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] I will now hand you over to Wolfgang Leitner, who will lead you through this conference. Please go ahead.

Thank you very much. Good morning, everybody. Welcome to our conference call for the full year results of 2020. I hope you and your families have come safely and healthily through last year, through the year of COVID, and I guess we all are optimistic to see the development on the vaccination side, so hopefully that global economy can gradually come back to something similar to normal, probably not yet fully normal. Before I start the presentation, which I think has been distributed to you, let me give you a quick summary of what -- how we see the year 2020. Overall, I think we have managed this difficult year reasonably well. Why do we think that? Number one, we -- and this sounds a little bit odd, I know, but that's been important, we started very early to purchase masks, hundreds of thousands, or I think, millions of masks, which allowed us to distribute them to all our production facilities globally and allowed us during the weeks and months where masks have encountered bottleneck to really continue to operate production sites across the globe, including Northern Italy. Obviously, being a supplier to the global tissue industry helped to be categorized as a critical supplier for the national -- in this case, national economies. What we did then was to agree on certain assumptions with regards to what do we have to expect from, let's say, starting in March of last year for the next few quarters. And with these assumptions, we made 2 decisions. Number one, to obviously take advantage of all the temporary support subsidies, short work weeks, et cetera, in a very decisive way, but at the same time, decide that we have to assume that this will not be enough that we have to basically make these temporary cost reliefs permanent. And the goal has been to make them permanent to a very large extent by the end of 2020, which you find reflected in our nonoperating expenses. All that would not have been possible without the commitment of our employees that really were extremely engaged. They were holding out in the construction sites under obviously quite difficult circumstances in difficult countries with not world standard health systems. They were willing to continue production, et cetera. So all that together, I think, enabled us to show reasonable results for 2020 now when we present the annual results. If we move on to the order intake, EUR 6.1 billion compared to EUR 7.3 billion in 2019, sounds like quite low. Order intake, it is low. But please do not forget that 2019, the EUR 7.3 billion has been extremely high order intake. So if we would have to allocate this reduction in order intake, I would split it in half. Half is all to the fact that 2019 was exceptionally high and the other half clearly is reflecting the somewhat lower economic activity due to COVID. Most heavily affected, obviously, were the 2 Metals business area -- or partial business areas. One part was suffering from the slump in the steel industry and the other part was suffering from the slump in the automotive industry. But also Pulp & Paper has been affected with regards to the order intake, but again compared to a very large -- very high order intake in 2019. A little bit to our surprise was the extent of reduction in business activity in the Service and aftermarket, especially in Pulp & Paper. What happened was that the annual or 18-month maintenance shutdowns have been postponed because customers wanted to avoid that 300, 400 people would enter the mill to perform these shutdown works. And all that resulted also in a certain reduction in order intake in the Service and aftermarket business. Revenue side obviously was supported by the backlog we had, the execution of these large capital orders, thanks to the high order intake in 2019. So basically, with the EUR 6.7 billion revenues, we succeeded in keeping it flat, heavily supported by this large Pulp & Paper orders under execution. Moving on to the profitability. Thanks to this cost containment cost reductions, our EBITA developed quite favorably, I would say. We -- it included still quite substantial nonoperating expenses predominantly for Metals Forming and for Hydro. If we adjust for these one-off items, profitability of the group would have been 7% EBITA, slightly above even 2019. So a solid figure in a not-so-easy year 2020. Obviously, we are aiming for further improvement during the current year. A few other comments. Liquidity position still is quite good. Net working capital developed negatively owing to the progress of this larger POC Pulp & Paper projects which resulted in the reduction of POC payables and an increase in work in progress, as well as advanced payments to suppliers. Free cash flow, nevertheless, developed positively. And taken all that together and our view on what we have to expect in 2021, made us propose a dividend payment of EUR 1 per share for the business year 2020, which is roughly a 50% payout. So we are staying within our 50% to 60% payout guidance. So far my introductory comments. If you allow me, then, I would move on to the more detailed numbers for 2020. On Slide 3, you see the summary. Again quickly through, revenue increased to the record high of EUR 6.7 billion. Now the increase compared to the record year 2019 admittedly was very small. But again, it's a record high revenue year of EUR 6.7 billion. EBITA, about EUR 390 million owing, to a large extent, the cost containment, cost reductions. Capacity adjustments costing us EUR 79 million that we think, and we are convinced, is well invested. We can afford it -- we could afford it and I think that brings us in good shape -- in great shape to hopefully benefit from a pickup in the global economy. Obviously, mostly Schuler and Hydro were the areas where we spent this money -- restructuring money. Profitability EBITA margin is up to 5.8% from 5.1%. Adjusted for these extraordinary items reached 7% after 5.8% in 2019. Group order intake, EUR 6.1 billion, down substantially. But again, not as much down compared to a regular business year as it may appear looking at pure number. For the backlog, EUR 6.8 billion, somewhat lower, but still a very good record for 2021. On Slide 5, now the revenue figures, EUR 6.67 billion to EUR 6.7 billion. You see it's carried by Pulp & Paper with plus 16%. And the other 3 business areas are down between minus 13% and minus 8%. I think at the bottom, the pie chart is quite interesting. Service is down from 40% to 36%. Capital is correspondingly up. This 4 percentage points decline in Service, again, could be split half-half, 1/2 owed to the substantial increase in Capital revenues because, obviously, they are fed by the backlog, and therefore, not hit immediately by a slump in the economy as service and repair business is impacted. And the other half of this decline results from lower service and maintenance revenue level. On Slide 6, you see the Service business. If we look at the last 4 quarters on the upper row, you see that the first quarter with EUR 576 million revenue compared reasonably with the EUR 587 million in Q1 2019. Then Q2 and Q3 were quite low, EUR 580 million, EUR 590 million compared to EUR 650 million, EUR 670 million in the year before. Q4 showed some increased activity, EUR 690 million, but still below the EUR 750 million, EUR 760 million in Q4 2019. So overall, Service on the lower left side, you see revenues from EUR 2.67 billion to EUR 2.44 billion and that the share of Service business, as I've said before, on the right side, 40% down to 36%. Slide 7, ratio of Service business by business area. The biggest decline in Pulp & Paper obvious because, there, the revenues went up very substantially due to these large projects. Therefore, the relative weight of Service went down plus the shutdown business, which definitely has been postponed, delayed, extended due to COVID. Part of that will be caught up, hopefully, in the first half of this year. Smaller part probably will be lost that people just say they wait a little bit more and then make the next regular shutdown, taking some risk obviously. Yes, I think the rest is not particularly dramatic with regard to the changes that you see. On Slide 8, you see this EBITA development once after the extraordinary expenses than before. So the reported EBITA margin went up from 5.1% to 5.8% in the blue bars of the left side. And the adjusted is 6.8% to 7% or EUR 456 million to EUR 471 million, yes. On the next slide, 9, you see that by business areas. Again, after extraordinary expenses and before, Pulp & Paper still in very good shape, 9.9% or 9.7%, respectively. Metals heavily impacted by restructuring costs in both 2019 and 2020. On an operating level, slightly negative, 0.8%, basically coming from Schuler. I would say it is an honest sign -- or an honest description of the profitability. We were not squeezing the income statement to show a positive result. I would say it's a mid-level between conservative and aggressive and maybe slightly on the conservative side. Hydro, sizable restructuring expenses. Excluding this, the 7%, are a little bit below our expectations. As you know, they are a little bit higher, but still they are, I think, good profitability. We need to keep in mind that on the Hydro side, the profitability of ANDRITZ compares very favorably to the profitability of our 2 main competitors in this field, which obviously [ lifts ] also a certain, I would say, a complication to improve profitability substantially. Separation shows a very good development, up from 6.6% before NOI to 9.4%. So very good profitability improvement over the last 3, 4 years. This leads us to some modified guidances or goals, margin goals on Page 10. In Pulp & Paper, we increased our 9% to 10% goal to 10% to 11% EBITA profitability. We maintain our Hydro guidance at 7% to 8.5%. We maintain our Metals guide, a long-term goal of 6% to 7%. It will take -- it will not be this year and maybe not even next year, but let's see. I'm not going to give any guidance for next year. But clearly, the expectation is that we see here somewhat [ positive ] number in 2021, not dramatic, but -- sorry. And Separation with 9.4% pre NOI already achieved. Obviously, 7% to 8% is not a meaningful long-term growth. So we increased it to 8.9%. Could it be more? Let's see how 2021 goes, and yes, it could be more. It would be great to have double digits there, but I think we need to take the stairs one by one and not get too excited about this improved performance. On Slide 11, you see the order intake minus 16%. As I've said, rough estimate, minus 8% because of high base year and minus 8% owing to COVID. If you look at the business areas. Pulp & Paper is minus 18%. Metals heavily impacted because of steel industry and automotive industry. And hydro, minus 1%, looks good. But basically, it's another year with a quite low order intake and I'm cautious to say it will improve. But we -- yes, we think it will improve, but we have decided to wait until I can show the real numbers rather than giving indications. At the bottom of the page, on the right side, maybe interesting, China. China accounts for 16%, up from 11%. As you all will probably see in many other industries, China has recovered extremely quickly. China is, I would say, is booming now. We see a lot of activities, project activities. Many projects -- many expansion projects proceeding. That certainly will be an important factor in the recovery of the global economy in 2021. On Page 12, what we've seen before, basically enough for the order intake. So you see it, again, was a good order intake in Q1 at EUR 1.85 billion. Total [ slump ] in Q2. Surprisingly good in Q3, but again, relatively low in Q4. And the split between Capital and Service, much more stable on the revenue side that we have seen before. On Slide 13, order backlog. Nothing really to report. I think what is -- the revenues that are supported by the share of the revenues, 2021 that are supported by the backlog as of end of 2020, it's a typical ratio of the previous years. So we are -- with regard to our sales expectations for next year, we are, I would say, basically relying on typical developments from the previous years. On Slide 14, you see the EBITA net income bridge. And for the next few slides, I hand over to Norbert Nettesheim, our CFO, to lead you through this source of change analysis. Norbert, can you take over?

Yes, thank you very much. Welcome to everybody who's in the call. Coming to the group's P&L statement, quickly leading you through the numbers. The EUR 392 million EBITA, you have already heard from Wolfgang with the EUR 180 million depreciation. We are coming to the EBITA (sic) [ EBITDA ] of the EUR 571 million, which is EUR 35 million, better than last year's. The depreciation includes EUR 11 million, let's say, extraordinary topics, which we adjusted also here, assets mostly in Metals business, little bit in Hydro according to the restructuring topics, which you are aware of already. Then the regular amortization of EUR 72 million. Also this number includes a slight extraordinary topic also out of Metals in the range of EUR 10 million. Here we will see next year, EUR 58 million out of regular depreciations and amortizations and hope that we don't need to do any extraordinary next year after we have now finalized our restructuring topics in these areas. The impairment of goodwill is a small topic in -- also in Metals. Same topic, as I mentioned before, cleaning up this business as far as we could. Leading then to an EBIT of EUR 315 million, which is EUR 50 million increase compared to last year's. Also, financial results improved mostly by cost of foreign exchange hedging, now EUR 34 million. Also reached a level, which is certainly a sustainable level for the future. EBITA (sic) [ EBT ] at EUR 280 million, 4.2% coming to the levels which we want to see more -- increase next year, certainly with a further increase of the operational numbers to be expected. Tax rate of 27.5% compared to 32.2% last year's. Also based on the program to utilize much better our losses carryforward by forming of tax groups. And we will hope that we can maintain the tax level on a rate between 26% and 27% in the next years. All effects in this year then accumulated to a significant increase of EUR 80 million. And our net income to a number of EUR 203 million, which is a 3% and a number which goes certainly into the direction which we want to see in the long term, 3% plus of the expected operational improvements, which we expect should then lead us to a number which is certainly above the 3%. Next page, cash flow. It's the cash flow as we reported in the external reporting. Nothing really exciting. Starting with the EUR 203.7 million net income, then adjusting all the noncash elements leading to a gross cash flow of EUR 675 million (sic) [ EUR 657 million ]. Also here, a significant improvement, EUR 60 million compared to last year's. So all good so far. Now comes first, let's say, a little bit of a negative message or that is a message, which goes into the other direction, which is a development in net working capital. Here, we have, after a significant improvement out of net working capital in the last year's improvement of cash, this year it's turning into the other direction. So we have a EUR 79 million increase in working capital, which is mostly driven simply by the timing sequence of these major orders in the Capital business. Last year, shortly before year-end, we received huge portions of down payment out of this a very large capital equipment project. This year, we are more or less in the execution phase with reduced order intake and reduced down payments on new orders. This leads to the normal development in plant and big projects business and caused this year a little bit of cash flow by increase of the net working capital. At the end, operating cash flow -- or cash flow from operating activities was EUR 461 million. Still a very solid number, very good cash conversion rate as far as I can see. The cash flow then transfers also into our net liquidity, which you see on Page 16. We could manage to improve it nearly by EUR 200 million, saying that this includes EUR 80 million foreign exchange rate effects from the change of exchange rates in the Brazilian real, the U.S. dollar and the Indian rupee, which brought our funds, which we have in these currencies down and transferred to euro. The whole effect is EUR 80 million. So it would be with the same exchange rate, EUR 500 million net liquidity, which gives us a very good basis for the next years and keeps us also flexible with regards to any urgent need of money or any opportunities on the acquisition side. Page 17, you also see the summary of all the financial numbers. I don't need to repeat them, most have been mentioned yet. Maybe if you add the 2 ones in these red squares, free cash flow, EUR 330 million is certainly something which should be pointed out, further strong development also with regard to the free cash flow. And as Wolfgang mentioned already before, you see it on Page 18. This gives us as well as from the profitability side, the equity side and the cash side, the opportunity to increase our dividend this year back to a level of 48% payout ratio, which we saw average -- at average in the past. EUR 1 per share is what we will propose to the general assembly in this year. So that's so far from my side, and I'm turning back to Wolfgang Leitner.

Norbert, thank you. Yes, moving on to the business areas. On Slide 20, Pulp & Paper. Yes, development has been very good. In spite of this, let's say, close to EUR 3 billion order intake, which still is a very high level and a very attractive level, profitability is very good. We have seen a fantastic development of the nonwoven business. We are there at the EUR 500 million level and order intake supported by our equipment to produce nonwoven fabrics, including even masks with our newly acquired -- or some 2 or 3 years ago acquired Diatec, subsidiary in Italy. More than 30 lines have been sold of this mask production line. Now we have also an FFP2 mask production line, which we are selling. Biomass boiler business in Japan, still growing very actively, very well. So yes, I think no concerns to report there. Profitability is good. I must say we are executing these very large orders, which are not only very large and not only have to be executed under COVID conditions in South America, but they also include technical challenges that we are confident we have analyzed, we have done everything to mitigate the risks. We are confident and optimistic we will achieve everything. We have made -- set up provisions for that, but this certainly will be a challenge for this year to get these large projects started up or beginning of 2022, depending on which project and how things develop in the next several months. So that will be the main challenge for Pulp & Paper to successfully start this huge pulp mills up. On Slide 21, Metals, continued weak business. Speaking of weak business and of Schuler, relatively low order intake. I think what is worth mentioning is that nearly 25% of Schuler's order intake in 2020 came from either battery-driven car production or battery production -- battery cell production where Schuler is very strong, has developed a very good technology, including the tools to produce these cells. So I think Schuler has been very successful to make this step from traditional cars to -- engine-driven cars to battery-driven cars. Obviously, profitability is far too low. And we are -- but we are confident that we have reduced the cost base, the break-even level very substantially. We are still in the process of seeing the effect of that. Vast majority of these very substantial personnel reductions will be in place by the end of this year with stronger first half and a smaller second half. So overall, Schuler will have reduced the workforce by about 1,200 employees and we are confident that, hopefully, is a basis for recovery of Schuler to the old levels of profitability within the next 2 or maximum 3 years, including this year. Slide 22, Hydro. As I said, order intake is somewhat disappointing, stable but low. Sales are correspondingly below 2019 because as a consequence of this lower order intake of the last several years. EBITA margin adjusted, 7%, okay. That could be higher, as I've said. 8% is -- 8%-plus is what we want to achieve. And some restructuring is in place or has been executed to reduce the cost base and prepare the basis for higher profitability on a lower sales level than seen in the past. On Slide 23, Separation. Affected by COVID, so order intake is down by 7%. As a consequence, revenue is down by 7% -- 8%. But profitability-wise, very good development. EBITA margin, 7.7% to 10.5%. And EBITA adjusted 6.6% to 9.4%. Very interesting businesses -- business segments from plant-based meat to wastewater treatment to baby foods to, you call it, very specialized segments. And we definitely see that as a business area now that it has been turned around, now that it is -- has achieved the profitability that we have been looking for to really look into both organic growth, but also one or the other, inorganic or M&A-based growth. I'm not announcing anything here or indicating that something will be announced in the next few months. But clearly, this business area is in good shape, is profitable. It's in very interesting markets from a profitability standpoint and from a risk profile standpoint, and therefore, we definitely want to expand -- or try to expand that business. And then to conclude on Slide 25, what do we expect from 2021. As I've said, order execution of this backlog of these large contracts still affected by COVID. Make sure that we can maintain a very good part of the lowered cost base that we have achieved in 2020 in 2021 and going forward. We clearly have seen that you can do a lot without traveling. We have saved more than EUR 50 million in travel costs, both in sales and in order execution. We have developed digital tools to take advantage of this -- not only these new tools, but also of our customers having also become used to digital communication, and hopefully, not seeing it as a lack of interest on our side if we don't fly somewhere to visit somebody, but invite for an MS Teams or other type of digital meeting. Obviously, any turnaround will depend on the turnaround of Metals, especially Metals Forming, and to a much lesser extent of Hydro. That's only a profitability improvement. And as I've said, digital channels, digitals tools definitely will play a more important part of our daily work. With regard to the market, I assume everybody agrees that nothing to expect on the first half of this year. I mean all the restrictions will prevail. And compared to last year, in many countries, many regions, we have higher -- very high infection levels. Hopefully, that will improve as vaccinations are gaining -- are penetrating the population in these countries and that hopefully should be seen in the second half of this year. China, as I have said, is already very active and has been last year already. Service, we are optimistic that service will be back. We do not expect that it will continue at the low level of last year. We see larger projects, both in Pulp & Paper and in Hydro, actually also in the Metal side. I mean you probably have noticed we have record steel prices. Who would have thought that? That hopefully should lead to certain limited investments on the steel business side and -- yes. And then on Metals Forming, as I've said this, electric cars, battery-driven cars, certainly should continue to offer some attractive business opportunities. And on the last page, 26, outlook and guidance. We expect group revenues to be somewhat lower than 2020, not dramatically, but single-digit percentage, for sure, but somewhat lower. We expect an increase in reported EBITA compared to 2020, the EUR 392 million. And we expect, depending obviously on the revenue development, how it really works -- turns out that the adjusted EBITA, in spite of the somewhat lower revenue level, should be stable compared to 2020, which would be in the range of EUR 470 million which would basically result in an EBITA profitability in the range of 7.5% if you're demanding on which stage you pick for that. So clearly, we hope for some slightly improved profitability, but we also expect a slightly lower revenue level as of now. Currently, we are not planning any substantial restructuring measures. But as I've said several times in previous meetings, if and when we see an opportunity that we can restructure with a good payback, we will do it. And the time is perfect now. We have done many things, which would have been very difficult under different circumstances. And as I said, depending on how the economy develops, depending on how our businesses, our companies develop, if there are opportunities to make some further optimizations, we definitely would do it. But as of now, we would not expect anything substantial. So much my summary of 2020, and I look forward together with Norbert and Michael Buchbauer, to your questions.

[Operator Instructions] The first question we've received is from Sven Weier, UBS.

The first ones are on the 2021 outlook that you've just provided, and there specifically, I mean, you said H1 likely stable and then post-COVID-19, you would clearly see some activity there. So I mean if everything goes as expected on the vaccinations, I would assume that post-COVID then refers to the second half. That would be the first question.

Yes. In principle, yes.

Okay. Got you. And then the second one on the 2021 outlook, I mean you just said sales will be down slightly. So if I take your comment with the 7.5% margin, it sounds like down maybe around about 5%. I was just wondering in terms of the flat adjusted EBIT, right, yes, you have some headwind maybe from lower top line, but on the other hand, you should have savings at Schuler already. You expect the Service business to recover, which should be high margin. So is it the flat EBIT more to be also a bit cautious and mindful about maybe some challenges on the Pulp execution and lower temporary cost savings compared to last year, is that the reason behind it?

Yes. I think definitely. I mean the challenge last year, we had windfall advantages, which, to a very small extent, would still be in place in 2021, for example, short work weeks in Germany. But that's more or less the exception, not much more we can count on. Obviously, we have reduced workforce quite substantially on a permanent basis. But will that be sufficient to fully compensate this disappearing onetime effects like travel, for example. I mean, let's not forget and let's be realistic, we have hundreds of salespeople who just wait for the airport to open to rush to the airport and fly somewhere because that's how they have lived for many years, and to a certain extent, we need that. But to a certain extent, we definitely want to change certain things. And all that, I think I would not want to bet the farm on things that are under development, I would say. And again, it's I think it's very difficult to really anticipate how the world will be in summer after, let's say, substantial part of vaccinations in the developed world have been executed or done. I mean people are saying as long as the world is not vaccinated, there will be enough complications continuing. So I think it's too early. I mean when I said -- what we did in March of last year, I think we made many good assumptions. But the one assumption that was not correct was that we thought Q4 2020 will be very quick, very fast on the way back to normal, which definitely was not the case. It was not -- I mean the companies had adjusted to the circumstances. So not all business had disappeared, by far not. But are we back up and normal -- were we back into normal in Q4, definitely not. And are we back to normal now, definitely not. So I think we need to continue to be on the cautious side. I think it's a balanced guidance, I would say. It's not overly conservative, it's not overly aggressive. It's, I think, as good as we see today and as we feel comfortable to share it with you.

Yes. I mean that makes sense and I guess you could still update them later this year. The other 2 follow-ups I had was on the midterm outlook. So appreciate the upgrade here. Was just wondering on the Pulp & Paper side, as we all know, Valmet has a 10% to 12% target. I was just curious, I mean, I think I understand your approach more that you take one step at a time and don't make -- or provide too big ranges. But how do you think about the possibility reaching up to 12% margin in Pulp business in the long term? So should we take your approach, really we make 1 step up now and then think about that later? Or how should we look at that?

First of all, I will pass on your question to my 2 colleagues on the Executive Board who are responsible for Pulp & Paper. I am asking them the same question. I think we also have -- we need to stay realistic. I mean, this is a business even if it's 50% Capital and 50% Service as it used to be when the Capital was not that high as it was in 2020. For such a business to be sustainably double digit even if it's only 10% or 11% is already quite a big achievement. It's realistic to say we want to have sustainably 12%. I don't know. But obviously, if Valmet achieves that, for sure, we will try to achieve that, yes.

Understood. And then the other question I had on the midterm guidance is if I take the midpoint of your margin targets for the divisions, right, and apply them to last year's revenues, I mean, I get to a group margin of around about 9%. And that would be 9.5% at the high end, 8.5% at the low end. But I understand your group margin target is still roughly 8%. So how should I look at that, the assumptions behind that?

I would -- either Michael can answer the question. I have not done these maths and consequences. We are more concentrating on really getting the 4 business areas to the levels that we have indicated. And whatever the result of that is -- and obviously, a lot depends on Metals. I mean this is the challenge. I am confident that we are -- we have sized it to a break-even level unless the automotive industry again stops buying anything or something like that. But under reasonably normal circumstances, it definitely -- we should have -- we should break even under the given -- under this current volume. So with some increase in volume, we should be more profitable. And also, we are still working on making it, even at this level, somewhat more profitable. But to bring it up to 7%, 8% is a challenge. And that will definitely take 2 years and that has the biggest impact on group profitability, obviously. Norbert, yes.

Yes. When you get this very, let's say, demanding group division, you have to realize that not all will make it to the top. And when you then do the math and you have a slight reserve in, then you come somewhere to the 8%, which we see for the whole group. In other words, not all will make it to the top in the same year. Sorry, go ahead, Sven.

Right. Yes. Sorry for interrupting. Was Just wondering, I mean, on Schuler, you talked about the new structure of clients, right. More BEV, more battery. I mean is there a margin difference to the traditional Schuler business there? Or it doesn't really change the mix for you?

Does not really change the mix. It definitely is not worse regarding margin than the standard business. Schuler has good technology and a good position there.

Okay. And then the very final one is just on ESG. I think you were intending to launch a more fully fledged ESG strategy in the first half. Is that the intention to do that still? Or has that changed?

Yes. I think in Q2 -- I think in Q2, we will launch something. But again, Norbert, your last answer was good. Maybe I pass on this question to you also.

We are definitely planning to come out with these clear targets in the second half and include it into our group's reporting strategy.

Wolfgang, Just as a remark, we should leave in 5 minutes because then we have the press conference.

So they can wait maybe a few more minutes, but -- okay, let's see how many questions are. Let's get to the next question.

We have a next question. It is from Andreas Willi of JPMorgan.

I'll keep it short. You gave a lot of comments around margin progression for the next few years. Would you expect Hydro to already be in the target in '21? And the second question on acquisitions, you mentioned Separation. How do you assess the current market in terms of attractiveness of valuations and targets that are out there to do some add-on M&A?

With regard to the first question, Hydro 8% already this year, I would not bet on it. I think it's -- they have mixed backlog. I think because the competition has been quite tough last 2 years for new orders. So hopefully, it's above 7%. But whether the 8% can be reached, we would not commit to that. M&A, we have announced a small acquisition in December, I think Laroche, which is a very good fit for us both for the nonwoven side and for textile recycling, which will be a very good market next few years, we think. Other than that, prices are very high. We have been participating in 1 auction and we were coming out low in valuation. So obviously, there's a lot of market -- a lot of money in the market and many funds need to invest something. So for an industrial investor who has to be rational and has to look after his balance sheet leverage, it's, yes, complicated, difficult. But as always, we are looking at several smaller things. And with Xerium continuing to develop very favorably, I think we get slowly also appetite for some larger projects if and when they would arise.

The next question is from Sebastian Growe of Commerzbank.

The first one is again on the framework for the fiscal '21 guidance and also then linking it back to the increased margin target at Pulp & Paper and Separation. Can you give us a sense how quickly those improvements would come through? So the question I really have is that Pulp & Paper would expect with a better, a, order backlog and b -- or sorry, at least book-to-bill being positive still? And then also with the Service coming back rather a margin improvement for Separation, that might be kind of as good as it gets? And then for Metals, just quickly, I think on the quarter 3 call, you said you would expect that 1 to 2 percentage points higher year-on-year in '21 over 2020. Is that still the framework? And yes, let's leave it there.

Yes. I think both Pulp & Paper and Separation certainly have a chance to not only stay within their new ranges, but get towards the -- in the direction of the upper end of the ranges or so already in 2021. This is not the official guidance, but we have no reason to say that if they don't have any chance to reach that. And the second question with this 1 or 2 percentage points is I didn't understand.

I think on the quarter 3 call, you said that for Metals and with the expected savings coming through from the layoffs that you would expect the margin to improve by about 100 to 200 basis points year-on-year. Is that still the framework that you would feel comfortable with for '21?

Basically, yes. Basically, yes, yes, yes.

Okay. And the very last one, if I may, on the Hydro business, you said that sort of the competitive dynamics is hindering you in showing better margins. Can you be any more specific around that comment that you made earlier?

No. It was not a competitive -- well, it was not a dynamic -- the competitive dynamics. What I wanted to say is if there are 3 companies and 1 company has a substantially higher profitability than the other 2, there are different explanations. One is that this 1 company is so much better than the other 2, which, in the long run, usually is not always the case. Or it says that it's -- you're already on a relatively high level of profitability compared to what the market offers in terms of profitability, and therefore, you should be cautious of asking for too high or communicating too higher-margin goals. As far as we know, we are substantially more profitable than our 2 main competitors. And that's just the fact and that has some impact on what we feel comfortable to say what we can achieve.

The next question is from Daniel Lion of Erste Group.

I will take just one to save you time for the press conference. Can you give us a little bit more insight on the Metals division, especially automotive, of course, regarding the dynamics you might expect from the now increasing activity on the automotive field, but when would you expect this to be reflected in your order intake? And maybe just related to this, how are you doing currently in the B segment, on depressed markets? Have you gained ground there already? How is this developing?

Yes. We're doing very well on the B sector. Our Yadon acquisition in China is doing very well. Has shown good growth, good profitability. And we certainly hope for Schuler to have next half 2021 a higher order intake than 2020. Now it's too early to be confident that this can be achieved, but we see quite good projects on the battery side, but also -- in battery-powered cars, but also on the battery sales side. But also on the conventional cars, there are a few projects that might go ahead. So there is -- I think there is some reason to hope for some increase in order intake in 2021 for Schuler compared to 2020.

But rather this would be a second half year topic, I guess. So first half year...

Yes. I would not see any particular could be evenly spread around -- across the 4 quarters.

And the last question is from Robert Davies of Morgan Stanley.

Just would like a little bit more color on the Hydro business. I noticed you mentioned that the orders were bottoming out there. Just be curious what's going on in terms of your large hydro projects versus pumped storage, and what underpins your confidence of maybe orders improving into '21 and '22.

Yes. There are several projects that have been also announced that are larger projects. So I hesitate because I have been too optimistic with regard to timing of these projects over the last at least 4 quarters, I would say, or 5 quarters even. So I don't want to become -- not taken serious by you, but there are clearly several larger projects. Pumped storage is active. We have booked one of the -- which would ultimately be, I think, the largest pumped storage plant in India [indiscernible]. In China, let's see whether we -- how we can compete against the local competition. So I think all we can say is that this should be the bottom in order intake that we've seen last year and the year before. And hopefully, we will see somewhat more in order intake this year. Okay. Mike, I think -- unless there is a question, I think we need to...

No. I think that was the last question. I think you can conclude then and finish.

Okay. Sorry, maybe I was talking too much so we were a little bit short of time. Thank you very much for your questions. And if you follow-up questions, please don't hesitate to contact one of us 3, and look forward to seeing you when we report Q1 results. Thanks, everybody, for joining.

Thank you. Bye-bye.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.