF's performance in Q3 2026. Also this quarter, we improved our margin and organic growth. as supported by selective higher OEM demand and stronger commercial execution. And this was definitely evident in our specialized Industrial Solutions segment. I'm Sophie Arnius, heading up Investor Relations. And with me, I also have our CEO, Rickard Gustafson; and our CFO, Susanne Larsson. There will, of course, be opportunities for you to ask questions after our presentations. [Operator Instructions] So without further ado, Rickard, its great handover to you.

Thank you, Sophie, and good morning to all of you, and thank you so much for joining us for this earnings call. I'd like to start by us reflecting a bit, and I'm very pleased that we are now starting to see the end in our strive to establish 2 competitive and strong and fit for purpose businesses. After the approval from our shareholders at the EGM on October 1, we are now starting to see a look somewhat different. As you will hear us report today, we are now viewing automotive as discontinued operations, while our Industrial business is treated as continuing operations. So bear that in mind as we go through the numbers. But looking into the quarter and then focusing primarily on SKF continuing operations, i.e., our industrial business. Here, we saw a strong organic growth of 4.3% in the quarter. The organic growth is driven by high demand in selective OEMs such as defense, drives and infrastructure, but also strong growth in Specialized Industrial Solutions. And there, we had especially strong growth in aerospace and magnetics, which I'll come back to shortly. Turning to the profitability and the adjusted operating margin is actually also coming in strong in the quarter, up 0.9 percentage points versus last year at 16.3%. And the drivers here are strong commercial execution, a continued margin expansion in Specialized Industrial Solutions. And we also see a good progress in the execution of our rightsizing program. And here, we're actually announcing today that we target to reach the SEK 2 billion run rate savings somewhat 6 months ahead of what was communicated earlier, i.e., we expand to complete that by this first half '27 rather than the second half '27 as per communicated earlier. Cash is also up versus last year to SEK 2.1 billion. And here, we see that our higher operating profit more than offset components inventory buildup that we have in the quarter to support growth, especially in specialized Industrial Solutions. Turning to our growth by region, and starting with EMEA, our largest region, where we see a broadly unchanged demand. Here, I would like to say that light industry performing somewhat better than heavy industries. But we do see some good green shoots in drives, high-speed machinery and also in defense. Specialized Industrial Solutions is also growing nicely in the region. And here, aerospace is standing out somewhat ahead of the others. In Americas, very strong organic growth, touching 10%, as you can see on this chart, where we see strong improved demand in key OEM markets. Here, I'd like to mention data centers, defense, off-highway, but also distribution and services have had a good quarter in this particular region. China and Northeast Asia, flattish growth, as you can see, but this should be viewed in the light of a rather tough comparison in rail and wind over the same quarter last year. we do see good growth, though, in distribution and machine tools. And also here in commercial aviation is starting to pick up quite significantly. And finally, India and Southeast Asia, very strong growth almost 12% organic growth. growth we see across most industries, some that stands out, in particular, would be distribution and heavy industries. While from a geographical point of view, we see very strong developments in India and Vietnam. So if we then leave the geographies and start to take a deeper look on our segments and starting with Bearing Solutions, which represent in this quarter at 74% of sales and 85% of our adjusted operating profit. Also here, we see a good organic growth of almost 3% in the quarter. And as I said on the previous page, is primarily growth in Americas and in India and Southeast Asia, where there is more flattish in the other geographies. On a side note, if you may recall, last quarter, we announced a venture in the humanoid space with Leaderdrive, and that initiative is progressing according to our expectation and plan. And we are still targeting to have that operational by the end of this year. Looking to the profitability and the adjusted operating margin, we see a slight improvement to 18.8% and clearly driven by strong development in price/mix that contributes, but also that we have the positive impact from the rightsizing initiatives that are progressing faster than anticipated, as I mentioned. And in this quarter, we have had some production related to the automotive separation, but the impact on our earnings has been nonmaterial in this quarter. Turning to Specialized Industrial Solutions. As you can see here, representing 26% of net sales in the quarter and 23% of the adjusted operating profit. Very strong organic growth. and all 4 business units that make up Specialized Industrial Solutions, they actually grow. And as I mentioned before, Magnetics and Aerospace are growing at an even higher pace than the other two. The key growth drivers or growth verticals for magnetics, I would say, is data centers and semiconductors, and I will give you some more details on Magnetics shortly. The adjusted operating profit is improving very nicely, 2.4 percentage points to 14%. And the key drivers here is the solid price/mix to some extent, driven by pruning and portfolio optimization activities that we have taken in the past that now starts to bear fruit. We also have the fact that, as I mentioned, Magnetics and Aerospace are growing somewhat faster than lubrication and seals, which also contributes to a positive mix in the quarter. And we also see a continued solid profitability development in our lubrication business. All of this is offsetting the general inflation and also some negative mix effect that we have where we have high demand in some products that comes with some higher material cost. So that will also be seen in the bridges as we go through them. Then turning to the discontinued operations, i.e., our Automotive business. Here, we are still seeing a rather volatile and weak demand. We have a negative growth of 4% where we -- primarily with a weak development in Europe, while we had a strong development or strong momentum in commercial vehicles and as aftermarket in Americas and China and Northeast Asia. The adjusted operating profit, though, is improving quite well to 4.6% in the quarter despite the negative volume. And again, here, we see a very solid price mix and good commercial activities in general and also, the fact that commercial vehicles and aftermarket is growing somewhat faster than light vehicles, which also has a positive mix impact. We also have some currency headwinds, sorry, tailwinds, actually, in the quarter that partly offset the inflationary environment that we also are facing. Overall, Demand remains challenging, as I said, and especially in Europe, but further improvements in our commercial capabilities really supported the improved profitability despite this rather volatile demand. So if we leave the numbers for a second until Susanne will come back with the details, I'd like to give some highlights on some strategic initiatives that we are working on and also give you some more color to our Magnetics business. Starting on the left-hand side of this page, our Magnetic Solutions business is roughly half, SEK 1.5 billion business. enjoying solid double-digit growth over the last few years. And the growth is driven by good development in certain industrial verticals such as data centers, semiconductors and energy. To support customers in those particular verticals, we have a full suite offering, where we have the magnetic bearings. We have the high-speed electrical motors. We have the electronic control cabinets and the frequency drives, all combined with a very sophisticated condition monitoring capabilities that actually supports the whole ecosystem. And this ecosystem, it provides significant value for our customers. It enables a significantly enhanced energy efficiency up to 30% is not uncommon for customers to capture. We see an increased uptime and less maintenance, where we have no mechanic contact reduces the risk of failure and this provides a very attractive life cycle equation for our customers. We do see that these solutions are very clean, silent and compact and an oil-free system is, of course, ideal for applications that require a high level of cleanliness, such as in semiconductors and also in hospital applications. And we have embedded sensors. They can really control and monitor the whole ecosystem, and it's also a perfect for scaling AI, another key value for our customers. So in order to secure growth in this highly interesting segment of ours, we focus on 3 pillars. First, in order to meet the growing demand, we need to scale our manufacturing capacity. And this is particularly relevant for our production facilities in Morocco and the build-out in China. And it goes both for scale and manufacturing, but also driving automation in those factories to secure that we can meet the demand. Secondly, we are building for the future, and we continue to invest in R&D to stay relevant in these key verticals such as data centers and HVAC, semiconductors and energy. But we're also exploring into new geographical areas and trying to find ways to also grow in the Asian markets. And then finally, we are also securing a broader value creation for our customers. And with our built-in sensors and the ability to scale AI, we can build even stronger customer relationships. by providing optimization in areas such at energy consumption, system performance and asset life cycle management. All in all, these 3 pillars, they provide a very solid growth platform for our Magnetics business. Leaving the Magnetics and turning to the Vertevo journey. As I mentioned in in my opening remarks, we had a historical event on October 1 with the EGM where the shareholders approved to distribute shares to of its automotive business to the SKF shareholders. So what should we expect next? And that's what we're trying to outline here on this chart. In November, you will receive a prospectus, followed by a Capital Markets Day hosted by Vertevo on November 17. And for all of you that have interest to join that, which I hope is quite a few of you. then you should remember to register before November 3 to take part of that exciting event. And then the ambition is to have the first day of trading out stock on NASDAQ on December 1. But as you also may recall, earlier this year, we announced a change in the scope somewhat where we were transferring some additional production channels to automotive. And we did that because it benefited both businesses. For Vertevo, it will provide faster track towards self-sufficiency. And for SKF, it reduces the need for future footprint optimization. And the vast majority of all the assets and production lines now sits within automotive. But with only a few channels or production units to be transferred to automotive, and that will happen in early 2027. So this means that the contract manufacturing will start to decrease from Q2 2027 and then further accelerate until midterm. So that is what you should expect related to the contract manufacturing. So with that, I would like to hand over to Susanne to take you through the numbers in the quarter.

Good morning, everyone. Yes. Let me try to enlight us a little bit more on the financials, starting with the profit and loss then. And as Rickard said, this is where we are now talking about continuing operations for the majority of our financials, where the net profit is still including our discontinued operations. So again then for continuing operations, we saw a net sales that increased 5.5% quarter-over-quarter. -- sorry, year-over-year, this quarter 3. And this was driven then by the organic growth of 4.3%. We had a positive currency of 1.7 million, and it was somewhat offset with a negative 0.5% of structure. The adjusted gross profit margin was largely flat year-over-year at 34.9%. So while price/mix and volume were positive contributors, we faced increased material utilities and logistic costs, together with the general wage inflation that impacted negatively. We also had some separation preparations causing production disturbances in the quarter 3. The adjusted operating margin was strong and improved with almost 1 percentage point to 16.3% year-over-year, and I will get more into that on the following page. Moving on to items affecting comparability. In continuing operations, we had minus SEK 67 million of those, and that was explained mainly by profit from a divestment of shares in associated company, our [ Ning Hyatt Role ] company in China, and that contributed with a positive SEK 180 million. That was then further reduced by SEK 86 million related to the automotive separation and another SEK 68 million of optimization of footprint and some other adding up to SEK 31 million. This net-net allowed us to have a net profit that improved SEK 490 million compared to last year to SEK 1.8 billion, and that is explained by improved performance together with SEK 320 million less of one-off costs this year, quarter 3 compared to last year. Similarly then, the earnings per share improved to SEK 3.9 compared to SEK 3.5 last year. If we then add the discontinued Automotive operation, our net profit for the SKF Group was further reduced by SEK 349 million and ended at SEK 1.4 billion. And this corresponded to an adjusted earnings per share for the SKF Group, including automotive, of SEK 4.2 compared to SEK 4.0 last year. Finally then, IAC for discontinued operation ended at a negative SEK 0.5 billion, which is mainly explained by separation-related costs. Let's then look at the drivers of the strong adjusted margin in continuing operations. So starting from the left and with organic growth, we have the strong organic growth of 4.3 percentage points. That is driven by price/mix and volume, and all of this improved the operating margin by 3.3 percentage points. We saw selectively higher OEM demand, together with a strong specialized industrial solution, continuing their commercial execution very well. This quarter, the earnings impact from support production relating to automotive separation was nonmaterial. Coming back to Specialized Industrial Solutions now. So this is where we had an increased production volume to cater for stronger demand in selected markets, and that contributed nicely to our organic results. And as we had stronger growth in Aerospace and Magnetics, this resulted in higher costs from a different material mix than last year, which is impacting the cost development negatively. But all in all, a positive net result from all of this. But if I remain on the cost development, we did face higher costs from material utilities, logistics and the general wage inflation, together with ongoing transformational initiatives. Still, our rightsizing program contributed with some SEK 350 million and continue to more than offset the separation-related negative synergies. And as Rickard mentioned before, we now expect our program to reach the SEK 2 billion annual run rate already by mid-2027, which is about half year prior to the original plan. We also continue to largely compensate tariff costs through price adjustments, and we expect to continue to do so also in the coming quarter 4. Net-net, the cost increases that impacts EBIT margin is a negative 2.7 percentage points, however, was more than offset by the very strong organic growth. The impact from the currency turned positive in quarter 3 with an EBIT impact of SEK 98 million, and this was mainly this quarter driven by a stronger Chinese yen vis-a-vis the Swiss kroner year-over-year, resulting in a margin effect of 0.3 percentage points. And finally then, the structure is the net of the divestment of the Aerospace business, Elgin, together with the acquisition of G-Tech that we completed by July, and that has a negligible impact on the operating margin. So moving on then to cash flow for continuing operations. So the EBITDA in quarter 3 amounted to SEK 3.6 billion compared to SEK 3.2 billion last year. Our noncash and other came in at minus SEK 422 million, which was in line with last year's cost -- sorry, cash and the tax paid was SEK 515 million. Moving on to net working capital. We generated a negative cash flow of minus SEK 587 million, which compared to quarter 3 last year was SEK 266 million worse. And this deterioration is explained by an inventory buildup fully in specialized industrial solutions and to the vast majority explained by material stock that is built up to support continued growth. Net debt, our operating cash flow came in at SEK 2.1 billion compared to SEK 1.8 billion last year. In the cash flow for this quarter 3, we have some negative SEK 500 million that is related to IAC payments from restructurings as well as the automotive separation related on to the continued operations. We had the CapEx for the quarter of a negative SEK 529 million and net net cash flow after investment ended at SEK 1.546 million. Moving on to KPIs that we have here on the right to the picture. Net leverage and return on capital employed for the continuing operation we saw that net debt in relation to adjusted EBITDA ended at SEK 1.1 million, and the return -- adjusted return on capital employed was 15.3%. As a consequence of automotive, by quarter 3 being reporting as a discontinued operation, the KPIs here are based on the quarter 3 capital employed for continuing operations rather than having what we normally have a rolling 12 months average balance sheet. So with automotive and being separated out, we do not really have comparable balance sheet data historically for the continuing operation. So let me instead try to relate to the SKF Group including automotive to allow for some comparisons on these KPIs. So again, SKF Group then, including automotive, improved the net leverage to 0.8% compared to 0.9% in quarter 2 as well as last year. And for the adjusted return on capital employed then with the SKF Group, it also improved and would have been 14.7% for the SKF Group, including Automotive, compared to 14.5% previous quarter and 14% last year. So that's a reference. Moving on then, outlook and guidance for the continuing operation. So we expect the sales to strengthen somewhat in quarter 4 year-over-year. This is because we see a similar market environment as we were facing in the quarter 3. However, we still have market volatility, and that allows for continued uncertainty. Currency guidance then for quarter 4 and for continuing operation we estimate to have a positive SEK 150 million impact based on the exchange rate that we saw by the end September. If I then turn to the guidance for the full year, the tax rate for the continuing operation, excluding divestments and separation of automotive is estimated to a full year of 27%. When it comes to the additions to property, plant and equipment for the year, we anticipate that to end at SEK 2.5 billion. And if we look at the guidance from last quarter, the previous guidance, this corresponds to a further decrease of SEK 0.5 billion due to optimization of SKF's continued operation and the planned investments that we have ahead of us. The full year guidance for items affecting comparability relates to the full group, including automotive, considering the automotive separation finalizing during quarter 4, and that allows us to remain at the range of a negative SEK 2.5 billion to SEK 3 billion. And this is fully in line with what we have communicated at the Capital Markets Day. And then finally, as Rickard mentioned, with the changed Automotive separation scope that we announced early this year, we have moved additional production line to automotive. This as a consequence of the one-off costs related to the automotive separation, so we are increasing those with approximately SEK 0.5 billion from SEK 2.5 million to some SEK 3 billion. However, the industrial footprint optimization is lowered by the same amount because we will have less optimization need for the continuing operation than what was originally anticipated. So with that, we stay intact with what we committed to at the Capital Market Day last autumn with the total expected level of ICs in the coming years, and we do not see an impact of this overall. And by that, I come to the end, Rickard, and over to you for wrapping up.

Thank you, Susanne. And before we move into the Q&A, let me just take a few minutes to summarize the highlights of the quarter then. As I mentioned, we do see strong continued growth and margin expansion in SAS, which is very pleasing. And in the quarter, as I mentioned, is up 2.4 percentage points. And this is an important part of the journey that we laid out to all of you for our Industrial business at the Capital Markets Day in November last year. We also see a solid momentum in delivering on our rightsizing savings as you heard both me and Susanne mentioned. I think this is a positive sign on our ability to execute on the initiatives that we put out to do for ourselves. And we're especially pleased that I've been able to do this in parallel with separating the company into 2 and still stay focused on our customers and capture the growth that is available in the market, as you also heard us talk about. Magnetics is an exciting business. It's not the largest business unit of ours, but it's a strong growing and well positioned as I hope I was able to articulate to you that we do see that is well positioned for structural growth as we move forward. And then finally, the Vertebo listing. I do see the EGM on October 1 as a milestone in the history book of this company. We are now seeing the end of this journey, and we are excited to complete it and see our colleagues ring the bell in Stockholm on December 1. And as I mentioned, there is an upcoming Capital Markets Day on November 17 and don't miss it. And in order to not miss it, you need to register before November 3. So with this, I thank you for your attention, and I hand over to Sophie and the Q&A session.

Thank you, Rickard and Susanne. We have now around 30 minutes for Q&A, and I can see that quite many of you are eager to ask questions. So please limit it to 1 question per person. And if time allows, you are very welcome to rejoin the question queue. [Operator Instructions] And we will start with a question from the telephone line, and it comes from Chit Sinha at JPMorgan.

So I just wanted to get a bit more clarification on the near-term guide. You delivered a solid 4.3% in Q3 and are expecting some of the market conditions in Q4. It seems to me that maybe comps are a bit easier in Q4. So I'd imagine a bit better growth rate. Is this the right way to think about the guide? If there's any headwind to be aware of that will be really helpful to touch on. And then if you could also touch on the pricing contribution both in Q3 and how you're thinking about this in Q4?

So let's have Rickard responding to this question.

Sure. On the growth forecast for Q4, we do foresee a maintained rather volatile environment. We do see, as I mentioned, strong growth in certain areas, in certain geographies while we still have some hesitation in -- especially in Europe, among some of our distributors that still are somewhat hesitant to fill their inventories due to the volatile environment. We also -- as always, there are also some some volatility and some kind of comparisons quarter-over-quarter that also you should consider. And we do foresee roughly the same activity levels and our best estimate is the somewhat improved growth in the fourth quarter. So there are still, given the a lot of uncertainties, we're staying at that best outlook of ours. And then on pricing, we always try to be very forward-leaning here and be proactive. And we start to see that energy and logistic costs started to move during the first half of the year. So as you may recall, we took some pricing actions then. And we will continue you need to monitor this very, very carefully. And if we see the need to try to push further price, we will definitely do that. And of course, as always, continue to drive work with our own efficiency to compensate for the cost inflation. We do not see right now that the cost inflation will materially change in Q4 versus Q3.

And also that, I believe, also answers John Kim's question that John statin from Deutsche Bank here around price. Let's continue with a question from the telephone line, and it comes from Klas Bergelind at Citi.

So first, on the bridge, it doesn't seem like overproduction was a big driver, but you had high production levels in SIS good utilization. You also had good mix there because of air and magnetics. I'm trying to understand how sustainable this is. I mean the end market outlook for aeromagnetic seems good. How should we think about seasonality for specialized should we have a step down in the margin in the fourth quarter? Or will that be more marked in bearings, including the 1-month impact from contract manufacturing?

So we have Susanne answering this question.

So as you are rightly saying on the bridge that we have positive impacts from price mix and volumes that are, to a large extent, compensated by increased increased cost then. And one reason of that is also, as you rightly state, the SIS mix impact where we have a higher growth in Aerospace and Magnetic allowing for a mix shift with higher ingoing material components. We were also facing some separation costs, some separation-related activities that impacted our production efficiency in quarter 3. This was on the last quarter of that kind of separation taking place now having automotive fully as an independent company. So we also saw, as an example, only out of that, that that, I mean, having to turn electricity into 2 separate entities that allowed for some disturbances in this quarter that we were facing that we do not anticipate to see in the coming quarter. We also didn't have a lot of support production for automotive in this quarter when it came to overproduction as we could see more of in quarter 1 and quarter 2 and that we are not seeing in this quarter either. On your question there on seasonality for Specialized Industrial Solutions, in terms of margin. Unfortunately, we don't have that long history here only 2 years quarterly. But the sense is that they follow the same patterns as industrial. So it's -- Q4 is seasonally lower from a margin perspective than Q3.

We will continue with a question from the telephone line, and it comes from Alex Jones at Bank of America.

Maybe just a follow-up on cost inflation. Can you confirm that you pricing actions that you took, and you talked about in H1 offset the input cost inflation this quarter? Or did you need the sort of additional cost and rightsizing that you're doing to do that? And then you talked about sort of no material change in cost inflation into Q4. Could you just talk about what you're seeing into 2027 at this stage, recognizing that there's still a couple of months left in the year?

Let's hear from Rickard on this topic.

Right, without disclosing all the details. But in general terms, I think our price actions and also commercial activities has helped to to a large extent and mitigate and offset the cost inflation. And then of course, we also drive, as I mentioned, efficiency measures in the business. And we are actively looking into price opportunities. We will continue to do selective price increases wherever we can. We monitor the development in the cost base and the -- especially when it comes to energy and logistics and materials. And if it's deemed necessary, we will do our utmost to put further prices into the market. My comment regarding the outlook in terms of cost development and inflation that was related between what we believe is going to be in Q4 compared to Q3. I have no comments on 2027 at this stage.

We will continue with a question from the webcast, and it comes from Daniela Costa at Goldman Sachs. And it's, I would say, more of a CFO related question here, Susanne. So if there will be further restructuring required in the industrial divisions then, so is Bearing Solution, as a Specialized Industrial Solutions following the automotive spend?

So our initiative in June last year 2025, and that was there to fully offset the synergies and allow the industrial business to be in a good shape. So at this point in time, we do not anticipate additional restructuring of that kind. What we have talked about in the capital market is that we still remain to have footprint optimization initiatives ahead of us and that we are planning and working through in detail as an industrial pure play company. Having said all that, we will, of course, continue to work on productivity measures along the way forward, but nothing else than what we have talked about already.

And if I may, just to reinforce what we said at the Capital Markets Day in November last year that these remaining transformation initiatives or rightsizing initiatives is the right word to use here. will end by midterm. And thereafter, we should not have this high level of items affecting comparability anymore.

And let's continue with a question from the telephone line and Anders Idborg at AGB, please go ahead.

Yes, just maybe on this change of CapEx guidance. You're now running at more like sales in the remaining business. And I guess part of it is related to the accelerated shift to automotive, I suppose, could you help me with that? I mean, is that a new level that you think you can sustain? I mean, we've talked previously about 5% in an intermediary term.

I will ask Susanne to respond to this. She's eager to answer.

No, we will stay with the guidance we allowed for at the Capital Markets Day where we said that in the next 2 years until midterm, we will have a higher CapEx level to then gradually come down. You are right that this very year, we have been extremely busy both with our separation activities but also taking the opportunity to reassess what we had in the pipe and been able to to actually challenge and reduce that scope. So I think this is not how you should read the continuation. We stay with what we announced at the Capital Market Day last November.

And let's continue on the perhaps CFO topic questions. I have questions on our working capital, both from Olof Cederholm at SEB and Rory Smith at Oxcap here sent into us. And so if we can talk then, Susanne, about the net working capital in the industrial business, so 38% of sales in the quarter up from 32% and that's 32% group then, including discontinued, and how -- also and how this trend in the coming quarters will look like and our medium-term ambition?

So starting about the current trend where we have deteriorated from a 32% to 38% as you rightly say. And in this quarter, it's fully explained by the specialized industrial solution, building channel stock to cater for further growth then. We do see a somewhat of a reduction in our bearings business. And I think all in all, what we do remain with is the guidance of the longer term where we should then improve and normalize and further improve as we communicated at the Capital Markets Day. I think it's fair to say that we have still some -- we have some stocks still remaining in our inventory. That has been disturbed by the separation activities that has been ongoing and where we have had that in the bearing business, particularly and it's also correct that we will remain with a somewhat higher channel stock in case that we are gradually reducing as we move along.

And I can just also remind ourselves what was the -- what we said at the Capital Markets Day in terms of working capital targets. And midterm around 29%, and this is for continuing operations, SKF post separation, and long term, 27% of sales. And as Susanne said here with Specialized Industrial Solutions, we are on a higher level to cater for growth and it's -- we don't expect that to come down in the long term here. So hopefully, Olaf and Rory, that answered your questions. So let's continue with the telephone line. And we have Andre Kukhnin at UBS as first out here.

I just wanted to take a step back and ask a broader question on the kind of margin mix between the 2 divisions, bearing solutions and specialized that lower margin profile is specialized. Is that just simply the business mix, it lubrication being lower? Or is it reflective of maybe different aftermarket versus new equipment mix, essentially, just trying to get an idea whether there is scope for specialized to catch up to where the bearing solutions business is already with maybe further pruning or just the growth that it's delivering?

Can you please respond to this question?