ABB Ltd (ABBN) Earnings Call Transcript & Summary

Greetings, and welcome to this presentation of ABB's third quarter results. You will hear from our CEO, Morten Wierod; and also from our CFO, Christian Nilsson, and they will talk through the results as per usual. And after this, we will open up for Q&A. I'm Ann-Sofie Nordh, Head of Investor Relations. And with that, let me hand over to you, Morten, to kick off the presentation.

Thank you, Ann-Sofie. In the third quarter, we continue to see a strong market with orders once again reaching just above $12 billion. I would say that we performed well in a vibrant market. When it comes to our operational performance, we progressed more or less as planned and guided for, a good mid-teens revenue growth. And the 20.8% operational EBITDA margin is the strongest Q3 margin ever for ABB. And the same is actually valid also for the EBIT margin of 19%. We continue to generate a standout return on capital employed, which was at 29.9%, and I expect our business to continue to improve and support ROCE. We have said that we will deliver more than 20% return on capital employed also when we start making more sizable acquisitions. And speaking of acquisitions, following the Rotork announcement in July, we today announced further capital allocation toward M&A. We will take a 51% ownership in a joint venture formed with Mitsubishi Electric's low-voltage power distribution business. And we also have a clear midterm path to full ownership. This deal makes us the low-voltage market leader in Japan and one of the world's largest electrification markets where we have had limited reach until now. We also view this as a door opener for growth across Southeast Asia to markets like Malaysia, Thailand, Vietnam and Indonesia. On the product side, they bring circuit breakers, motor starters, contactors and control devices and beyond that, energy measurement and monitoring equipment. The product portfolios are similar, and we can apply a best of both worlds integration principle for platforms and technology. The Mitsubishi business coming into the JV has around 2,800 employees. And in fiscal year 2025, it generated around $640 million of revenues, with a low double-digit EBITDA margin. In terms of performance improvement, it will be similar to what we successfully did with the GE Industrial Solutions acquisition. We will drive profitability by expanding sales through combined channels, and we will introduce ABB products and technology to Mitsubishi Electric's customer base. We aim for the JV to be running at an operational EBITA margin of at least 20%, 5 years after deal completion. The transaction values the new company at an EV of around $890 million. This translates to EV over sales of $1.4 billion and EV over EBITDA of $11.1 million based on 2025 actuals. Performance is initially low in the JV. Hence, multiples paid are at a meaningful discount to ABB, even before we accounting for synergies. When we include the expected synergies, the EV over EBITDA multiple reduces into the mid- to high single-digits range. We see strong returns on this deal with internal rate of return well above our cost of capital, and we expect the deal to close during the second half of 2027. Another significant milestone this quarter was the launch of the Infinitus Direct Current portfolio. This new portfolio enable us to support AI data center customers across the full spectrum of DC architectures from source to rack. It spans across the white space localized DC designs to native centralized high-density architectures. But DC is not new to us. We started our R&D investments into solid-state technology already 15 years ago. But at that time, it was aimed at marine applications. Now there are multiple examples where direct current solutions drive the industry forward, like in rail, renewable energy, microgrids and now also in future AI data centers. We decided to invest early in DC because the technology solves real customer needs. First, it enables higher power levels. It facilitates data center rack densities to shift up to 1 megawatt and facilities can scale from 200 megawatts to 1.5 gigawatts. Second, DC is more energy efficient. Fewer AC/DC conversion stages mean lower energy losses. A 500 megawatt data center shifting to DC architecture can reduce conversion losses by more than 5%. This will save almost 200 gigawatt hours annually. That's the electricity consumption of 60,000 European households or some tens of millions of dollars in cost savings. For a 100-megawatt facility, a 5% improvement in energy efficiency can free up additional 5 to 6 megawatts for token generation. This is worth close to $100 million in potential annual revenue for the operator. Our portfolio is built on the concept of 5 modular building blocks. This allows our customers to select and combine what they need to construct a complete system. This means we can support diverse data center topologies from hybrid transitional architectures to optimize target design. The building blocks span the entire power path from medium voltage grid connectivity or behind-the-meter generation to DC conversion and distribution to power protection systems and cooling optimization. The modularity is critical because the transition to native DC architecture will be staged rather than immediate. And we talk about 4 distinct design phases. I've said earlier that we view the sidecar as an interim solution, and we rather expect the economics of centralized DC architectures to ultimately drive customer decisions. And with the Infinitus portfolio, we are ready, including our solid-state transformers available to order in the second half of 2027. That said, there will be no universal architecture. The market will evolve across the spectrum and with the Infinitus portfolio, we can serve every segment. When you compare the localized DC with a centralized design label 2 to 4 on this slide, it is visible how the weight of the electrical power infrastructure shifts from the white space to the gray space. We believe that in the target DC architecture, as much as 75% of the spend on electrical power infrastructure can be linked to the gray space. This compared to about 55% in a legacy AC architecture. The gray space already represents the majority of our data center exposure today and the shift towards centralized high-density DC meaningfully expands our addressable scope. And another proof point of our DC capabilities is our partnership with Ferrari Hypersail. We will support Ferrari Hypersail with expertise across marine power, DC technology and advanced electrical systems. Our solutions will be installed under 100-foot Oceanic full foil monohull yacht powered by renewable energy. The DC architecture will function as a high-performance, self-sufficient microgrid with systems operating at 48-volt and 800-volt DC. The vessel is designed to bring together speed, resilience and safety with onboard energy generation and management in one of the most technically demanding environments. Yet another DC happening in September was the report we published in collaboration with [ DCG]. The report makes the case that direct current technology is moving from the periphery to the center of industrial, commercial and digital infrastructure. The future of power distribution is not an either/or choice between AC and DC, but a hybrid system that combines the strength of both technologies. AC and DC each have important roles to play. And together, they can help build a more efficient, resilient and future-ready electrical system. Now let's turn back to the third quarter results. I already mentioned the order intake of $12 billion. This reflects a comparable increase of 40% from last year. And we're in a good market situation for all 3 of our business areas. Orders were supported by strength across our entire portfolio, meaning short-cycle products, service as well as the project and system businesses. And we saw orders increasing in the majority of our customer segments. Data center was a standout, delivering triple-digit growth with no signs of demand softening or CapEx hesitation from our customers. But there are some softer areas. And similar to previous quarters, we see low customer activity linked to Process Industries and residential buildings. But I'll let Christian go into segment details when he talks through each business area. In total, book-to-bill reached 1.24 and the order backlog expanded to just about $32 billion, almost equivalent to 2025 full year revenues. There is always a mix of short and long cycle, but naturally, it is the project and system business that predominates in the backlog. As you know, we have had very good order intake from segments like data centers, marine and rail. These are businesses with long lead times, skewing mix in our backlog further toward longer delivery times. So mix in the backlog is one thing to keep in mind. The other is production capacity. We have an overall good position, and you often hear me talk about our strong delivery track record. This is important to us, and we are investing incrementally, as you have seen in our announcement. CapEx is tracking at a higher level of around $1 billion. With demand having been so strong in the last 12 to 18 months, some product lines are now approaching high utilization, mostly so in electrification until ongoing investments gradually becomes fully operational during 2027. All 3 business areas contributed to comparable revenue growth of 14%. Volume expansion was the primary driver, complemented by net pricing realization of just about 2%, a stronger contribution than in Q2. And we saw double-digit improvements for both the short- and long-cycle businesses. Looking at the different geographies, comparable orders were up by double digits in all 3 regions. The Americas continues to be the strongest growth driver and increased by 70%. This was driven by the U.S., where orders were up by as much as 82%. This high number includes large bookings, but base orders were very strong and improved by about 50%. Europe was up by 10%, supported by increases in most of the top 10 markets. Asia, Middle East, Africa improved by 29%, with China up 25%. China orders increased in all 3 business areas with strong double-digit growth in both Electrification and Motion. Now we turn to earnings, which reflect both favorable market conditions and a strong operational execution. We improved operational EBITA by 24% to $2 billion, up in all 3 business areas. And as I mentioned in the beginning, a group margin of 20.8% Operational leverage on higher volumes was the main contributor to our improved results. The solid price execution and the forever ongoing efforts on continuous improvements compensated for inflationary cost impacts and higher spend on R&D and SG&A. We reduced expenses in corporate and other and losses were lower in the e-mobility business, all included a job well done by the team, and we keep moving in the right direction. That said, while we improved business performance, the earnings per share of $0.65 actually reduced by 2% from last year. There are 2 main drivers to this. The first being a noncash unrealized FX hedge linked to the ongoing Rotork acquisition, which weighed on earnings by about $115 million. And depending on FX movements, we may have some additional volatility in finance net until we close the deal in the first half of 2027. Secondly, we had a lower result in discontinued operations. This is, of course, linked to the ongoing separation process in the Robotics business. We are working towards our ambition to complete this divestment by the end of the year. And with that, I hand it over to you, Christian.

Thanks, Morten. So let's take a look at what happened in the different business areas, starting with Electrification. Demand remained persistently strong and drove order intake to a new record of close to $7.7 billion. This represents a standout increase of 70% from last year. But it was also up from the already high level of second quarter. So what drives this exceptional demand? The segment trends have not really changed from what we've seen earlier in the year. The data center segment stood out again with a triple-digit order growth with no signs of slowing customer activity. That said, it is a tall order to expect triple-digit growth in each quarter going forward. It may be as simple as the impact of timing of order bookings and also the base is getting rather sizable. But electrification is not all about data centers. It was very encouraging to see order growth, excluding data center, reaching the high teens level. And all our large customer segments in electrification grew at a double-digit pace. To mention a few, we saw a strong increase in the utility business with investments going into the grid refurbishment and expansion. Orders in the buildings segment was up due to strong commercial demand. It improved also in China, where we performed well in an otherwise bleak commercial building market. We have executed well in areas like high-end hospitality as well as niche-backed public funding like health care and education. Turning now to revenues, which amounted to $5.4 billion. The very strong comparable growth of 21% was above all supported by higher volumes. But the team did a good job on pricing, which contributed with around 3%. This is a stronger contribution compared to Q2, saw a good realization trend. And it was encouraging to see that pricing now broadly offset commodity inflation. The strong revenue growth with added contribution from continuous improvement efforts converted to 27% improvement in operational EBITDA to $1.4 billion. And the margin was up by 110 basis points to 25.6%. Again, new records for electrification. All included, a great performance by the team. Now looking at the fourth quarter, we expect comparable revenue growth to be in the high teens to low 20% range. And while we expect a repeat of the usual seasonal pattern of sequentially softer margins in Q4, we anticipate a slightly softer drop compared to the historical average of around 150 basis points. Now we turn to Motion, where order intake of $2.5 billion corresponded to a strong comparable growth of 12%. This improvement was driven by the short-cycle business with large order decline from last year's high comparable. Similar to previous quarter, we saw strength in the grid-related investments. HVAC for commercial buildings and data center cooling as well as food and beverage also contributed to the growth. A more stable trend was noted in oil and gas. And while there may be quarterly differences, I would say that process industry-related demand in pulp and paper and chemicals continues to be overall muted. Turning now to the revenue at $2.3 billion, which grew by 9%. The increase was mainly driven by strong demand in the short-cycle business, while we also executed on the order backlog. Main driver for revenue growth was higher volumes with added contribution from a solid price development. In Motion, we also had about 2% revenue contribution from M&A. As in recent quarters, profitability in Motion was under pressure despite a positive impact from higher volumes. Year-on-year, the operational EBITDA margin declined by 100 basis points to 19.1%. Our Gamesa Electric acquisition hampered margins by about 40 basis points, still operating at a small loss. Pricing was robust also in Motion, and we were able to offset commodity inflation in absolute terms, although still with some margin dilution. For the fourth quarter, we expect Motion to achieve comparable revenue growth similar to the Q3 level. And in contrast to the usual pattern, we expect operational EBITDA margin to slightly improve sequentially. The stronger-than-usual quarter-on-quarter development is supported by improved operational performance in the Project and System business, where we have had some inefficiencies earlier in the year. Next, we turn to Automation, where orders remained stable versus prior year at $2.1 billion. The order number is sequentially lower, but this is more due to timing of order placement rather than a real change in underlying customer activity. We still see good demand linked to our offering for higher energy efficiency and energy resilience. Demand for marine and ports, electrification and automation remains high. And we see improving market sentiment linked to discrete automation in the machine building segment. Order growth rates were strong, although still on a fairly low comparable. Demand in the oil and gas segment is generally robust, bearing weakness in the Middle East. Similar to what I mentioned for Motion, we continue to see bleak process industry markets for chemicals and pulp and paper. Orders in mining remained muted in this quarter, but our colleagues are mentioning that they send some initial improving sentiments in the customer interactions about future mining projects. Early days, so let's see and follow up on this one. Nuclear is a small segment for us, but an area where we see high customer activity. Revenues reached $2.1 billion, up 5% on a comparable basis. The improvement was driven across the spectra of backlog execution, product business and service. Despite gross margin pressure from items like unrealized FX and commodity derivatives and some cost inflation, the operational EBITDA margin improved to 14.8%, up 90 basis points from last year. The margin improvement was driven by solid execution of the order backlog with an increased profitability and also a stringent cost control in SG&A and R&D, which reduced in relation to revenues. For Automation's fourth quarter, we expect a low to mid-single-digit comparable revenue growth. And we have the ambition to keep the operational EBITDA margin broadly stable from Q3. This will be a stronger outcome than the usual pattern of a sequential drop in Q4. Looking at cash flow, it was another solid quarter with free cash flows of $1.6 billion, supported to our strong free cash flow margin trend. The slight year-on-year increase of 2% was driven by higher operational earnings in continuing operations. We also kept disciplined in our trade net working capital management with no material cash impact. This was partially offset by somewhat higher CapEx spend and the lower cash flows in discontinued operations. But all in all, it was a good cash quarter. So far this year, we have generated $3.7 billion in free cash flow. We expect good business-driven performance also in our fourth quarter, and we received the cash contribution of around $300 million linked to the real estate sale we just announced. We are well on track towards improving free cash flows from last year's $4.6 billion. And with that, I hand it back to you, Morten.

Thanks, Christian. So let's finish off with the outlook. For the fourth quarter, we expect comparable revenue growth to be broadly similar to the third quarter. When it comes to the operational EBITA margin, we have a seasonal pattern of a softer Q4. We expect a sequential decline also this year, but slightly less than what we normally see. Note that this guidance does not include the positive one-off linked to a real estate sale we just completed. This sale will trigger a gain of about CHF 240 million booked in the fourth quarter. This results in a slight upgrade for the full year 2026 guidance. We now call for comparable growth to be in the low teens range, and we expect the reported operational EBITA margin to improve by at least 270 basis points from 2025, including real estate sales. So now Ann-Sofie, let's open up for questions.

Yes. We're ready. Let's do it. [Operator Instructions]. And with that, let's take the first question, and we open up the conference call line for Will at Kepler Cheuvreux.

My question would relate to the strength of the order intake in electrification, specifically around data center. We've seen 2 quarters above 100% or above 130% in North America. What levels of risk control are you putting in place to ensure the durability of the orders and to ensure there's not elements of preordering or orders that may fall subject to cancellation in the event of a change in the economic conditions?

Yes. Thanks, Will. First of all, when we do the -- say, a normal risk approach when it comes to customer assessment when we -- before we take the order, most of them also come with a significant advanced payment or clear cancellation policies, which is part of how we do with every large project at ABB. So -- but also -- so -- and you have to remember also that these data center designs, even if they are standard products, they are not kind of standard solutions. It is still engineering involved. It means that the order is for a specific site, which already have a permit to have a grid connection to have kind of the funding in place to be built. And that's the -- when we get the order, then it's all about execution. And as we said, lead time can vary from 12 to 24 months, and that's more depending really on the project when they want the delivery on site. We are normally not the limiting factor when it comes to the lead time. So that's kind of how we look at it. We do not see any preordering. And I don't see any kind of buildup for something which is anyway build to a site. So it's very difficult to handle this by preordering as well.

Thanks, Will. We open up for the next caller, James from Rothschild.

I wondered -- well, encouraging to hear your comments on data centers and that you see no sign of slowing customer activity. But I wondered if I could ask your thoughts on the wider equity AI ecosystem market debate and concerns that are going on. And specifically, we've got this known path of AI supply ambition with huge amounts of gigawatts and an ambition from hyperscalers to build those. And I could see a path to orders increasing and the desire to continue those starts and complete the existing and the announced but not yet started. But on the demand side of the equation, when you look at the model players and the hyperscaler players, do you look much and think much about what kind of returns and demand that side of the equation is seeing, whether it's sufficient to support the kinds of industry CapEx levels that we're heading to?

Well, of course, we discuss and talk with our customers like the hyperscalers about their -- both financing models, but also their revenue models of the future. And the confidence there, and I think -- but you mean you can hear that directly from them as well, the confidence there that these investments that is being made now will have very solid returns. And that's you see also with kind of the -- I often say that the hyperscaler or the data center industry do have deeper pockets than most kind of standard industrial customers when it comes to getting those grid connection. I think that's more the for me would be the discussion longer term that you see when you have -- when you -- if you're running out of grid, who will take that capacity. You have a choice between decarbonization of industries or building data centers. And that's more of the industrial debate that is happening in many countries. So I think what we are doing there is to help building the data center much more energy efficient and that you can do more with less and at the same time, helping more energy and electricity supply to come online. I think that is the part of the equation for the coming years, we will see much more investment where hyperscalers and the whole data center industry will take a bigger part, also bringing equity or capital into the electricity power generation because in the end, you will -- there will be not enough free capacity to pick up. And therefore, you would also need to have more grid expansion. We see that especially in the United States with a lot of LNG and other grid expansion activities happening. And I think we'll see that also here in Europe in the coming years. And that's -- and again, it's a sweet spot for ABB and where we play. So that's kind of how I see it. And therefore, I'm confident when it comes to the longer-term development of this market. But both the demand and the supply side needs to be part of that discussion.

Thanks, James. And we open up for [ Magnus ] at [ Nordea]. Magnus?

[ Magnus Nordea]. I think you delivered a very solid 85% growth in the backlog in electrification in the quarter and you're guiding for very explicit revenue growth into the fourth quarter. But looking beyond, how -- what limits your backlog conversion into 2027? Is it more about your own capacity? Or is it the customers' ability to take deliveries? Or how should we think about the backlog conversion and revenue growth into next year?

Yes. Thanks. I mean I can start. We come out in January with -- when we do our fourth quarter, we'll come also with the full year '27 guidance. So I'll leave it that part until then. But what I can say is kind of how we are dealing with the capacity build-out and electrification. And it is one -- it is a mix here of how we bring new capacity online, and you've seen with a higher CapEx spend, where a lot of that has been allocated, of course, to electrification with a factory and manufacturing build-out. You may see quite a few new stories where ribbon cutting and groundbreaking over the last years. So those are investment now coming online. And that's why you see a higher revenue in electrification business. And it's a mix here of what is our own capacity, but it also has to do with the customer side. It's not just we are very seldom really the bottleneck when it comes to deliveries. Like the data center, we talked about when that is being built, it's both the construction work, but it's also a lot of other equipment like power transformers that goes in here, gas turbines. And those is more longer lead item than what we do as ABB. So we are very seldom kind of the limiting factor there for the build-out of projects.

You, Magnus. We have a question here via the online tool regarding CapEx. It's from Fredrik SEB. He says, given the growing backlog and high utilization rates, could you please update us on expected CapEx profile for '27 to '29?

I can take that. Yes, the CapEx plan for this year is around $1 billion as we have communicated in the past. And we don't expect that to grow significantly as we move across the next few years either. So this is really a good level for us. And as a reminder, of course, it has grown quite a bit since some years back, but around $1 billion or so is still the target.

Very good. Then we open up for another question from the call. It's from Andre at UBS.

I wanted to ask about the margin implications from the capacity ramp-up. So far, I think you've delivered very credible 30%, 35% operational gearing in electrification with sales obviously ramping 20%. I think for next year, just judging by the speed of your orders growth in the last 4 quarters at 50%, it may well accelerate. And you've just talked about adding capacity in various ways. Should we think about operational kind of drop-through implications from that, from that additional capacity ramp? Or do you think you can maintain that kind of operational gearing that you've delivered so far this year?

That...

Yes, I'll take it. I mean that gearing is going to be similar as we move forward. So that's a good performance from us so far, and there's nothing changing necessarily in the profile going forward for that.

Very good. Then we have a call from -- a question from Max at Morgan Stanley.

Maybe just to ask one sort of off the topic of data centers. So just in terms of the automation business, obviously, step down in sequential orders, you talked about kind of timing of orders in the Middle East. I'm just trying to understand, are those 2 comments connected? Was it one particular kind of larger order that maybe slipped from the quarter? Is there any kind of underlying weakness? Maybe just unpacking that sequential order deceleration that we've seen and maybe the moving parts between that?

Yes. Thanks, Max. As always in the automation business, there is more volatility in the order intake, especially on the large projects. And as you -- I'm sure you remember, we have had quite a few of those large projects in previous quarters also last year. So sometimes the comparables get a bit tough. And -- but if you look at the automation business, when we're looking at for this quarter, we had good activities in the power generation on the energy side, I would also say on the machine building, on the B&R business. Where it is a bit slower is more kind of on the process -- some of the process side where we see still kind of waiting for -- we are more optimistic when it comes to the future in mining, while -- and there, we see kind of more conversation, not on the number side, but more on the conversation with customers. While when we look at the part of, let's say, traditional process industries, pulp and paper, the metals industry and so on, cement, those are more kind of a bit of a tougher market. So that's kind of the overall outlook. But when we talk about the electrification trend that benefits the automation side as well, that being in -- when you're looking at capacity like in LNG, it's going well, so the oil and gas side, but also into the machine building. Those are elements that is driving. So I think overall, we are optimistic also when we're looking at the future intake here. But that's -- but I say we also always need to look a bit kind of through some of these large order bookings when you're looking. So we look quite a bit on the base orders we call it also in ABB when we're looking at the automation side. And there, it is growth on the base orders, but again, a bit short on large order just this quarter.

And if I can just add yes, I can just add, if I may, that the timing comment was not direct linked to Middle East. There, you should see them as 2 separate things because Middle East has been on the soft side since the beginning of Q1, and that hasn't changed. With that said, we have a next question. We open up the line for Ben at Oxcap.

It was about the -- well, the joint venture with Mitsubishi Electric. Very interesting deal. Could you just talk through the kind of strategic rationale? I mean, of that $640 million of sales, how much is Japan versus other markets? And I'm assuming and tell me if I'm wrong, that this is about gaining access and penetration mainly in Japan. And the kind of related question is the scope of it is literally just the low-voltage distribution products. But when I look at your businesses, there's a huge amount of complementarity actually between the 2 in Energy Systems and factory automation. So my question is, is this really just about low-voltage distribution? Or could this be something broader in the medium term?

Thanks, Ben, for the question. First of all, this is a joint venture that what we talk about now between Mitsubishi Electric and ABB that is limited so far to the low-voltage product of the electrification market. And the main reason why we want to go in here is that Japan is one of the largest electrification market globally. But it has been so far, let's say, difficult for us to come as ABB come into the market. Mitsubishi is a clear market leader in this space. And that is now with this joint venture and we were taking a 51% controlling stake will make us the local market leader overnight. And it is -- you can think about it like the GE Industrial Solutions case all over again, where we are bringing in a global platform of products like circuit breakers, contactor, all the industrial devices that is needed in that electrification space. And then we're taking the best of the 2 when we're looking at those 2 portfolio, and we will manufacture that majority in our -- this new JV operational units in Japan. So that is, as you say, the majority of business out of the [ 640 million ] is done in Japan, as you say, with a clear market leadership. And we're looking at how we -- say, when we are taking the best of the 2 based on the GIS acquisition kind of principles, we will also see how we can bring up the performance of the unit from today a bit of a low double-digit EBITDA margin and up to at least 20%. So it will take a few years because that -- we know, as we have done it before, it will take a couple of years to get there, but we are very confident that we will get there and be able to create a lot of value for the company. And we also have a firm exit kind of or a firm deal for when we'll take over 100% control of that new entity. And then if we can do more together in other areas, that is more discussions kind of to be held in the time. Now the focus is to do this successfully, and then we will build on that success onwards.

Thanks, Ben. And then we have another question here from the online channel from [ Thomas], who says, free cash flow looks to be really good in 2026 and significantly up from last year, approaching $5 billion. Do you agree? And can you talk about the drivers?

Well, I certainly can. And I do agree that year-to-date, the free cash flow of $3.7 billion is really, really strong, good operational performance on that. If we walk from that level into -- as the question alluded towards the finalization of Q4, of course, there's different puts and takes. First, of course, the continuation of our strong operational performance will, of course, generate positive cash flow in Q4. Adding to that is the real estate that we have talked about at $260 million, also adding to that. And of course, subtracting of the opposite of that. It's our continuous investment, as we mentioned before, around CapEx that we support our customers. And net working capital, probably a little bit of a drag also on that as we are supporting our growth into Q4 and then discontinued operations. So if you put it all together, I think the fair path is that we are moving towards a number indeed that is starting with the $5 billion, so the $5 billion or so. So yes, I would agree that it is a good performance so far and that we have a good path to $5 billion.