Alleima AB (publ) (ALLEI) Earnings Call Transcript & Summary

Hi, everyone, and welcome to the presentation of Alleima's Interim Report for the Third Quarter 2025. My name is Andreas Eriksson, Investor Relations Officer. I'm joined today by Goran Bjorkman, President and CEO; and Johan Eriksson, CFO. Goran and Johan will walk you through the operational and financial highlights of the quarter. And following the presentation, we will open up for a Q&A session. You're welcome to ask questions via the conference call or submit them through the webcast interface. And the presentation materials are available for download at alleima.com. As always, safety is a top priority for us, and I trust that you are familiar with the safety procedures at your current location. And with that, I'll hand over to you, Goran.

Thank you, Andreas, and hi, everyone, and thank you for listening. Let me start with the highlights of the quarter. The geopolitical situation is still turbulent, and we are still seeing a market with continued uncertainties. Customers are prolonging their investment decision. And I would say the overall kind of wait-and-see attitude remains. And I think this is particularly visible in Europe, but also in Americas, where volumes related to the more short-cycle businesses like industrial, chem, petrochem and also industrial heating are low. Despite this, I think our underlying performance is decent given the challenging environment, and we are clearly benefiting from a diversified exposure. Order intake rolling 12 declined 1% organically and revenues were flat year-over-year. Backlog remains solid in important segments like oil and gas, nuclear and medical with good product mix and visibility for the near-term future. But as I stated in the more short-cycle business and then especially in Europe and Americas, backlog is weaker. Our adjusted EBIT margin declined year-over-year to 4.7%. And this is clearly below last year and also as we guided for in quarter 2, but it is in line with what we expected. Main reasons for the softer result are the weak European market, where we have short backlogs, and it's actually impacting revenue, but also the prolonged maintenance stop we had during the summer and of course, the FX headwind. The reason for the prolonged stop was a large maintenance investment replacing the expansion press in the large extrusion. And we have some weeks' delay in the start of ramp-up, while there will be some effects also in the fourth quarter. Even though we have segments with strong market, our global footprint that helps us to mitigate the more direct impact from tariffs, we don't foresee a fast recovery of the market, or at least, we cannot trust that, that will happen. Therefore, we are now initiating a number of targeted measures to further strengthen our operational efficiency and, of course, our long-term competitiveness. The majority of these efforts will permanently reduce cost levels, including restructuring initiatives, while others are, I would say, more a natural part of our ongoing work to align capacity and cost with current market conditions. In total, we expect annual savings of roughly SEK 200 million, coming at a one-off cost of almost SEK 400 million and a total reduction of about 250 FTEs. And I cannot stress enough in times like this, our balance sheet is a real advantage. Our financial position enabled us to stay with our strategy where we have several ongoing profitable growth projects. Moving over to sustainability. I said it many times, we are generating a positive impact both through our own operations and through our product offering. Safety is always a top priority at Alleima, and we are continuously and actively implementing measures to maintain safety as a top priority. I'm happy to say that the development again is trending in the right direction, and the accident frequency is on record low levels. Our share of recycled steel remains high and remains over 80%, both on a rolling 12-month basis and year-over-year. And I think this is a good figure given our product mix. Also our CO2 emissions are steadily decreasing, even though we noted a slight uptick in this quarter. Alleima's largest contribution to sustainability through our products where we support our customers in their sustainability journey. That is why we are introducing a new KPI where we measure the share of sort of products supporting sustainability. This is things like fossil-free energy, renewable, nuclear and hydrogen, energy efficiency, electrification, medical and where the overall target is that this part of our business shall grow faster than the Alleima average. And as you can see, we have had a good development, but now more flattish. I would say that nuclear, medical and also energy efficiency through compressor steel still strong, but we see more headwind in areas like electrification, hydrogen and renewable energy. Some other sustainability highlights from the quarter. Alleima was once again awarded the EcoVadis gold medal for our sustainability performance, placing the company among the top 5% of over 150,000 rated companies globally. I think this recognition confirms our long-term commitment to responsible production and sustainable development. Another important milestone is that Alleima's climate targets have been validated by the science-based target initiative, ensuring alignment with the latest climate science and international agreements. Together, these achievements mark an important milestone in Alleima's work to increase customer value by reducing climate impact and strengthening sustainability across the value chain. So let's take a closer look at the market development. Market sentiment remains mixed with continued macroeconomic uncertainties. Demand remained notably low in Europe and stayed subdued in North America, while Asia continues to show more resilience. And we maintain momentum in several key segments. But I will walk you through the development in each segment, starting with oil and gas. Our view on the underlying demand is still positive, and I would say, especially for umbilicals with the project list of upcoming tenders and potential future orders is solid. We are a bit more uncertain, however, on the midterm outlook for OCTG. We still have a solid backlog, and we are on historically high levels. And maybe as important is that we have managed to increase our operational efficiency and thereby improve profitability for our OCTG business, and we are comfortable in our partnership with Tenaris also moving forward. Chem and petrochem Europe is on low levels, same with North America, while Asia remains solid. Industrial, the European demand is worsening on the low value-added products. North America, we noted an increase from low levels. But I have to say much of this is actually tariff-related effects. And that is -- you can -- we see our price increases to compensate for the import tax. But also here, Asia is on an okay level. Industrial heating overall, somewhat improving, but still on low levels. Applications like electronics, semicon and glass are improving. And we have been on low levels now for, I think, about 18 months. And if this improvement we now see is a turning point, I think that is too early to conclude. Customer demand is still on a good level, mainly driven by the white goods industry in the Strip division. However, some customer indication from U.S. indicated the market is starting to soften somewhat. Medical market remains strong, driven by multiple factors, and we have a solid momentum across the product portfolio. And I'd also like to mention that the integration of Endox is going according to plan. Mining construction, flat underlying demand year-over-year. Nuclear, high activity, growing demand continue to support a solid backlog, providing good visibility going forward. Transportation, I mean it strengthened year-over-year, driven by the titanium tubing for aerospace, which is strong, while automotive is worsened. So aerospace is up, automotive is down, giving a -- that aero should be flat, sorry.

It is on the curve.

Yes. Hydrogen and renewable energy, this segment remains mixed with varying performance across this broad range of businesses. But surely, there is a headwind in the hydrogen, renewable area. Moving over to order intake and revenues. Order intake rolling 12 months, SEK 18.7 billion, a negative organic growth of 1%. This is mainly coming from the petrochem and industrial segments, especially in Europe. North America is weak, while Asia remains on high levels. Nuclear, medical and consumer grew and industrial heating grew from low levels and continue to book good umbilical orders in the oil and gas segment. Revenues flat organically, Kanthal and Strip grew while Tube declined. Biggest positive impact came from medical and while we see the weak Europe that impacted us negatively. Rolling 12 months book-to-bill of 97%. And our backlog is still healthy levels in key segments like oil and gas, nuclear and medical, but for the short-cycle business in Europe and America, the backlog is short. Earnings, the adjusted EBIT amounted to SEK 197 million with a margin of 4.7%. Given the weaker market in Europe and Americas with short backlogs for the short-cycle business, the extended maintenance shutdown and the FX headwind, the result came in line with our own expectations. However, course and clearly lower than last year. And with the market with continued uncertainty, we are now taking the measures to reduce cost and improve operational efficiency. These actions, together with the ongoing growth investments in medical, nuclear chem, petrochem will make us stronger going forward. And we're staying with our strategy, which also includes our order booking discipline now in downturns. Free operating cash flow SEK 285 million, lower than last year, mainly impacted by lower operating profit and higher CapEx. So let's look into the divisions, starting with Tube. Tube noted an organic order growth of minus 6% for the rolling 12-month period, where we continue to see a weak Europe and North America for the regional businesses. Asia continues to develop well. Backlog in key segments like nuclear and oil and gas, still solid, and we maintain a positive view on both those 2 markets. Organic revenue growth of minus 3%, mainly driven by a negative development in chem, petrochem, but also timing of nuclear orders that was built in Q3 last year. Book-to-bill, 93% rolling 12 months. Adjusted EBIT margin of 3.6%, and this was dampened by the weak Europe as well as the higher-than-normal under-absorption effects due to the prolonged maintenance stop, where we replaced expansion press in the large extrusion. And as I mentioned, we've had some weeks delay in the start and ramp-up, and we will have a negative impact also in the fourth quarter. We will, however, be able to catch up some of these effects, but due to the large backlog we have in the large flow like OCTG, that will take until mid-2026. Tubular FX headwind of minus SEK 16 million year-over-year. Moving over to Kanthal. Organic order intake growth for the rolling 12-month period of 9%, which is a good growth, but still on relatively low comparables in the heating part. Medical is strong, and we noticed some rebound in industrial heating, where applications like ceramic elements for electronics, including semiconductors and glass industry stood out positively. And it's also in these applications, our announced investments in Japan and in Scotland are related to. If this is a real -- start of a real rebound, I think that is too early to conclude. Medical segment continued to show strong momentum with growing order intake and revenue and a solid backlog. Book-to-bill, 104%, rolling 12. Adjusted EBIT margin was 16.1% in the quarter, which considering the rather low volumes in the heating part of the division, the FX headwind and also some costs related to preparations for ramp-up of investments, I think it's an okay result. So Strip. Strip continued to grow its top line with an organic order intake growth of 24% on a rolling 12-month basis with growth in all segments, of course, then the Consumer segment being the main driver. Organic revenue growth of 5% in the quarter, all major segments contributing to that. Book-to-bill rolling 12, 112%. Strip came in on an adjusted EBIT margin of minus 4.2%. There is a continued negative impact from the weak fuel cell business, but also the Precision Strip part is not performing in line with last year despite the positive growth. Strip with most of its operations in Sweden normally has a seasonally weak quarter 3, and they also had continued FX headwind. But there is also efficiency problems where I would say, quality and yield had a negative impact. Strip has not been performing well in the last quarter despite the positive market and the operational problems, they are addressed, and they showed a clear improvement in the end of quarter 3, while I am positive that quarter 4 will show an improved performance. And with that, over to you, Johan, for some numbers.

Thank you, Goran. So before we move into the financials on this page, I'd just like to highlight that the targeted measures that Goran mentioned, and it's expected to result in an item affecting comparability charge on the P&L of approximately SEK 400 million in the fourth quarter. However, please note that the cash impact, which is roughly half of the SEK 400 million, primarily will occur during the first half of 2026. And on the savings side then, we can say that the run rate savings will be achieved half of it, about 50% by the end of quarter 2 next year and full effect by the end of the year. So now let's jump into the bridge on the right-hand side. So order intake for the rolling 12-month period amounted to SEK 18.7 billion, corresponding to an organic decline of 1%. Total growth was minus 5%, impacted by currency and alloy effects with a stronger SEK and lower metal prices accounting for 4 percentage points to each. Quarterly revenues reached SEK 4.2 billion with a flat organic growth, of which we actually had 100 basis points coming from tariffs, the U.S. tariffs. The revenues were held back by weak market conditions in Europe and North America, just like Johan pointed out. Currency effects, primarily from stronger SEK against the U.S. dollar had a negative impact of minus 4%. Alloy effects impacted by minus 2% on quarterly revenues. And we see looking into the fourth quarter, a continued negative year-over-year effect from alloys. And we expect the rolling 12-month order intake to be at -- have around minus 2% from alloys and the quarterly revenues at minus 1%. And in Structure, as Goran also pointed out, we have some positive contribution from Endox, even now it's rounded off to 0, and the integration is going according to plan. Moving over to the left-hand side. Adjusted EBIT, I'll get back to in a coming slide. So we'll get on to the reported EBIT, where the margin declined from 2%, 3% from 6.5% last year, impacted by negative metal price effects of SEK 70 million compared to minus SEK 24 million last year as the trend for metal prices and the U.S. dollar have continued to be more negative this year compared to last year. The net financial items for the quarter amounted to SEK 6 million compared to 0 last year. And one of the items in the financial net is the positive interest net on our cash balances. And in the quarter, they were yielding approximately 1.98%. The normalized tax rate came out at 25.8% for the quarter, while the reported tax rate amounted to 36%. The reported rate is impacted by a couple of prior period adjustments. Free operating cash flow came out at SEK 285 million, and I'll get back to that in a later slide as well. And finally, adjusted EPS for the quarter came out at SEK 0.56 per share, impacted negatively from the lower adjusted EBIT. Looking at the adjusted EBIT and the bridge. Going from last year's SEK 314 million or 7% to this year's SEK 197 million or 4.7%. And we note an organic decline on EBIT of SEK 78 million, resulting in a negative organic leverage. This is mainly driven by the weaker markets in Europe and North America and the higher-than-normal under-absorption and maintenance effects, primarily in Tube then, and as Goran pointed out, the yield and productivity issues in Strip. It's worth noting, though, that we've been able to compensate for the U.S. tariffs, making it EBIT neutral in the quarter. The currency headwind continued, and we were impacted by the strengthened SEK mainly versus the U.S. dollar. The total effect corresponds to a margin dilution of 70 basis points in the quarter. And structure, again, it's the contribution from our acquisition of Endox that Kanthal made early at the beginning of the year. Looking at the balance sheet and capital efficiency. Net working capital decreased in absolute terms year-over-year, mainly due to currency effects and lower metal prices, but increased as a percentage of revenues to 39.5%, and that's due to our lower quarterly sales. Continuing into inventories, they are lower in value, both sequentially as per normal seasonality and year-over-year coming from both lower volumes in inventory and lower metal prices. And we continue to have a lot of focus on this in the divisions. Capital employed, excluding cash, increased year-over-year to SEK 16.3 billion, mainly driven by the higher CapEx levels. And the return on capital employed, excluding cash based on operating profit, including metal effects, was 8.1% for the rolling 12-month period, down from 9.9% last year. Looking at cash flow. The free operating cash flow amounted to SEK 285 million, which is lower than last year. The EBITDA is impacted by the negative metal price effects and currency headwind as well as the operational effects that we explained earlier. The noncash items were slightly more positive this year. This refers, for example, to provision or provision releases in the operating result that have no cash flow impact. The positive impact from lower working capital mainly comes from accounts receivable and inventory. An increase in CapEx comes both from our prolonged maintenance stop and increased growth CapEx. And if we look on the graph on the right-hand side, we can note that we continue to deliver a healthy cash flow, although in the last 2 years, we have effects from the ongoing growth investments, which, may I remind you, are in segments that are more profitable and less capital intense and will start yielding in the coming years. Overall, and as Goran also pointed out, our financial position remains strong, where we are well below our financial target of a net debt-to-equity ratio below 0.3x. At the quarter end, we were at negative 0.02x. The net pension liabilities decreased year-over-year to SEK 735 million from last year's SEK 938 million, mainly as a result from higher discount rate and value increase of the pension assets. Leasing liabilities was on par with last year. And again, our cash position continues to be strong. And we have a net debt or rather a net cash position of SEK 362 million and a SEK 3 billion unutilized revolving credit facility on top of that. Looking at the guidance we gave ahead of the quarter and the outcome. For CapEx, the outcome is that we are now at SEK 745 million year-to-date. We guided for SEK 1.2 billion for the full year. So I would say that we're well in line with that guidance. The currency -- the transaction and translation effects is -- came out at minus SEK 113 million. We guided for SEK 115 million -- negative SEK 115 million, so well in line there as well. And the total bridge effect, including the hedges and revaluations was negative SEK 41 million. Metal prices affected us negatively with SEK 70 million, where we guided for negative SEK 150 million. Here, the deviation comes from several metals, but mainly from the development of molybdenum in the quarter. Normalized tax rate was year-to-date 24.1%, where our guidance is in the range of 23% to 25%. For the quarter, the normalized tax rate was on the higher side at 25.8%, mainly due to the country mix for the profits in the quarter. And then looking at the guidance for the fourth quarter. We remain -- we maintain our guidance of SEK 1.2 billion of CapEx for the full year. The currency effects, we estimate for the transaction and translation to about minus SEK 150 million, 1-5-0, on the back of the stronger SEK, of which I would say that half will be mitigated by hedges, roughly half. Metal price effects based on end of September metal prices and currency rates, particularly nickel and U.S. dollars, we anticipate a neutral effect for quarter 4. And the tax rate for the full year 2025, we expect a normalized tax rate in the range of 23% to 25%. And by that, I hand back to you, Goran, for the outlook and summary.

Thank you, Johan. The general economic environment was continued uncertain during the third quarter, and we expect that to linger into the fourth. At least we don't trust it will improve much. One-off cost of about SEK 400 million related to restructuring activities is expected to affect fourth quarter results. We also expect some diluting effects related to the delayed ramp-up from the installation expansion press, and that will have some impact on the profitability in the fourth quarter. We maintain a solid backlog in several key segments, providing good visibility into near-term deliveries. However, we are seeing challenges in other customer segments, particularly in Europe and North America, which already have affected and is expected to continue to affect short-term deliveries. Product mix anticipated to be remained broadly in line with third quarter, and we also expect currency headwind in the fourth quarter. And finally, cash flow tends to be strong in the second half of the year compared with the first. And that brings me to the summary. So let me summarize. We are affected by a continued uncertainty due to the geopolitical turbulence, but we still have good backlog and momentum in key segments like oil and gas, in nuclear and in medical. Revenues flat organically where Kanthal and Strip grew while tube declined. The biggest positive impact from the Medical segment, while a weak Europe impacted us negatively. EBIT margin declined year-over-year, mainly due to the weak Europe, the FX headwind and the prolonged maintenance stop. And therefore, we are initiating a number of targeted measures to further strengthen our operational efficiency and long-term competitiveness. Majority of these efforts will permanently reduce cost levels, including restructuring initiatives, while others are a natural part of our always ongoing work to align capacity costs with current market conditions. Our financial position remains strong, which will enable us to continue to execute on our strategic agenda, where we now are driving several growth initiatives to strengthen us long term, while we stay with our order booking discipline also in downturns. And with that, back to you, Andreas.

Thank you, Goran. We will now begin the Q&A session. Please feel free to ask your questions via the webcast or directly through the conference call. Operator, please go ahead.

[Operator Instructions] The first question comes from the line of Kaleb Solomon from SEB.

Just 3 questions from my end. On the effects from the sort of delayed ramp-up following the maintenance stoppage, could you maybe put a rough figure on what the impact will be in Q4?

Group level, maybe 80 basis points in fourth quarter. And as I said, I think roughly half of that we will catch up, but that positive effect will remain until, I would say, mid next year.

Okay. And on the SEK 200 million in sort of annual cost savings you expect to achieve from the measures, did I interpret you correctly, Johan, that we'll start seeing half of that run rate effect in Q2 next year for the first time? And will those sort of cost savings be fairly evenly distributed throughout the quarters?

Yes. So half of it from quarter 2 and full effect by the end of the year in run rate.

Okay, that's clear. And on the sort of topic of tariffs and general uncertainty in Q2, you mentioned June was significantly worse than the rest of the months. And I know you say customers sort of continue to be cautious. But based on your Q3 orders, it at least seems like things have gotten a bit better since June at least. Can you maybe give us some color on that, and what you have been seeing in Q4 so far?

The comment I made regarding June that was in Americas and June stood out as very negative. That came out better in July. And I think it's been kind of flattish. It looks, number-wise, more positive, but that is due to that -- I mean, we bring up prices due to the tariffs. And I think it's more or less a stable development. June was not -- I mean, that stood out as negative, after that, more flat. And once again, I mean, we compensate for tariffs. I think the main issue is all the uncertainties. And even if there is now a deal, Europe and America, even though the new things come every week, remember, that deal does not include tariffs on steel imports to the U.S. That is still to be sold, hopefully, through quotas, which I think would be the best idea.

And just a short follow-up. Could you maybe say something about how competitors who ship more finished products and kind of lack the local processing capacity have managed to handle tariffs? Have they been able to pass on costs to the same extent or...

That I don't know, honestly. We have not seen any big movements on sort of the competitiveness situation in Americas. My assumption, but this is just a good guess is that some of our competitors that don't have so much added value in the U.S. perhaps take a hit on -- maybe they take some of the cost for the imports themselves. But I don't know that. That's just speculation.

The next question comes from the line of Adrian Gilani from ABG.

Yes, I'd like to start off with a question on the savings program. I guess, can you go a bit more into specifics? Is that localized to a specific segment or geography, or will it sort of be spread out over your entire business?

I can say, it is -- first of all, we see that majority will be permanent. I think we estimate roughly 75% of the SEK 200 million will be permanent. So if volumes go up, that will still be a saving. And in respect to the ones that will be -- where things will happen, I cannot communicate this in this kind of meeting. It's in several countries, including Sweden, and it's a combination of sort of staff reduction, there are also some expected closures, but I cannot go into more details because I want my personnel to hear it from us not through this kind of call, if you're okay.

Yes. No, I understand that. Then on industrial heating, you sounded a bit more optimistic, I think, than you did a quarter ago. Can you expand a bit on what you sort of base that on? Is it the current trading in Q4 that is pointing up a bit, or what is that optimism based on?

So you heard that. I was trying to play it down a little bit. I mean it's the numbers actually. On the heating system, which is the more added value part of the industrial heating business, there was a positive uptick in the quarter, but what I'm saying is, I mean, I have all the hopes that, that is an improvement in the market, but hope is not a good strategy. So I'm carefully optimistic maybe, but there are small movements in the right direction, but from low levels.

Okay. Understood. And then, I mean, do you have any view on -- you talked a bit about tariffs in the U.S. before, but Europe's proposed steel safeguard package. I understand that for your more specialized products, a tariff on the raw material doesn't have a massive impact. But for your less specialized products in Europe, is this something that's going to have an impact, you think, on you?

Yes. I think it will have a positive impact. How much, we are trying to understand. But you're right, I think there are other steel companies in Europe that this is much more important for the more sort of standardized carbon steel producer. And I think the commission has taken a wise decision. I think this is good because, I mean, it's huge overcapacity in China. They are subsidized and in a way, they export unemployment. So I think this is the right thing to do. If it has any impact on us, it's on, I would say, on the more less special part of our portfolio, but I cannot quantify it at this moment.

I understand it's difficult to quantify the impact, but could you talk a bit about sort of what products perhaps where you are seeing high import pressure so we can understand.

I mean, it's mainly in Tube, I will say.

Okay. Understood. And the final, just very quick one. Just to check that I heard you correctly. Did you say half of the forecasted FX headwind for Q4 will be mitigated by hedges?

Yes, yes, that's correct. Estimated -- that's estimated.

The next question comes from the line of Anders Akerblom for Nordea.

So just a follow-up on the previous sort of topics. Not discussing specifically the import volumes to the U.S. among your competitors, but rather kind of domestic capacity. Following these tariff announcements, are you seeing any indications of sort of incremental capacity additions in the U.S.

No, we don't see that. I don't see any of our -- at least larger competitors are moving forward with any kind of investments that I am aware of, no.

Okay. And in terms of the cost-out measures, you touched upon this previously, but I'd just like a bit of a clarification in terms of -- I mean, is this predominantly driven by you seeing sort of clear efficiency improvement opportunities or that there's some aspect here as well of kind of positioning for potentially lower demand from some of the key segments than if this would be in Tube, say, or similar?

I'm not sure how I should answer that question. I think what -- I mean, we've seen a weaker market for some time, especially in Europe. At some point, probably that will turn back again. But we cannot trust that, that just will happen. We have to take measures. It's more from that point of view. So it's more the view we have on the market right now. No speculation it will go in any direction going forward.

Okay, that makes sense. And finally, on the FX impact that you guided for previously for Q3. I mean, adjusted for this and the final outcome, I guess, results were a bit weaker than expected. So could you elaborate a bit on sort of the kind of greater-than-expected organic under absorption in Q3? And you mentioned 80 basis points impact in Q4. But what was it that mainly drove this kind of in Q3? Was the production stop longer than expected or from what you said previously?

No. The stop was according to our plan in quarter 3. And if you remember, in quarter 2, we guided for a quite weak quarter 3, and it came in roughly as we expected. The longer summer stop that we referred to in third quarter is that we made -- we were doing quite a large investment. And it's the ramp-up of that machine that is causing some delays that now is also impacting quarter 4.

The next question comes from the line of Tubic Igor from DNB Carnegie.

I just have one follow-up question. Can you give us some sort of update on your upcoming projects, the coming years, where we are in terms of time line and when the projects are expected to start to ramp up if they haven't yet?

Looking at you, Johan, they are all in line with what we have communicated before. So for instance, I mean, Tube Mill 68 or Tube Mill 26 that we call the nuclear will start up end of next year. I will be in China in a few weeks to do the inauguration of the new Tube plant in China. That is 2. The other ones is also on time, yes.

Should we expect the Chinese ramp-up to start here in Q1, or how should we think about that?

Yes, in a way. I mean, when we make a decision like this, of course, we look long term at the market development. And we have had a fantastic development in China, if we go back a decade or a little bit less than a decade. And if that would continue, we would run out of capacity, and we expect the market overall to continue to develop well and then we had to add capacity. That's the background for the decision. Then when machines are in place, and we have people running it, then of course, the ramp-up will depend on the market situation right at that point. But we will have machine capacity by the end of this year, and then we can take more orders.

Okay. That's clear. And can I just ask you, have you started already to take on some orders for this new capacity, or are you planning to do that once everything is clear?

That's the detail that I cannot answer. But since I'm going to be the mid-November, I was surprised if I guess everything is up and in a way running already now. And if there are orders to book, I guess they book them. But Igor, I don't know that detail.

[Operator Instructions] The next question comes from the line of Viktor Trollsten from Danske.

I had to call in a little bit late. So sorry if you have answered some of this. But firstly, on Kanthal and industrial heating, if we should say, outlook, just is that driven by the CapEx side of demand, or is it OpEx driven? That's my first.

I'm not sure I can answer that, but I guess more CapEx. I mean we see it in semicon. We see it in electronics. We see it in glass. How much of that is to add new capacity and some of that they order, heck, I cannot really judge, but it's clearly in those part of the subsegments of industrial heating, we see improvements.

Okay. And just as a reminder, could you help us how much of industrial heating is to the CapEx-driven sales, and how much is [indiscernible]? Is it basically 50-50 or...

Yes, that's what we normally touch, yes. Semicon normally is CapEx driven. So at least that one should be like that.

Okay. No, fair enough. And then on the currency in the quarter, and again, sorry if I call in a little bit late here. But what's the difference between the transaction and translation impact of SEK 113 million, basically what you guided for and the total currency effect of SEK 41 million. Is that hedges or...

Yes. Yes. So between that and the total effect there comes hedges and revaluations of bank accounts and [ ARAP. ]

Okay. And was there any particular division that was more or less impacted or...

We had a fairly similar impact on Kanthal and Tube, I would say, so yes.

Okay. Yes. That's clear. And then just finally on my side, on the oil and gas business. I mean, oil prices coming down quite a lot. So just obviously, you keep your arrow flat, so to speak. But if you could remind us where are you in terms of capacity utilization now in that business? Is that running at 100%? What's the overall ceiling in the industry? Your 5 cents on it would be fantastic.

Not sure that you were there -- here, Viktor, when I went through the arrows. I think overall, we judge oil and gas flat on a good level. I think we're a little bit more optimistic on the umbilical side than on the OCTG side. Both of them have good backlogs. But since you asked the way you asked, I mean, we have actually been running umbilicals not at 100% capacity utilization this year, then it has not been visible because the pricing has been so good from a value point of view, it's been high. And we've -- I mean, there's a lot of potential orders to win, and we think we're going to be successful. So we are actually planning for a slight increase of pace of umbilicals maybe around end of this year, beginning of next year. So I think we are -- we will increase output in umbilicals if things go as we wish. So that's our plan.

Very good color. Good color in light of what we see in the oil price, et cetera. It doesn't feel like you -- you doesn't sound too concerned on...

No. I mean, oil price, it's always volatile. But if you go back half a year or maybe more, it's been between SEK 60 and SEK 30 -- SEK 60 and SEK 70, and SEK 60 is still a good price. And then we have to remind ourselves, it's not only oil business, it's also gas.

There are no more questions from the phone at this time.

All right. Thank you. Then I think we will conclude this call. Thank you for all your questions and for joining us today.

Thank you.

Thank you.