Andritz AG (ANDR) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of Andritz AG. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Wolfgang Leitner, who will lead you through this conference? Please go ahead, sir.

Thank you very much. Good morning, everybody. Welcome to our Q3 conference call. I hope you are safe and have adjusted to the second wave. I'm sure when we are ready to enter the third wave, we already will have developed a good tradition of how to cope with these circumstances. If you allow me, I would do some general remarks in the beginning before we take you through the presentation. I think Andritz has managed to cope reasonably well with this crisis. We started with cost containment measures at a very early stage based on certain assumptions we have made on with regard to how the business could develop. And we intensified then these measures, obviously, as the full impact on the global economy has been felt. And I thank our employees. They were acting extremely professionally, in extremely committed way. They were hanging in, in construction sites across the world in countries with, I would say, not fully developed health systems. They were willing to spend 2 weeks in a hotel room in quarantine to be able to enter China, for example. So I think without this commitment of our employees, we would look very differently when we report on this third quarter. With regard to the Q3 results, I hope I can say that it was a good quarter for Andritz. After a rather low order intake in Q2 of about EUR 1.2 billion, we achieved a good order intake of roughly EUR 1.7 billion in Q3, with basically all business areas achieving good order intake. The solid performance with regard to the order intake of Hydro is here especially mentioning. I'm glad that finally I could deliver on my optimism from the last several quarters where I said I'm optimistic that Hydro will improve and increase their order intake. We booked some large orders and achieved overall -- made good for the shortfall of the first half of 2020. So now after 9 months, the order intake is basically unchanged compared to the same period as last year overall. It's also important to note that the order intake of Schuler has been reasonably good in Q3, a bit higher than in Q3 of 2019. We won some orders -- some sizable orders from well-known electric vehicle or battery electric vehicle manufacturers. And I think it's also of interest to say that about 1/3 or slightly more than 1/3 of Schuler's order intake in the first 3 quarters has come in connection with e-mobility with battery vehicles or hybrid vehicles. So I think that shows that there is also hope for the automotive industry and the suppliers of the automotive industry to which Schuler belongs. On the revenue side, we have been able to proceed on our major project sites without major delays despite all the challenges and travel restrictions and immigration issues that I have mentioned before. So group revenue basically reached the same level as last year, around EUR 1.7 billion, especially driven by this large -- by execution of these large Pulp & Paper orders. The sales generation and continued cost discipline led to a strong development of our operating result, EBITA and corresponding profitability. Liquidity position continues to be good, solid. Net working capital has -- was certainly impacted to a certain degree by the progress of our large POC projects, leading to a reduction of POC payables and an increase in work in progress as well as advance payments to our suppliers, but everything in line with regular project development. Nevertheless, both net working capital as well as cash flow from operations have been basically in the same level as Q3 of last year. So far, my general comments, we can now take you through the presentation starting on Page 3. And as mentioned, group order intake, EUR 1.7 billion. Pulp & Paper is down compared to last year's quarter, but from a very, very strong Q3 2019. Metals declined due to metals processing. Metals Forming year-on-year is up. Hydro is significantly up due to some large orders, which we finally obtained. And Separation slightly increased also. Revenue, same number, EUR 1.7 billion. Strong increase in Pulp & Paper due to order backlog execution, and decline in the other business areas. EBITA at EUR 104 million after having provided for restructuring costs to the extent of EUR 26 million, as I said before, I think the result of good and early cost containment. EBITA margin adjusted for these provisions at 7.8%, and the reported EBITA margin is 6.2%. On Slide 5, now starting with details. Order intake, down 18% but still with EUR 1.7 billion at a very good level, 4 x 1.7 is 6.8. So that certainly is a very good order intake for us. And the EUR 2.1 billion of Q3 2019 were definitely a big quarterly peak. If you look to the middle, you see Hydro up from EUR 343 million in Q3 2019 to EUR 469 million in last -- in this year's Q3. Overall, a good order intake. And on the right side, you'll see that the year-to-date numbers, first 3 quarters, down from EUR 5.8 billion to EUR 4.7 billion. But again, the EUR 4.7 billion is a good level for our business where we are. On Slide 6, you see the quarterly development. On the right side, perfect balance between developed markets and emerging markets, 50/50. Overall, very stable with certain fluctuations typically between South America -- between Americas -- South America and China. Here, China is on the higher side and South America is on the -- not really lower side, but not as high as it has been last year due to this large pulp project. On the lower left are some orders to reference. We've got pump storage hydropower plant in India; got major turbine refurbishment order from Canada; press lines, as I said, from electric vehicle manufacturers. By the way, also battery lines, cell housings for batteries for electric vehicle manufacturers or their battery suppliers. So flue gas treatment system for waste management facility in Singapore. You remember that we are executing the largest wastewater treatment plant in Shanghai currently. And also got the first part of an order for railway wheel production, which is a joint project between the old Andritz Metals and Schuler. Slide 7, Revenues. Very stable on a quarterly basis and slightly up but basically stable on a year-to-date basis. I think nothing else especially to be managed -- to be mentioned here. Maybe, yes; it's, I would say, slightly surprising to us that capital has held up very nicely in revenues. Obviously, order intake has been affected by COVID. Service was affected somewhat in the range of roughly 10% due to limitations of access to mills to do refurbishments and also due to lower utilization rates of the mills of our customers, lower need for consumables that resulted in slightly lower service revenues. We see on the next page, Slide 8, that If you look -- if you compare Q1 '19 with Q1 '20, so that was basically stable. And then Q2 and Q3 were both above 10% -- below, sorry, below the corresponding orders of 2019. Overall, that led to reduction of the share of our service sales from 40% of total sales to 36%. In absolute numbers, a slight decline in service sales. On Slide 9, you see that this basically is true for Pulp & Paper where the service share went down from 50% down to 40% because it was basically for developments which had the same effect of reducing the share of service, so one is the substantial increase in revenues for our capital business. And the other one, as I said, was a slight decline in service revenues for the Service business. For the other business areas, basically has been a very stable ratio. Slide 10. Order backlog picture is, I think, slightly now declining, obviously, from this big order intake that we had in 2019. But with EUR 7.3 billion still a very good and comfortable order backlog. Slide 11, Profitability and EBITA. So before restructuring expenses which went up from EUR 102 million to EUR 130 million or from 6% to 7.8%. Obviously, we like what we see here, very good development. The reported EBITA obviously is heavily impacted by substantially different restructuring expenses. We booked EUR 95 million in Q3 2019 whereas we booked only EUR 26 million in Q3 2020, so that the reporting EBITA obviously is much improved. But as I said, I think the more relevant comparison is before these restructuring expenses. You'll see the breakdown on the right side, so approximately 60% of this EUR 26 million went into the Metals business area, but also Hydro incurred some sizable restructuring expenses. On Slide 12, same picture for the first 3 quarters. Here, again, the EBIT margin went up from -- before restructuring expenses from 6% to 6.5%. We brought it from 3.9% to 5.8%, but still there is a sizable difference in restructuring expenses. In the first 3 quarters, we have booked about EUR 35 million of restructuring expenses. And you probably will ask what do we expect for the fourth quarter. And it will be, I would say the EUR 35 billion probably are a little bit less than half of the full restructuring expenses that we will book in -- that we plan to book in 2020. Obviously, it depends not only on what we want to do, but also on what we can agree with workers representatives, unions, et cetera, who are in a binding way so that we can book this provision for the restructuring expenses. Yes, from that, on 13, you see the breakdown of profitability and then EBITA between the business areas. Pulp & Paper, Q3 were 10.2%, very good profitability, in spite of the higher share of capital. Keep in mind that this went down from 50% to 40%, which obviously has just the diluting effect on the overall profitability. First 3 quarters, 9.6%, to 9.4% after restructuring. Metals still struggling. Still in the first 3 quarters slightly negative before or, let's say, a red breakeven, I would say, before restructuring events. Q3 already somewhat better. We hope that we can stabilize this level to a certain extent before we hopefully see the effect of the restructuring expenses. Hydro, the 5.8% is better than year-to-date 5.3%, but obviously not exactly where we want it to be. For the balance of the year, we expect probably a further slight improvement of this margin. Separation is doing well. Excellent quarter and excellent profitability for the year-to-date [ 9 ] period. I now hand over to Norbert Nettesheim, our CFO, who will take you through the next several charts.

Yes, good morning also from my side. Let's start with Chart 14, which shows the bridge from the operating results to the net income. Start with an EBITA of EUR 278 million, which you have heard already. This is compared to last year a significant increase, but mostly coming out of the reduced nonrecurring and nonoperating topics. Going to the left, the depreciation is lower than in the last year, only EUR 126 million, which gives us a very good development in EBITDA which is more than EUR 80 million above previous year's number. To the right, nothing really exciting to be reported. The regular depreciation is of about EUR 55 million compared to EUR 60 million last year, slightly increased but due to the regular effects which we have in this position. Then we have this year a small position in the first 3 quarters on impairment of goodwill. This is a small foreign operation which we have value adjusted simply due to the expectations for the cash flow of the next years in this operation. Gives us an EBIT of EUR 218 million, which is significantly better than last year. We had EUR 93 million last year after Q3. Financial results slightly improved also by about EUR 7 million. And taxes with a constant value of 30% simply calculated on the EBIT, which leads then at the end to this EUR 134 million of net income, which is compared to EUR 40 million in the last year, also significantly increased. Next page is the bridge from the net income to the operating cash flow, it's EUR 134 million net income at the very left, you have seen and I have explained. And then we adjust the noncash relevant elements in the P&L, which is not very exciting positions. And mostly in the range as our position in the last year. Then we come to cash flow. Gross cash flow of EUR 446 million, which is EUR 80 million higher than in the last year, simply driven by the better net income which we report. And from this gross cash flow, we have, unfortunately, this year in the first 3 quarters consumption of cash by increase of our net working capital. Here in the last year, we had just the other way around, EUR 153 million tailwind by the reduction of working capital. This year we have EUR 108 million front-winds from the increase of working capital. But as you know, our business is highly driven by this huge capital project. And the net working capital position is fluctuating very much depending on down payments, which we receive mostly shortly after receiving major orders, and then later on from the consumption of this cash in the regular order execution. So cash quarter-to-quarter we see some fluctuations. Overall, for the total year, we don't expect very much impact from change in working capital. So our net working capital target is still at about EUR 600 million and as we had at the end of last year. So here, I can, let's say, give a short outlook that we are happily working on keeping this turned in the next quarter. So the rest of the positions are also regular positions of interest and not very much changed to the previous year. [ Interest paid ] is a bit lower in the current year, which gives us a favorable and comfortable cash position of EUR 255 million also in the first 3 quarters of the current year. This then leads to Page 16 to still a favorable financial position, EUR 254 million net liquidity. Out of EUR 1.5 billion gross liquidity and EUR 1.3 billion gross debts. Here we had some payments of some repayments off of that, but also some currency effects, which were not the same on both sides of the balance sheet. So overall, this EUR 9 million increase of net liquidity is influenced by EUR 80 million of unfavorable cash developments. Otherwise, we could show here a much better number, which would be much nearer to the cash flow development, which we showed you before. But overall, we feel very well with the EUR 254 million net liquidity, which we still have in our hands. And here also the projection is that it will increase to the end of the year. So with regards to the grand overview, I quickly can summarize on Page 17, very satisfying order entry compared to the recession and the whole situation. Here we are in solid backlog. The revenues significantly improved. EBITA improved. EBITA before adjusted adjustments, which gives us an also very favorable development in net income this side of the P&L. With regard to the cash situation, also satisfying total situation with a very stable total working capital. So far those were the financial numbers. I turn back to Dr. Leitner.

Thank you so much, Norbert. Yes, continue on Page 19, briefly take you through the business areas. Pulp & Paper, I think everything going well. Good profitability. EBITA margin, 10.2% in Q3, 9.6% for the first 3 quarters, up from -- still up from last year. Yes, we continue to do some business on COVID also with the mask production lines that we are selling. I think 21, or I think a few more in the meantime, have been sold already, which shows how fast we can act and which is also a good opportunity for this Italian company, Diatec, that we had acquired a few years ago, which has developed the Smartclient to establish new relationships with global top providers of diapers also that -- where we hope to expand also the regular product line. So I think overall the field of nonwoven is booming. We will exceed definitely. We'll probably make 450 million order intake just for the nonwoven division, which includes this mask product lines also. So a very good development. On Slide 20, Metals. Obviously, our continuous -- continuing challenge. We are doing a very substantial restructuring on the Schuler side. We need to adjust to lower volume and we need to reduce our presence in Germany to be more cost competitive. I think the highlight is that the EBITA margin before restructuring measures or costs is with 2% positive in Q3. It's slightly negative for the year-to-date number. We expect it to be slightly negative for the full year, but very little only. And I think looking forward, we will -- we are facing the challenge that certain onetime cost reduction effects in 2020 will expire or will not be available next year. Others continue to be available in Germany, for example. So we are concentrating on making all the temporary effects to make them permanent going into the next years. And that's the main goal currently that we are pursuing. You see the declining number of employees, obviously, yes. I think that's it. On Hydro, yes, we are executing some orders with a somewhat lower gross margin. Therefore, we see a slightly lower profitability than we usually see. Q3 showed some upswing already with the 5.8%, Q1 to Q3 5.3. 5.3% is certainly not satisfactory. We are recently optimistic that we can continue with this upward trend in Q4 so that the full year profitability should be somewhat, not dramatically, but somewhat better than what is shown here. Good order intake with this we have said. I hesitate to say that, but I continue to say it, some large orders are still to be expected. Obviously, a little bit more complicated because of COVID. Also because of some political issues in some countries where these projects would be realized. But we are -- we continue to be confident that some large orders are around in the next 1 to 3 quarters. Slide 22. Separation, good development, very good profitability. Slow organic growth, but definitely certain growth. And yes, stable business. It's many different segments, as you'll probably remember. High service share. So it's our smallest business area, but it's above average profitability and therefore -- and we see good growth opportunities, organic, inorganic. So we definitely are happy with this, provided this trend in performance continues. And then the outlook by business area, on Slide 24. Pulp & Paper, reasonably good project activity. Obviously, we had another 2 years of very high order intake. That certainly will not last forever, but it's a mixture of various projects so that we still are -- continue to be optimistic, including this high activity in non-volume business. Metals Forming slightly improved. Remains to be seen how it develops. I think the ones in the field that are following the automotive industry, you have seen that the guidance has been improved by the main German suppliers at least, OEMs substantially. So they had obviously a very good third quarter. Whether that was dominated by catch-up for the last second quarter or whether that is sustainable trend remains to be seen. And in my meetings with the automotive people, I think it's dominated by uncertainty, hoping that this is now stabilizing, but still a certain level of skepticism also. And we just need to see [ it ] again with our very good presence in e-mobility. We would -- as long as cars are purchased, I think we should be in a reasonably good shape. Metals Processing also obviously suffers from this slump in the steel industry and also the stainless steel industry. So it's a low level of projects as a consequence of very high price pressure. So that certainly we will have to expect a few more slow and difficult quarters. Hydro, overall reasonably good environment. Hydropower is currently fighting to make sure that European Union does not see this as a transition technology but as a sustainable technology but the Greens obviously are split. Apparently the split of the Greens for wind power is slightly smaller than the split of the Green parties regarding the hydropower, so they are more skeptical there. But on the other hand, there are many projects in Asia, for example, that we expect to be -- to proceed in spite of the globally reduced electricity consumption due to COVID. Clearly, that is not a short term, it is not a favorable factor in demand. Separation, good project activity and both for the separation equipment but also for feed production equipment. To conclude, outlook on Slide 26. What is our agenda? As I've said several times today already, secure the appropriate cost structure for 2021. We want to be conservative in this regard. And obviously within this task, which really applies to all 4 business areas within that, obviously the focus is on Metals Forming and to a much lesser extent on Hydro where we definitely need to improve our profitability so that also our group profitability hopefully goes up again. What is our guidance? With margin guidance we have slightly increased last week. We had to publish it. We apologize for that. But you were too pessimistic in your consensus. Michael Buchbauer got very concerned and convinced me that we need to go ahead and talk and publish the results. So the adjusted EBITA margin in 2020 we expect to be more or less unchanged compared to the adjusted EBITA margin in 2019, which was 6.8%. And the reported EBITA margin after extraordinary provisions for restructuring is expected to be stable or slightly higher compared to 2019, where the reported EBITA margin was 5.1%. And group revenue, we expect to be slightly lower compared to the EUR 6.67 billion. So that's my presentation report, and I look forward to your questions.

[Operator Instructions] The first question is from Sven Weier, UBS.

I have 3, and I maybe ask them one at a time. The first one relates to the Schuler restructuring and now we've had the second quarter where the EBIT outcome was somewhat better than expected, so no further setback. And you talked about near-term stabilization in this and then later on improvement towards the margin target. I just wanted to check in again with your confidence, the evidence you may have had that we now have reached kind of a more stable path also going forward. And that we should not expect any other setbacks as we've seen in the last couple of years. Also maybe when you look at the backlog of Schuler and Metals overall maybe, do you think that the lower margin contracts are now behind you so that you can really look forward? That's the first one.

Yes, obviously, easy question, difficult to answer. What are we doing? We are doing -- we are reducing or lowering the breakeven point of Schuler substantially. Having said that, and I think we -- currently, we think that it is low enough or we will be in our capacity by the end of next year when all the restructuring actions are really fully in place and are seen on the regular current quarters that we should have a reasonable level of -- low level of breakeven point. With Schuler's high market share for these larger automotive production lines, inevitably Schuler will always depend on the market. There's not enough room to say, okay, we hope to increase our market share; we have a better product now and because of that we think we can quickly increase our market share. Schuler has a very high market share and therefore for this automotive part, this top end of the automotive production lines depends on market. So to achieve an attractive profitability in the range of 5%, 6% plus requires certainly a certain uptick in the market -- upswing in the market. When will that come? I cannot -- I mean we all can speculate together, the same qualities or, as I said, third quarter has been good for the automotive industry; China is developing reasonably well. So yes, it could be that new investments are starting. But can I bet on it? No. So I hope that these disappointments, negative deviations and negative surprises, as we mentioned, that they are over. And that we are, I would say, breakeven, yes. We certainly hope that we can gradually step by step in small steps increase this from breakeven over the next 4 quarters. That's the plan. But I also don't want to promise too much on in confidence where we are with Schuler. What I can definitely say is that we are far ahead of our schedule with regard to restructuring, that we have a very good cooperation with worker representatives, with unions. Obviously, we are not the only ones that have to resize in Baden-Württemberg and therefore the public environment is favorable for this type of restructuring. And it's also obviously supported by the short workweek subsidies and support also by the German government. For the other part, Metals Processing, I mean in simple words, a similar thing applies, the same applies. Markets are very difficult. And we expect a low level of new projects as we go forward. We have increased our presence on the aftermarket side where we have had due to low utilization of certain steel mills and actually closures of certain steel mills, we had to adjust. There are also our capacities, so the profitability of the aftermarket service segment, metals processing has been lower than usual. That should change as we go into next year, and I would say, by the middle of next year. So I think there I would see some increase in profitability. If that would be followed by gradual increase in profitability by Schuler, I think we should have a good chance to see one or the other percentage points of higher profitability next year for the Metals business area as a whole.

And how do you feel about the quality of the order backlog? I mean because I think that was also an issue in the last years, right, that you had some lower quality, low-margin orders that had some setbacks for you. Did you feel that that has improved some?

It has not become worse, for sure. Has it dramatically improved? Dramatically, certainly not. Maybe slightly. I think in this metals processing part, we have been able to get rid of certain problems, risks. We are not fully through with others. Schuler, obviously the prices we achieved -- I mean Schuler, definitely with regards to the order intake as far we know, has done much, much better than their main competitors. One of the main competitors, as we know, has an order intake of minus 50, minus 5-0 percent. Obviously, this doesn't come by itself, but this comes if you offer low prices. And therefore the backlog certainly has low margins. The plan has always been we need to -- we can live to a certain extent with low margins provided they are not doubled by underabsorption in the respective locations. And on top of cutting off, I would say, or taken away under-absorption. So that we are taking care of. And clearly we -- just this week we had budget discussions and Schuler was yesterday. Obviously, we have said that we need to now try to be a little bit more resistant with regard to discounts compared to what we have been willing to offer, in last year, for example. We need to really be back to the old profitability. We do our homework, but we need to pick up in volume to be really profitable. And we need a few, let's say, somewhat better prices. Obviously, we are reducing the cost of our product at the same time. So that taken together should be -- should improve the quality of the backlog also.

And the second question ties into restructuring, but more on the Hydro side. I think here you are a little bit later than the Schuler. So I was just wondering how confident you are there in the negotiations with the workers council and -- yes, looking forward on that one.

Yes, we've published certain things already. We are yet to publish in Austria, for example. We do it in many -- in several different countries. We are simplifying the structure, also liquidating certain companies in countries where the level of business has been too small, way too small. So I think the better part should be on the way this year. Will we be fully done so the effects we should see before middle of next year? Are we fully done there? Not quite fully. I probably would think a little bit more can come, but nothing dramatic. And obviously, I mean, hydro has never been close to the low profitability that Schuler has been. So it's more a question of fine-tuning and optimizing and adjusting to a somewhat lower volume. I think we lag a little bit and had lagged a little bit behind in adjusting to the lower volume.

I mean I know it's a little bit too early to look forward to 2021 and the margin outlook. I trust you provide that in March. But if I summarize what you've just said on Schuler and hydro, I guess you have some little tailwind from restructuring next year. I guess the mix-wise, and this year you actually had the headwind, as you said, from the equipment side and in the mix. But I guess service should catch up next year. The backlog quality is a little bit better. So sounds like we could expect some further margin improvement in next year overall for the group. Is that a fair statement?

Yes, I would say. I would hope for, let's be specific, for Metals and for Hydro. I would -- for metals, I definitely would hope to see, what am I going to say, 1 point, 2 points more, for sure. And for Hydro, hopefully, 1 point more or something like that. But these are now -- this is really nothing you should count on. I mean obviously we cannot -- we are not planning to stay as we are. So obviously we have plans. Obviously, we can only -- the results can only be positive if we get the support from the market, that COVID at some point is stabilizing, because really we have limitations to access the mills to do service work, to do refurbishments obviously. Also the development of the early phases of projects suffer from the lack of being able to travel to both ways. Nobody can come from Asia and we cannot go to Asia unless we spend 2 weeks somewhere before and so on. So that obviously still are headwinds. But in spite of that, our goals are to be -- to improve profitability, yes.

And my final question is on cash and cash conversion. I mean last year, I think you introduced that also, the specific incentive for your management level. And as far as I can see, at least in the underlying working capital, you've already seen some improvement compared to the past. I was just wondering how you look at further improvement potential here. Maybe also with the view to incentivation of management, maybe also next year, do you see there a further steady improvement potential on the working capital side?

I think what we can do is and what we are doing is incentivizing the management with regard to things they can influence. On the other hand, the cash or the cash flow is, in our case, so dependent on the aggregate of cash flow on large projects. And therefore it depends on down payments and exactly when are the progress payments and so on. I think we are doing -- making good progress on our payables. We are managing our inventory. Also, I think, reasonably good on receivables. Down payments is difficult to forecast because it really depends on when the orders are coming to force. If we continue to get a reasonable amount of larger orders in a reasonably stable timeframe, then I think it should stay at least the same. Whether we can further improve it is questionable, I would say. It's possible, but I mean we have to live with certain volatility in this regard for sure.

Yes, absolutely. That's why I was more referring to the, let's say, the working capital outside the, let's say, project working capital that is more influenced by the down payment.

Yes. I mean, no change with regard to the execution. I mean typically if -- in the beginning of a large project, of a large order, we are cash positive than for, let's say, 2 quarters in the middle of the execution period we are negative and then we hopefully get positive towards the end where the costs are. So it really depends on the mix of large projects. Now we had -- as you remember, we had high order intake recently that obviously had some effect on the net cash flow of this individual projects and overall also. If Hydro continues to get some larger orders and if Pulp & Paper gets one or the other, of these large orders, then we should probably be stable, maybe slightly better, but not dramatically.

The next question is from Daniel Lion, Erste Group.

I would like to start with the Pulp & Paper and Services business. In terms of the recent development, we've seen that services is, of course, hampered by travel restrictions. Would you expect this to become worse? And going forward, would there be a pent-up demand that would maybe in the short-term increase services business once the travel restrictions are eased sometime hopefully next year?

Yes. I mean clearly, what we have seen is that the shutdowns of pulp mills, which is quite a sizable part of our aftermarket business in Pulp & Paper, these shutdowns have been postponed where they could be postponed. But you can only postpone them by 3 to 6 months basically. We have made -- in March we have made certain assumptions, and in simple words it was that Q2 and Q3 will be variable with regard to new orders and also with regards to what we can do on the revenue side, on the service side. We had the assumption that Q4 will be substantially better. Do we still have that? Not really, I would say. I think Q4 will remain quite quiet most likely; let's see. But then Q1, these shutdowns have to come. But this will -- because of that, the following shutdown then will also be postponed by 3 months or 6 months. So it's not really -- it's like in tourism. People would probably have left -- would have lost 1 quarter of shutdowns, in simple words. Obviously, that's not the [ major ] part of the aftermarket business, but it's a sizable part. Other than that, I think it's -- we have seen effect of the lower utilization rates, lower production of our customers that we think this will go down further. I think it may stabilize on this level but at some point it should go up again.

Would you have the capacity to oversupply services once it's possible again?

Good question. To a certain extent, yes, but not indefinite, not without any limit, yes.

Okay. And then coming to the automotive business, can you give us an overview of the market activity based on regions currently?

Yes. Europe is 40%; North America, roughly 25%; China probably 30%. And what's missing [indiscernible].

And do you see the order intake dynamics to be, in the meantime, spreads rather evenly? Or is it rather a Chinese or Asian topic at the moment?

No, it's Europe and U.S., as I said, I mean 3/4 of the order intake come from Europe and North America for Metals.

Very good. Then one short one on the Separation. How sustainable would you see the recent margin development, 10%? Is this the new reality? Or is this just because larger projects were finalized?

I would prefer if you take as a basis for your question, whether it's sustainable or not, the 3 quarter profitability that it had been was 8.4%. I think that's certainly sustainable. I would not -- at the 10% I would not take yet, but the goal is yes to go after that. There are no onetime effects or anything where we said, okay, we have to warn you that Separation will go back to a much lower level. That's not the case.

And last one, rather strategic one. Hydro-gen is a business area that you can think of expanding to, to diversify further?

Yes, which product would you have in mind for us?

I don't know. I haven't reflected on a specific product, but we're seeing the investments are increasing, of course.

Yes, we are -- I would say we have with an eye on related technologies, whether that's carbon capture and storage or sequestration in power plants, whether it's conversion of CO2 into methane, whether it's biomass into methane, all that. We have an eye on. We are following the hydro-gen part because obviously, it's -- you could also say surplus electricity could use to produce hydro-gen, So that's something that our Hydro division is looking into. But it is more, as I said, having an eye on developments. We certainly do not have a business plan what -- how we could benefit from that. For that, it's a little bit early for us.

And the next question is from Sebastian Growe, Commerzbank.

The first one would be around the Metals division. And when looking at the year-to-date staff reduction, it's down about 750 heads. The earlier reduction size was about 500 at Schuler. Can you give us a sense of how it breaks down between the Processing and the Forming business for the year so far? Where you would see the headcount trending by the year-end or early fiscal '21? That would be the first question.

I would not want to be as specific with the personnel numbers. The vast, vast majority of the restructure, downsizing and employees is in Forming and not in Processing. Processing a little bit, but not dramatic. And we are definitely not -- we are ahead of where we want to be in terms of reduction and substantially more should be seen until the end of next year. More should be seen in the first part of next year and then to a lesser extent over the following quarters. As we have always published, that it will be done by the end of 2021 with a very small part left for, I think, H1 '22.