ACEA S.p.A. (ACE) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call operator. Welcome to the Presentation on the Strategic Guidelines and the H1 2023 Results of the ACEA Group. [Operator Instructions] And now I'll hand you over to Ms. Ira Angrisani, IR Manager at ACEA Group.

Good afternoon. And thank you very much for attending the conference call on the strategic guidelines and the H1 2023 results of the ACEA Group. Mr. Palermo, CEO of ACEA, will be illustrating the strategic guidelines and Sabrina Di Bartolomeo will be illustrating the H1 '23 results. A Q&A session will follow the presentation. Please go ahead, sir.

Good morning, everyone. First of all, I would like to illustrate the journey that we have embarked on and that will lead us to disclose the new strategic plan next fall. And today, we are going to illustrate the strategic guidelines that are driving the drafting of the new strategic plan. ACEA Group is an infrastructure operator with a strong presence in regulated sectors mainly. And this set it apart versus other family Italian operators or players. ACEA Group focuses mainly on the water business and ACEA is #1 in Italy in terms of number of customers served, 9 million customers, 59,000 kilometers of network and very good results achieved because we have managed to reduce the water leaks more than any other player in Italy. We are also operating in South America, where we have roughly 10 million customers served. The second pillar of the ACEA Group business is accounted for by electric power, where we are #2 in Italy in terms of number of customers served. Our power grid amounted to 1.7 million PODs for 32,000 kilometers of grid. And again, we have been able to achieve major results in terms of reducing the grid losses that are now down to 6%. We also operate in the generation market, 0.7 terawatt hour generated and a strong presence in the commercial business as well with 1.4 million customers. And the third pillar is accounted for by the environment. We are #4 in terms of waste managed. Waste management amount to 1.7 million tonnes waste managed. And this implies also waste to energy, which means 47% recycling rate achieved by our plants, and waste to materials generating 340 gigawatt hour of energy. So ACEA Group is one of the major players on the Italian market. But I think it's worth mentioning that the presence on the Italian market is mainly related to regulated sectors. So 85% of our EBITDA is accounted for by regulated sectors. These 3 sectors -- these 3 pillars as a covenant will be facing major challenges going forward as far as water is concerned. I think we are all aware that the protection of water resources is becoming increasingly important, not just in Italy, but also in Europe at large. According to estimates, 18% of GDP is directly and indirectly linked to the availability of water. And this gives you an idea of the importance of this resource for the Italian economy. The average leakage rate of the Italian system is very high, unfortunately, 42%. And that's why I said that ACEA has managed to set itself apart from the other European players. The European average leakage rate is 23%, 66% of Italians underestimate their water consumption. And therefore there is a limited public awareness, which hampers the appropriate protection of water resources. As for electricity, the future challenges refer to energy transition, first and foremost, 60 to 65 gigawatt growth in renewables by 2030 is expected, of which 80% solar. And then electrification and the role of grids, that is becoming increasingly important as consumption will be increased by 1.5x in 10 years, which implies the need to guarantee the system resilience. And then there's a substantial need for flexibility for the whole system as a whole that implies a 10 gigawatt of energy storage expected by 2030. And again, ACEA Group, as I've already pointed out, can play a very important role within this framework. And then the third sector, the environment, we hear a lot about circular economy. And we do know that circular economy is a major driver, especially as far as plastic waste recycling is concerned. So plastic waste recycling is expected to grow by 10 percentage points in Europe by 2030. And then the regulatory framework is changing, and we expect an increasing regulation of waste in Italy. And new forms of treatment are appearing on the market like waste to chemical and special waste, and these are thanks to the recent technological developments that have characterized the global market. And then engineering, last but not least, engineering is an area where we do operate, and we are witnessing an increasing demand for technical expertise to support the country's infrastructure investments. What is the ACEA vision? How does ACEA see the future and its positioning on the Italian market? So we definitely are going to support the development of the infrastructures in Italy. And this development and this growth of infrastructure will be driven by people and enabled by people. We are, as I said, the leading player in regulated sectors like the water sector, and we are strongly positioned in the electricity sector, particularly in the Rome area. And we are strongly positioned as far as the environment services are concerned. So we are already well known and seen as high level of service providers for the communities, which means customers, citizens, towns, provinces and regions. We are increasingly involved in engaging our employees as a driver to achieve the ambitious results that we would like to achieve. So of course, we are also focusing on shareholders' return. All of this will be achieved by retaining our distinctive positioning in the 3 sectors I demonstrated, grasping the opportunities provided by the energy transition, which means that our business model will combine renewables. As I said, we are strongly positioned as far as photovoltaic is concerned, we'll be focusing on decarbonization, waste recycling and carbon CO2 capture. And then we will also be focusing on smart cities, particularly as far as public lighting is concerned. In other words, our challenge or the challenge we'll be facing going forward will also relate to operational excellence. As far as the major projects are concerned, like the Peschiera plant and the waste-to-energy plant and also in terms of on-field activities excellence, we want to incorporate digital technology and AI in our business processes. So ACEA will focus increasingly on a strong financial diligence also as far as investments are concerned to support the growth of the 3 business lines and focusing on, as I said, adequate or appropriate shareholder returns, but also focusing on an appropriate management of cash and investments. Coming to the 3 strategic pillars that I mentioned. Let's start with water. We'll be covering this extensively in our new business plan. And of course, we will be providing you with some more numbers on that occasion. So as far as the water is concerned, we would like to consolidate our position in the Italian market. We currently are particularly strong in the sector in the South of Italy, Tuscany and down to Campania. So we want to further extend our geographical footprint in the center of Italy. And we actually would like to strengthen our presence in the municipal water supply systems in Italy and in the industrial water services. We are already strongly positioned as far as industrial water services are concerned. And we plan to provide direct and indirect support for the industrial water processing where we have distinctive skills and competencies. We are also planning to leverage on our existing strength and consider partnerships with other operators if needed to strengthen our growth in the existing businesses. So we want to further develop our business in the areas where we are already operating. The idea is that of becoming the high-end leader on the water market, leveraging on our track record of industrial water services and considering that we already have a 9 million customers or inhabitants. So we are going to develop the Peschiera aqueduct that is financed with public money, and it currently accounts for one of the major projects in Italy. And for electricity, the strategic pillars imply ensuring the resilience of the grid and protecting the quality of the service in the City of Rome, which is our top priority. But at the same time, we would like to develop a new renewable capacity in response to the energy transition. At the same time, we will be aiming at strengthening our performance and service on the retail market. So these are 3 different areas, but they are particularly focused areas. As I said, the grid in Rome, we want to boost the grid's resilience and digitization by improving the service quality, by increasing distributed flexibility and local dispatching and offering smart city services to supplement the typical grid services that we already provide. As for renewables, over the years, the group has developed major projects with the contribution of financial partners. The idea here is that of optimizing the portfolio to balance the group's consumption to achieve energy neutrality. And then as I said, we would like to consolidate our retail market performance and services by focusing and boosting digital channels through the optimization of the customer management model and ensuring the effective transition of customers to the free market, which accounted for a major step and also a major challenge for us going forward. Then the third business area, the environment -- environment services. And here, we aim at consolidating and expanding our leadership position in Central Italy. And in the past 6 to 9 months, we have been developing major projects like the [ energy-to-waste ] (sic) [ waste-to-energy ] plant in Rome, and we are bidding to the tender. I would like also to recall the expansion and the revamping of the San Vittore plant. This is another important plant serving Lazio region. The idea is that of meeting future demand for new waste-to-energy plants to dispose off the waste in Central Italy. And I'm referring not only to waste-to-energy plants, but as you might know, the company is focusing on the integrated waste cycle to be further developed in Central and Southern Italy. Recently, also thanks to the acquisitions made, we have been able to strengthen our position in this area. And we believe this will enable us to achieve additional synergies with the water business, for instance, because, as you know, a large treatment implies necessarily synergy between the environment and the water businesses. And then as I've already mentioned, we are going to focus on revamping and developing new lines, leveraging on the group's extensive experience in waste-to-energy, and our capabilities in materials recycling that is growing in importance and could open up new opportunities. As you know, we are currently assessing new opportunities in the new segments like the waste-to-chemical segment. Commitment to ESG has been confirmed and will be further confirmed. So the SBTi target for cutting CO2 emissions are confirmed. We confirm our determination to strengthen the waste recycling chain and reduce water leakage. As far as our people is concerned, we are committed to gender equality, boosting youth employment and last, but not least, boosting personnel development and training opportunities for our employees. And ACEA has also committed to fully embed ESG criteria in our risk and compliance processes, which is something that we have already partially done, then support the supply chain to enable ESG performance. And we are also expanding our operating ESG KPIs that are constantly monitored at group level. So this, in a nutshell, is what we expect in terms of group's positioning, and these are just the strategic guidelines that will be driving our business plan. So we're going to focus on water, environment and electricity that account for the pillars of the group's business. And as I already pointed out, over the next few months, we'd be working on this to disclose a new business plan next fall, that will be the result of the new managerial team that we have progressively built. And my managerial team is currently working on this new business plan, focusing on the growth of the group, pay attention to financial diligence and investments on working capital and on debt in line with best practices considering that we operate mainly in regulated businesses, as I've already pointed out. This is it, as far as the strategic guidelines are concerned. And I would like to start the presentation on the H1 2023 highlights.

Would you like to add the Q&A session now?

Well, if there are questions now, we can have some questions first, and then we can move on to the presentation of the financial highlights.

So this is the Chorus Call operator. Q&A session can start now. [Operator Instructions] The first question by Javier Suarez at Mediobanca.

I've got a couple of questions about the strategic direction of the company. First of all, what is the management perception of the capital -- ideal capital structure for the group? I guess, you're currently, closer to 4x rather than 3x. What do you think would be the ideal debt of a company operating in regulated sectors, but also considering the volatility of interest rates? And then the second question refers to the capital allocation of the group. Do you think the company should achieve balances between CapEx and organic business, M&A and growth? So what -- how do you view this need to rebalance the capital structure? And then the third question, in the past few years, [indiscernible] has been the margin. So what managerial actions can be made to better control the working capital?

Well, first of all, Javier, thank you very much for your question. Well, your part of your questions will be answered during the presentation of the financial highlights. Anyway, As far as debt is concerned, considering our guidance of 3.8x, as you might have seen today, we are closer to 3.6x today. So it would be too early for me to announce a target because we're still drafting our business plan. And I would like to mention this when we disclose on the plan so I wouldn't like to give you any numbers. Now clearly, we are aiming at curbing our debt. And definitely we'll be coming back to this when we illustrate our business plan. But definitely, this is going to be one of our priorities. Even though, as I said, we are planning to grow in a regulated business, this is one of the distinctive features of ACEA. ACEA is perceived as a multi-utility, but consider that 85% of its EBITDA comes from regulated businesses. And you know that nevertheless, we're still able to curb our debt. And this is our intention to go on limiting our indebtedness. As for CapEx, what happened in the first 8 months since I joined shows that despite our CapEx, we're still limiting our indebtedness. For instance, the Peschiera plant is financed by public money. And this is an example of what we are doing. And then the resilience and recovery plan is going to provide us with additional public money to finance these projects. And in the water business, I believe that major investments will have to be financed by external money, by public money, in other words, and not by companies directly. So I know that the Italian government is working on this now. So we'll see what happens. As for capital allocation, if I understood your question correctly, in our case, the water business accounts for our most important business and therefore, capital allocation will focus on this and all the others will follow suit. As I said, we expect a short-term return on our investment that would have a favorable impact on cash -- on our cash. And this is something we've been focusing on. This is something that has always characterized the water business. And all the operators are actually focusing on this. In other words, shorten the period of time required to get a return on the investment made in the water business. But we are working also on the other businesses that we operate in, so electricity and the environment. And I believe that the first positive signals will appear -- will materialize over the next few months. As for the working capital -- well, the working capital, to be well managed, implies cutting costs, as you're going to hear. We have already put in place some cost cutting, which has partially offset the financial charges that we have to bear. But at the same time, we are focusing on optimizing the [Technical Difficulty] are carried to recover part of these additional costs. And this would have a positive impact on our working capital. So I hope I've answered your question.

Next question by Stefano Gamberini at Equita SIM.

Thank you very much for your initial comments on the strategic guidelines. I've got a couple of questions too. One about the leverage and investment development. So far, you invested EUR 1 billion per year, and the leverage has reached 3.7, 3.8 on EBITDA. So how can the process be set up over the next few years? I'm trying to understand this because investments are definitely important and interesting. But I'm trying to understand how you can speed up your investment, considering the large number of projects you are working on. And then my second question is the following. Are there assets that can be disposed of more easily? So you said that you are not a multi-utility, but a regulated business. So why are you investing on renewables then? And the -- are the energy retail assets more likely or easier to dispose of or the water assets which are broader, could they be disposed of to finance investment in Italy to finance CapEx in Italy? Or would you need a capital increase? In other words, what are your strategies so that the EUR 1 billion CapEx needed every year can be sped up over the next few years? I'm talking about equity investment, of course, not considering incentives because then, of course, when it comes to investments made in the water business that are financed with public money, I mean, this is okay, but then the value is detracted or deducted from the RAB of the operator. And so there is no advantage. And then what is the dividend policy of ACEA Group? A regulated company must inevitably have an attractive dividend policy. So how can you combine all of these, say, requirements considering that you are planning to grow going forward.

Thank you very much for your question. Answering your question now means having our business plan ready now. That said, we are actually focusing exactly on what you have described, and that's why we are presenting our initial strategic guidelines today. Finding the right solutions that combines the growth and development and attending to CapEx management and capital management must inevitably imply the assessment of our business group, and we are exactly considering what you just pointed at. As you correctly said, the regulated businesses are crucial to the group, and they account for 85% of our EBITDA. All the rest can be considered for disposal. Photovoltaic is an interesting business. But again, we have to think about what we plan to do. And please consider that our water business does use energy. And so -- but the remaining capacity in terms of energy duration can be considered for disposal. In the past, the group has considered these points already, which has led to a number of decisions made but inevitably had an impact on our P&L. So this is exactly the type of evaluation that we'll be doing over the next few weeks, and then we'll be disclosing our business plan in October next. I believe that the dividend policy of ACEA has always been generous one, this year too, and this has been testified by the interest shown for the company. But clearly, the dividend policy will be based on the -- related to the business plan targets that will be incorporated in the new business plan. But as I said, we are going to focus on rigorous due diligence, financial due diligence, paying attention to all the levers. I mean, there could be different levers that we can act on. And this includes acting on the business scope or resorting to different sources of financial resources to finance our investments. I don't think the RAB is an issue, as you said, because I believe the group can make substantial investments in the water business because in the past, we, I mean, underinvested in this business. And over the years, ACEA has acquired geographical areas where investments in the water business have always been negligible for years. So receiving public money to finance plans or finance projects in the water business can definitely be the right way to go because this would enable us to generate revenues without undermining our RAB and having public money to finance the large-scale projects like the Peschiera aqueduct. The Peschiera aqueduct is financed partially by the tariffs and partially by public money. But the final result is the improvement of the whole system. And such projects do not imply expanding the customer base but are mainly meant to again improve the whole system, the water system as a whole. And it's not accidental that such large-scale projects have already been financed by the state also in the past. So I believe that in Italy today, we see a virtuous system where the large-scale projects are financed by public money, while we finance the local distribution networks through the tariffs. And when I say we, I mean the operators in the water business.

For the time being, there are no additional questions.

All right then. So I would like to say just a couple of words about the financial highlights, and then I hand you over to the CFO of the group, Mrs. Bartolomeo. So the results of the first half of '23 show a substantial growth of regulated businesses and testify our operational discipline. Revenues -- group revenues grew by 5%, reaching EUR 2.3 billion, including EUR 1.2 billion from water, energy infrastructure and environmental sectors. The organic EBITDA, net of extraordinary items, grew by 3%, up EUR 18 million on the first half of 2022. And such growth has been driven by the organic growth in regulated businesses. The water business grew by 6%; energy infrastructure by 3% and it was driven also by major cost efficiency. Net profit, and again, here we have reported also the adjusted net profit because the previous year was characterized by extraordinary items that were one-off, of course. So this year, we have estimated net profit that is higher than the adjusted net profit of the first year half of 2022, which shows that by increasing operating efficiencies, we managed to offset the growth of financial charges that have been reported this year as a consequence of higher interest rates. And it has also been possible to increase the depreciation of previous year's CapEx. CapEx amounted to EUR 503 million, growing in the regulated business, but in line with our investment plans and fully in line with the average of H1 and H2 of 2022. The group has been able to generate a free cash flow of EUR 103 million, so up EUR 65 million versus the first year half of 2022, which has enabled the group to improve the -- its financial structure. So the net debt to EBITDA ratio is 3.7x versus our guidance of 3.8x, which I believe this testifies despite the increase in the debt that is impacted on by dividend payment that took place a few days ago as well as the taxation and financial cost. As I was saying, our net debt is improving. And these are the key financial highlights. Again, growing revenues, growing EBITDA, net profit adjusted, so net of extraordinary items is improving too, CapEx in line with our plans, and free cash flow improving. And now I'll hand you over to Mrs. Di Bartolomeo, our CFO, for more details about our financials.

Thank you very much. Good afternoon. So I would like to carry on what the CEO already started. As you can see, the group is growing. And as a consequence, the investment plan is also growing despite the full year target has remained unchanged. It's just the result of the bringing forward of some investments. Revenues grew, 87% of our revenues come from regulated sectors. EBITDA grew by 3% on the previous year. And this, despite revenues were slightly dropping as a consequence mainly of the energy price and the impact that this had on the trading company. EBITDA is growing, as I said, also a consequence of greater operational efficiency and greater attention to all the costs that can be reduced. Our CapEx plan is still ongoing, especially in the key sectors like water and again, our EBITDA is growing despite the increase of financial charges. As for net debt, net debt increased by EUR 359 million versus the previous year, but we have to consider a very positive cash generation. And our guidance matches the guidance that was already given at the beginning of the year. As for our EBITDA, our EBITDA is accounted for by 53% by the water sector, 28% by the energy infrastructure and 6% by environment. So regulated sectors account for 87% roughly of our EBITDA that reached EUR 670 million at the end of the first year half of '23, up 3%. You can see the evolution of the EBITDA. We have added 2 nonrecurring items there, that is to say the bonus for the technical quality in the water sector in July last year amounting to EUR 26 million, and then the sale of CO2 allowances in the environment sector for EUR 12 million, again, in 2022. These nonrecurring events had a positive impact on 2022. Net of these, the organic growth is at EUR 30 million despite the negative energy scenario, but the growth -- the organic growth, so the growth of the tariffs and the attention paid by the management to the management of assets has made it possible to grow our EBITDA by 3%. This year, no recurring events have materialized with the exception of the change in the business scope. As for net profit, we have good news here. If you look at net profit, you see that net profit grew by 6% compared with the same period of the previous year. And this more than offset the depreciation of financial charges and interest rates year-on-year. So operational discipline has made it possible to outweigh the increase in depreciation and financial costs, and therefore, the rise in interest rates. I would like to recall the nonrecurring events that had an impact on revenues and EBITDA in H1 2022. That is to say, the roughly EUR 20 million capital gains for the disposal of photovoltaic assets, which materialized in H1 2022. As for CapEx, as we already pointed out when I commented on the EBITDA, 87% of our CapEx relates to regulated sectors with the same breakdown that we have seen for our EBITDA. So we go on focusing on generating value in the regulated businesses, which implies growing our RAB going forward. The main actions that have been put in place refer to repair and widening of water and sewer pipes -- sewage pipe in water business, the extraordinary maintenance of the existing plants and networks and also the improvement of treatment plants. As for energy infrastructure, the action has been focusing mainly on the upgrade of the grid and on the insulation of 2G meters. As for the environment, as you already heard, we are carrying out maintenance work on the San Vittore, Terni and Monterotondo Marittimo plants and on the construction of the plastic sorting plant, which accounted for EUR 18 million CapEx this year in this sector. As for the other sectors, we are definitely still investing though in a much more limited way than in the regulated sectors. As for our cash flow, in the first year half, we have witnessed a generation of EUR 103 million of free cash flow, an increase of EUR 65 million versus last year, same period. And such an increase in free cash flow has partially offset the payment of dividends and also the payment of taxes. Please remember that this year, we did not benefit from the tax allowances of the previous year. So this year, we have experienced a different timing in the payment of taxes. And therefore, we had to pay such taxes in advance. And the increase in free cash flow has made it possible for us to cover this increase in financial charges and due to the rising interest rates. As for our debt structure, we confirm our guidance. Our net debt amounted to EUR 4,798 million, growing by EUR 359 million versus December 2022 with a breakdown between long-term and short-term debt and cash and cash equivalents that enable us to meet to honor all the deadlines of the next couple of years. The debt structure is mainly fixed-rate debt. So 91% is fixed rate debt and then because of the rise of interest rates, the average cost has reached 2.02%, and average duration of 4.6 years. As you might remember, in January '23 -- on the 17th of Jan'23, we have successfully placed a green bond for EUR 500 million, paying coupon interest of 3.875%, maturing on 24 January, 2031, then followed by a tap issue of EUR 200 million, same conditions with a coupon interest of 3.875%. And then on 6 July, '23, EIB loan was granted for EUR 435 million for 15 years, which will enable us to meet all the deadlines over the next years. Moving on to organic growth in the different sectors. In the water sector, as we already pointed out, EBITDA grew from -- sorry, revenues grew from EUR 664 million to EUR 716 million, so up 7% versus the first year half of 2022. Net of nonrecurring items, it increased from EUR 638 million to EUR [ 672 ] million. Again, you see organic growth amounts to 6%. So as you know, the first phase of ASM Terni closed in December 2022. As for CapEx, as I said, it's just a matter of bringing forward investment in the first part of the year to close in line with the previous year with 2022. As for the energy infrastructure, again, our CapEx plan is still ongoing. We still focus on improving the grid and on the installation of 2G electricity meters. In June, we have reached 804,000 meters installed, revenues growing 3%, EBITDA growing 3% too, just organic growth. CapEx was limited and confined, meaning the first part -- I mean, limited in the first part of the year to the benefit of the water business that will be recovering in the second part of the year. Please consider that energy infrastructure and water are the areas where we would like to focus our CapEx mostly. As for the environment, we are still working on the integration of the plants acquired in 2022. We have seen a substantial increase of waste treated that grew 8%. Revenues are slightly down, mainly because of a pricing effect that impacted the first year half. As for the EBITDA, well, again, what I said about revenues apply here too, EBITDA benefited last year from the sale of CO2 allowances, which is not there this year. And EBITDA was impacted by the energy scenario and the reduction in prices. Treatment and disposal has reached 941 tonnes, whereas we see a reduction of electricity -- waste-to-energy electricity sold. As for the events that have occurred on 23 January, '23, we have acquired the 100% of Deco after acquiring the remaining 35% stake in Deco. And then we have acquired 70% of Tecnoservizi on 3 October, 2022. As for electric power generation, we have reached over 200 megawatts of ready-to-build photovoltaic plants. So we're still developing our photovoltaic plant pipeline. We have reached 860 megawatt hours, of which 208 already authorized and 652 megawatts waiting for the authorization. Revenues have been impacted on -- by the energy scenario. So both revenues and EBITDA were impacted upon by the -- negatively by the energy scenario. And CapEx grew to EUR 25 million. In terms of total electricity produced, electricity produced increased especially in the thermal electric area. In 2022, we did have some problems in -- with the production of hydroelectric power, sorry. So the hydroelectric power grew in the first year half of 2023. As for commercial and trading, we see an increase in our customer base on the free market. We have reached 1.2 million customers, [ 262,000 ] for gas. Revenues though are impacted upon by the price of energy. So they dropped to EUR 1.2 billion. EBITDA shows a recovery on the one end, thanks to the price of energy and also to organic growth, thanks to the good management of the commercial and trading business. As for CapEx, CapEx is in line with our target. So this is it. Thank you very much. I think we can now start the Q&A session.

This is the Chorus Call operator. [Operator Instructions] The first question by Stefano Gamberini at Equita SIM.

I've got a couple of questions about the guidance for this year. One refers to the EBITDA growth. You have considered the EBITDA adjusted. So I would like to understand whether this 4% growth refers to EBITDA or EBITDA adjusted. So I would like you to clarify this because my second question refers to how you plan to grow by EUR 55 million of EBITDA in the second year half. You reached roughly EUR 25 million, EUR 30 million in the first year half. How can you reach EUR 55 million considering that in waste and power generation, the energy scenario will inevitably be impactful? My second question refers to your debt guidance. Why the leverage guidance has not improved despite the more positive size in Q1 and even more so in Q2, which -- whereas you see a deteriorating working capital because if you make a calculation, the expected EBITDA, [ 1.350 ] and that consider financial charges and CapEx, roughly EUR 1 billion. The difference is even more than the figure I mentioned, and this is probably due also to the different management of funds. So why working capital is expected to deteriorate even further? And why, in Q2, the working capital deteriorated substantially? Because in end March, working capital has improved by EUR 125 million. But if we look at what happened in June, the working capital appears to have deteriorated by EUR 70 million, which means that that's been in quarter only a deterioration of EUR 200 million.