AT & S Austria Technologie & Systemtechnik Aktiengesellschaft (ATS.VI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Alexander, your operator today. Welcome, and thank you for joining the AT&S conference call on the current business environment. [Operator Instructions] You would -- I would now like to turn the conference over to Ms. Gerda Königstorfer. Please go ahead.

Thank you, Alexander, and welcome to the conference call today. We are reporting today about the first 3 quarters of the current year 2020 and '21. The presentation will held today by CEO, Andreas Gerstenmayer; and CFO, Simone Faath. And we will report about the market development, the trends, additional to financial highlights and, of course, about the current situation regarding the outlook. After the presentation, we will have the Q&A session, and we will invite you to give us our -- your questions. So thank you, and now I want to hand over to Andreas Gerstenmayer.

Yes. Thank you very much, Ms. Königstorfer, and a warm welcome also from my side to our third quarter result. I'm also happy to share again the presentation with Simone Faath. I was heavily waiting for that moment, again, for a year now, and I'm happy to have achieved that. So let's get into the presentation. We thought we get started a little bit different than typically, as we are -- in a lot of cases are required and asked about our sustainability activities, we thought it's a good idea to get started with it and to give a little bit of a highlight and in view on that topic. When you enter into our annual report, you can read a lot more details about that. You will also see a similar picture like it is now on this slide, which is explaining how we are doing and how we are progressing in the area of sustainability. I think it's important to mention also that this is not an activity we have initiated recently. Sustainability is -- has always been part of the AT&S DNA. So going back to very early investments in China, in India, wherever we have our locations, we applied all international up-to-date standards. And I think this is important to mention because for us, it's so natural, it's so normal that we take care about the environment, take care about our people and take care about how we are behaving in the society that it was for us not really necessary to highlight that. But obviously, it's important in the times we are in. And therefore, we are happy to give a little bit more deep dive on that. Typically, sustainability is part of the AT&S strategy. We have interaction with our stakeholders. We derive from the SDGs our targets. We are following the global trends. And also, we are closely observing opportunities and risks out of that. For today, we just want to give you a brief idea of what we are driving forward and some of the targets we are looking for. For example, renewable energies. This is, for us, an important part. We have already achieved a share on quota of renewable energies of 47%. If we would go into more details there, you could easily see that in Europe, we have almost achieved 100% renewables. In other parts of the globe, it's a little bit more difficult because the liberalization of the energy supply is not that far progressed, like we know it from Europe. And this is what we are working with the local governments, what we are doing with all the setup of our energy supply. But you should also know just installing photovoltaic panels on the roof of our factories would not help because that -- we did the calculation could probably cover 1% or 2% of the power consumption of a plant of AT&S. So it's more nice to have it, but it's not really a solution. So we need to have better fundamental solution with the supply of the amount of energy we need. What we're also doing is typically, and we have been doing that quite a long time, we take care about a good diverse mixture of our teams. One of the parts is definitely that we try to promote women in important positions. Also here to mention AT&S was the first company in Austria that made the way for women to enter into a 3-shift working style. And this was not because we pushed them, because they wanted it because for their private life, it was better to balance with their families. And this was quite long ago. It was, I think, 20 over years ago that we tried to find a solution with the Austrian government that time to make up the opportunities for the women to join equal labor environment. What we also do is, and you know it, renewable energies' sustainability targets is part of our innovation strategy because we are 100% convinced the environmental topics can only be solved by technical solutions. We cannot just cut down the processes or the consumption because that would simply not help and the company development would suffer. So what we are doing is starting and inventing proactively new technologies, new processes, new materials, whatever we can do to support in that way better our customers with more sustainable solutions. And for that, we also need to have a very strong alliance with our suppliers. We are digging into the supply chains. We have shown it with a fair phone approach that we can go back to the gold mines how the gold is explored and so -- and I think these are the topics we can change, and we are changing. And so these are important parts of our strategy. I could talk quite long about that. I just wanted to give you an idea what we are doing there, and it's not painting AT&S outside dream. I think this is part of our daily life. And by the way, also for the investors and analysts, everything what we are doing in the sustainability area, energy consumption, water consumption, recycling is also good for our bottom line. So I think this helps us to reduce cost, and this is a nice win-win situation. Okay. This is an introduction at the beginning for today, entering into the market environment on Slide 2. What we see from the recent developments throughout the last quarters, that we see a significant increase of data traffic in the market. The Internet of Things is more and more evolving. Everyone is relying on enhanced connectivity and also that the digital society is more and more establishing. Therefore, a lot of our products are necessary, a lot of our solutions are required. For example, our ABF substrates for the computing part, for the high-power and performance computing, the demand is very strong. And the nice thing for the time being is that the capacities are somehow at the limits. This provides us a good position and is also pushing us towards more efficiency and driving to squeeze out whatever we can out of the capacities and factories. Mobile device market for sure is supporting the introduction of the new 5G generation of communication standards. It's heavily started now in Q3, our running fiscal year 2020/'21. As announced already last year, we had a little bit of shift of the peak season from the Q2 to the Q3. And this is also one of the underlying reasons that the Q3 was an all-time high in terms of revenues in the AT&S history. The good thing was our automotive market continues to recover. We also have seen in the Q3 that automotive applications are coming back. Demand is coming back and -- by the way, and you will see it later in the numbers, the Q3 automotive was already above the levels of the Q3 2020 -- 2019, sorry. Yes, industrial market was more or less flat, but this is in the given environment, I think, a good message. And medical also starts again with stable demand, and what we foresee for the future that this will also create additional growth opportunities. Brief overview about the market numbers. You see and -- or what you not see on this slide is that the entire global electronic device market is a little bit shrinking or declining. In that light, the slight growth of 2.2% of the PCB and IC substrate market in the year 2020 is a good message. So this means that all the technologies required from the PCB and IC substrate area are gaining value and also could create a slight growth of 2.2%. But for the future, we are quite optimistic because all the trends are very much intact and the growth up to 5.7% until 2025 is a realistic scenario, which we are somehow seeing with all the applications in front of us. AT&S clearly could and will continue to outperform the market. As you know, our average target to reach the above EUR 2 billion revenue is 15% growth -- annual growth that definitely will outperform the market, and this is also mainly driven by the selection of application which we included in our strategy. In a little bit more detail, ABF substrate market is definitely one of the big drivers of the demand. I will go into that a little bit more detail later on. We have the artificial applications. We have 5G. We will have in future also the autonomous driving and other things that heavily support the ABF market. PCB, a little bit uncertainty is still the aviation and security area. What we see recently is that there is a new application coming to the market. It's 5G satellites. The projects are called other EUR 3 billion. So this means all the people who are not living in big cities, how can they get access to the 5G network. Most likely that will be managed through the -- via 5G satellites. This is an increasing business. And I think this is also something which is of very interest. Medical, in the light of the COVID pandemic situation, I think we will have an increasing sensitivity about Medical Systems and Solutions. And once the hot phase of the pandemic is over, other treatments will return and recover. And still, we think this is a good market to be in. Industrial, machine-to-machine and -- still the industry 4.0 applications are taking up in the light of digitalization of production environment. The same is true for Automotive. In addition, we see a strong uptake in the area of new energy vehicles. This is a strong boost over the last couple of quarters. And we foresee that in the coming years this will outperform the autonomous driving growth and will be an important area where we can contribute with our technologies to the applications. Consumer, I think this is everything what are using to get -- to stay connected. In the situation of social distancing, it's become even more important. And we all know with the way how we are collaborating, the way how we learn to interact and communicate over the last couple of quarters, this will not completely disappear once the health situation has changed. Distance learning, relocated working and so on will remain to a certain degree. Yes. And I think communication, computer, we need powerful networks. We need powerful devices to handle all the data that are generated somewhere in the Internet of Things, I think, itself speaking. So all these applications are nicely playing into our direction, and we can support them with our technologies. Coming to Slide 4, digital transformation that we are not just talking, we think or we believe. I think this is a fact. We have seen a sustainable data traffic increase since the first lockdown in spring time. The first peak was data traffic increase of about 30% to 50% year-over-year. It slightly declined over the summer time, but recovered in the fall time again. So we assume this will stay on a certain high level and support the data generation significantly. What is the main drivers for that? We see -- and this is more a hardware view now. We have seen a 12% growth rate for the devices on video-on-demand users there. We have seen a 10% growth rate for PC, laptops and tablets, which was 1 year ago a market sharply declining, and everybody was mentioning, this is a market that will die soon. So the recovery is heavily there. And yes, with all the new working world people have to manage, I think this will stay a while at least. For the data management, we have seen 8% growth rate in the server and data centers applications and also some entertainment was there, a 5% growth rate for gaming consoles, wearables and smart speakers. More details on Slide 5. Also here, you can see number wise, what is the expectation. We have been talking in -- at the occasion of the quarterly calls already about 2019 in data center ICs. You can also see between 2020 and 2025. There is again a significant growth of around about 10% every year to a huge number of 75 million units in data center ICs. Base stations for 5G show a growth of 25% over the next couple of years. The total smartphone market is not that significantly growing. The expectation is 3%, but 5G smartphones are predicted to show a 34% average growth rate for the next 5 years. So in all, these devices are generating significant amount of data. Why is it that way? This is shown on Slide 6. We have mainly 5 areas of data generation handling and so on. So we see the sensors and the devices generating data. We have the data processing part of the net -- of the Internet of Things. And the devices, we have the data analytics, which is becoming more and more important, not just for commercial applications, also for applications in the industry to improve efficiency and quality. And we have the data transfer, which is mainly related to the protocol to 5G, future 6G, whatever is needed. And we have the data storage. This is all about data management, data handling and data generation. And you see we can nicely contribute with our technology, on the one hand side, to the sensors. For example, camera modules and whatever you have there, we have the devices area with the data processing and the data analytics, which is mainly our business with PCB main boards, either on the mobile devices or in edge computing applications. We have the antennas for the 5G modules. For example, called antenna and package solutions. And we have the data farms, data centers with the processing power and supporting it by our latest IC substrates technologies. So also there, you can clearly see what we are telling you with our midterm guidance. We are really well positioned in all market areas, which definitely will show growth. Some more examples on Slide 7. I think we can somehow speak that probably some few words about the lower line, the IC subs that I already mentioned in more detail. But our PCB or substrate-like PCB for modules are also taking up. We have a lot of areas of usage of these modules, either in smartphones, for example, in camera or high-frequency modules. We have the Bluetooth modules in the wearables. We have also modules for automotive for autonomous driving, the ADAS systems, advanced driver assistance systems and we have the machine-to-machine communication modules and the car-to-X communication, which is, again, connectivity topic that is supporting the introduction of 5G protocols, WiFi protocols in the industrial and automotive ecosystem. This is also showing strong demand. And also what I said before, the market is on capacity shortage in terms of IC substrate. That was the decision that we started our third investment in Chongqing. You see on the picture on Slide 8. From the distance now on the left-hand side, this huge building. This is Plant 3. From the outside, it's ready. A few days ago, we had the first production equipment move in already. So 16 months after the start of construction, we have already everything under control. Clean room conditions are set in specification. Everything -- power supply, water supply, air conditioning and so on and so on, everything is in there. And we are starting to equip the facility to prepare for the qualification, the ramp of the products. Worth to mention is once this factory is up and running, on Slide 9, you can see that we will provide 5x the capacity. We have compared to the situation we had last year in our Chongqing I factory. In the last quarter, we were also able to conclude our Chongqing I expansion project. This was already contributing to the Q3 numbers and was fully in line and on-time with our expectation and plans. We are now progressing for the next fiscal year, we will have the first time that we have the fully equipped Chongqing I factory available, generating revenues and profitability, hopefully. And on the other hand side, we will continue to introduce some new technologies, some upgrades, some debottlenecking also in the Chongqing I factory while preparing for the ramp of the Chongqing III plant. Once all of that is done, just from a market perspective and position point of view, today AT&S is on a #5 position in the global IC substrate market. With ramping all these capacities and having in mind, the capacity expansions of our competitors in 2024 AT&S will be on a #3 position with today's view. So we will significantly catch up in the market and gain market share. I think this is important to understand. We are really positioning ourselves in this market as one of the important global players. We are supporting the top end of the technologies from data center applications down to the mobile device part of the market. And I think this is one of our main pillars of the AT&S growth and technology strategy in the future. Now turning into the details about the business development of AT&S in the last quarters on Slide 10. As already mentioned, we have concluded the ramp-up of the new capacities in Chongqing I, supported by the ongoing very strong demand of ABF substrates. We had the mobile application business nicely supporting our Q3 numbers, especially with the launch of the new smartphones in Q3 and the peak season. But also with some customer and application diversification, we have really gained some success in the PCB or substrate-like PCB business for modules, which are also showing growing interest and demand in the market. The Automotive is already on a good way. And expectation is that over the next quarters, this will continue and most likely getting back to the pre-crisis situation, I think, somewhere in 20 -- end of '21, beginning 2022. This is what we have available from the market analysts today, but we need to observe continuously. Medical healthcare market showed, again, increasing demand in Q3 as well. And the Industrial segment, as I said in the beginning already, was at least on a flattish level, which, in the given environment, we see a positive development. So this is a little bit about the general topics about the market, about the strategy and I will now hand over to Simone Faath to walk you through the numbers and the facts and figures of our business.

Thank you, Andreas. So a warm welcome from my side as well. So just to remind you, yesterday, I had my 3-month anniversary. So I started on the 1st November 2020. So please be aware of this when you ask questions, okay? So yes, turning to Page 11. Here, you see our revenue and EBITDA development. So as already said by Andreas, in Q3, we had our highest ever quarterly and year-to-date revenue. On a quarter-to-quarter perspective, so Q2 to Q3, you see that we grew our top line by 19.4% and on a year-to-date basis, we generated a revenue growth of 17.3% versus last year Also, we had some headwinds coming from FX. Our year-to-date EBITDA increased by 19.4% to EUR 186.7 million, driven by our higher revenue from our substrates and mobile application business and partially offset by negative FX effect. Our EBITDA margin was 21.1% of revenue. So turning to our net profit, you see that this grew by 48% to EUR 37 million. Also, it was also negatively influenced by FX effects and less interest results compared to previous year. We reached an operating free cash flow of EUR 128 million, which was driven by higher investments compared to our previous year. So now going to Page 12. Here, you see how our revenue split looks like. The main position with 74% is recognized with customers who have their headquarters in the U.S., which is a slightly increase versus prior year where this share was at 69%. The second largest customer group can be seen in our German -- in Germany and Austria with 12%. And when you look at our segments, you see that the share of our Mobile Devices & Substrates business has further grown compared to last year and contributes with 76% to our total AT&S revenue. This increase is mainly caused by a strong demand in our substrates business and also due to our expanded capacities in Chongqing. And the remaining 24% of our total revenue is generated by our Automotive, Industrial and Medical segment. So turning now to the next page, #13. You see how the different segments look like. Starting with our biggest segment, our Mobile Device and Substrate business. Here, you see that we -- compare to Q3 last year, we show a revenue growth of 40%, so 4-0. And on a year-to-date basis, we grew 29% compared to last year. And this, again, despite of a negative FX impact driven by the U.S. and Hong Kong dollar. Our Mobile Device business benefits from really a broadened customer base as well as a broader application portfolio. And our IC substrate business is driven by better volume and better product mix, and this is really due to the fact that we successfully ramped up our Chongqing I factory. From an EBITDA perspective, we achieved EUR 170 million, which was a plus of 31% versus prior year, and our EBITDA margin improved to 23.1% of revenue versus 21.9% in the last year. So turning our attention now to Page #14 and how the development was in our Automotive, Industrial and Medical segment. Here, you see that we have an increase in our Q3 revenue compared to last year's Q3 by 10%. However, on a year-to-date basis, we see a decline of 9%. The Industrial segment shows a solid development and a year-to-date revenue above prior year, driven by a better product mix. However, our Automotive segment is burdened by a strong decrease in vehicle sales, which Andreas already pointed out before. And this resulted in a year-over-year revenue reduction, but at least we see some signs of recovery and further sequential improvement. Our Medical & Healthcare business was influenced by temporary unfavorable product mix. But in Q3, we see an increased demand and a favorable product mix compared to Q1 and Q2 of the current year. So following our top line decline and our underutilization of the plants, our EBITDA decreased by 31% to EUR 16.6 million, which represents 6.8% of the total AIM revenue. So turning to the next page, #15, you see our net CapEx. And knowing that with our ongoing investments in Chongqing related to our growing IC substrates and module PCB business but also with smaller investments for other strategic projects, we will be spending roughly EUR 520 million in net CapEx this fiscal year. So EUR 304 million of our total year budget we have already spent so far in the first 3 quarters, and this amount represents a doubling of our CapEx compared to the first 3 quarters of last year. The driver for the remaining EUR 260 million is mainly -- in Q4 is mainly seen -- or can mainly be seen in Chongqing III and II and to a smaller extent also in other projects in Shanghai, Austria and so on. Now let's have a look at our balance sheet. So on Page #16. So in total, our total assets went up by 8.1% to EUR 2 billion, and this is mainly due to our ongoing investments in Chongqing and our technology upgrades. Our equity went down slightly by EUR 223 million to EUR 737 million, and this was mainly due to negative FX effects but also due to our dividend payments and our hybrid payments. So our equity ratio went down to 36.8% and our net debt increased by EUR 155 million to EUR 402 million, and this was mainly due to higher CapEx. So going to the next page, #17, you see our cash flow statement. Our cash flow from operating activities was more or less on the same level as it was last year, the first 3 quarters. And so it's stable. And this also, we had some really negative effect from the working capital. Our cash flow from financing activities was slightly increasing to EUR 36.7 million and our operating free cash flow was -- or is EUR 159 million, down compared to last year, and this was mainly driven by higher CapEx. So going to our finance structure on Page #18. Here, you see really how our net debt profile evolved over the last years. And that we always manage really to stay below a net debt-to-EBITDA ratio of 3 and -- which is also our target for the future. So going to the next page on Slide #19. You can see the maturity profile for the current and for the following 4 years. And currently, we do have EUR 854 million in liquid funds, which are composed as follows: so cash of around about EUR 394 million, financial assets of EUR 39 million and unused credit lines of EUR 422 million. As you can see, we are well prepared to meet our future financial obligations. Now having a short look on our outlook for the remaining year. So our full year guidance increased. As Andreas had already pointed out, the digital change will speed up and really touches all our lives and every area of our life. So the expectation for the current year is that we will have an ongoing strong demand for ABF substrates and also the market shortage. Capacity shortage is also helping us really to further increase our revenue there. Our Mobile Device business will show the usual seasonality in Q4. And as we have already shown, we see some, let's say, light at the end of the tunnel when it comes to our Automotive business. So this, we expect to be flat year-over-year in Q4. And we show really a slight increase in the Industrial and Medical Health Care segment. So what does this now mean for our full year guidance? We updated this and Q2 -- a strong Q1, Q2, Q3. And now that we have only 1 quarter left, we, of course, also have an improved visibility. So this is why we now come to the conclusion that we can increase our guidance when it comes to our top line. So -- and we increased it to be -- or that we -- can we achieve a growth year-over-year between 17% and 19%. Remember, last time we said that we will end up with around 15% of annual growth and our EBITDA margin stays at the same range of 20% to 22%. And as I already said before, our investment program also remains unchanged. So we still consider EUR 52 million of CapEx for this fiscal year. So coming to the next slide, to our medium-term guidance. This we can confirm, means it remains unchanged. And -- so we are still working on our expansion of our technology leadership. So we -- as you have already seen, we are already at 21% of innovation revenue at the moment. And our target is really to even exceed the 20% going forward. Our -- we will continue our profitable growth path, means that we considering now all the launches and the ramp-up we did with Chongqing I which has already been successfully completed, but then also the full ramp-up of Chongqing III, we think that we will be able to achieve a revenue of EUR 2 billion and, of course, also with the sustainable margin improvement. So our midterm EBITDA margin is a target of 25% to 30% of revenue. And also when it comes to our shareholder value and also our financial structure, we think that we will be able to achieve a ROCE, which is clearly above 12% and that our net debt-to-EBITDA ratio will stay below 3 and that our equity ratio will be above 40%, so 4-0. And just to summarize what Andreas already said before, we do a lot when it comes to sustainability. And so our target is really to reach 80% of renewable energy and that we bring more and more women in management positions. So our target here is to reach at least a level of 30%. So that's it from the finance side. So now we would like to open up for your questions. Thanks.

Thank you, Andreas Gerstenmayer and Simone Faath for the presentation. And now I want to hand over to the moderator, Alexander, to guide us through the Q&A session.

[Operator Instructions] And we have our first question and it comes from Daniel Lion.

Congrats to the strong growth you've shown. This fits with my first question. Already, we are seeing top line growth of above 30% in the third quarter now and profitability at more or less last year's level. Can you help us understand why the strong top line growth has been translated into a stronger economies of scale? What are the effects that play a role here?

For sure. What has allowed is when we can really fully utilize our plans and when we have then a special yield, so this helps us a lot when it comes to economies of scale. But don't forget that we also have successfully ramped up now our Chongqing factory, Chongqing I, where we now could fully utilize the full capacity there, and that also helps us that we have really a very, very strong demand with regards to our ABF substrate. And this all, in a nutshell, really helped us a lot in order to improve our top line but also our EBITDA.

So in the end, as a follow-up, you expect profitability to move further up along with even better utilization of Chongqing I and then Chongqing II that is currently in ramp, right?

That's true. This -- you also see in Q4 where we also have really -- where we will show a nice top line growth combined with nice EBITDA expansion.

Please do keep in mind there will be some effects out of Chongqing III to be figured in future. So once we start ramping the factory, there will be some burden also there. So don't be too overoptimistic for the next year because we need to prepare ourselves for the next growth step. I think things will not go through the roof. So there is preparation and advanced costs there. We will have people on site. We will need to do the training. We need to do the qualification. So this is also the reason why we, so far, stick to our midterm guidance we have given. And once Chongqing III is up and running, so then the next biggest step will come and meet the future targets. Just to make it clear because sometimes we forget about the preparation activities we need to initiate and Chongqing III is a large factory.

How much of onetime cost would you expect for the ramp in Chongqing III? It's like EUR 10 million in -- or maybe the EUR 15 million split on the 2 years of the rent?

We will show you once we disclose our guidance for the next year. So that will be incorporated there.

Okay. And then 1 question to Chongqing III. You're showing on Slide 19, you expect full capacity already when I understand correctly in the first quarter of '23/'24. And just going back by when would you now expect first revenues out of Chongqing III? Can you a little bit help us also understand maybe an average capacity throughout the years, '22/'23 and then '23/'24? For me, it now seems that we will be already close to 500% for the full year '23/'24 when I see the full capacity shown on the graph. Maybe you can help us understand how the dynamics come in.

Please compare it to the running fiscal year. There also, we showed that at the end of the fiscal year, we will have 190% available. So definitely with the given demand in the environment, we try to ramp as fast as we can, but still there is a lot of things needs to be prepared. So from today's point of view, there is more -- the second half of the year or the end of the year 2023/2024 to be expected that the ramp can be concluded. So it's not the case. But from the very first beginning of the fiscal year, all their capacity will be available.

So start of production...

There's still some movement in there. And we know from all the schedules we have, we will be on stream in '24 fiscal year, but the exact timing we will provide later. So there is a lot of back and forth there.

But still, first revenues, somewhere in the second half of '22/'23 and then towards full capacity also somewhere in the second half '23/'24?

To the end, I would say. You need to also to this and so on and so forth.

Okay. And then profitability-wise, this still means that we should see then the accretion in the year '24/'25, which is the year of the mid-term guidance, right?

Yes, yes. It's the same for future always. If you compare to Chongqing I, so we will have really the full effect out of Chongqing I next year when we have all the capacity available from the start of the fiscal year. And the same applies for Chongqing III, where we have then all the capacities ramped up and for the full year first time in '24/'25. It's the same pattern all the time.

Yes, sure. It's just about when -- the timing of when you start and when to be concluded so we can somehow assess the average capacities and potentially also the margins attached to it.

To help you a little bit with the calculation, so you can -- I think you will not make a big mistake if you would try to calculate for the ramp years, the additional capacity as a linear ramp from the beginning till the end. So it means the additional capacity in '23/'24 is mentioned here with -- how should I say, the numbers are so small -- [ 100 40% ] and you start with more or less 0 in the beginning and ramp to the full extent at the end. So you have a linear ramp profile. And assuming that as a base -- first rough baseline for your calculation is not completely wrong. You know what I mean?

Yes, yes, exactly. Perfect.

The next question comes from Florian Treisch.

Yes. It's partly -- yes, adding to the questions of Daniel. So first of all, so Chongqing I as I understand correctly, Q3 was 100% utilization of 100% of capacity build out, i.e., as you said, we will see an impact in Q1, Q2 next year, but then we are basically up and running and fine. Maybe just building up on the questions as they are building up on each other.

What are you meaning with the next year buildup? Is -- I couldn't understand.

I mean in Q2, my understanding is that you are in the 80% ramp-up. So Q3 is now 100% ramp-up concluded, i.e., as you just said, the impact from the ramp-up will mean we will see a limited impact in Q2 next year at the latest and then it's a novel run rate thereafter.

With the existing capacity we have ramped so far, not with the additional 30% what we are mentioning in our slide. This will be also distributed over the next year because there's some kind of technology qualification. Equipment needs to come. There are some bottlenecks we need to balance better. But this is not one shot at the beginning, and we have all the capacity available. Again, the same story like we told Daniel Lion. Again, it's always distributed over the fiscal year.

Okay. Kind of top-up question to that. If you look at the margin declining in the Mobile Device and sub business, is that only driven by weak mix or are we currently really seeing inefficiency in the ramp-up process, not by saying that IC is not profitable, but clearly, some inefficiency bottlenecks is kind of typical ramp-up scale. Can you quantify that and confirm that?

I think it's a mixture out of different effects and also some timing variances between the quarters. So -- I always said, over the last 10 years, don't calculate too sharp on a quarterly perspective. So this year, especially, we had a lot of volatility in the business over the quarters and there are some overlaps between the one and the other quarter. We have FX effects. We have mix effects. Sometimes we also -- in the beginning of the fiscal, we had some uncertainty in the business where we need to also evaluate the risks we had in our portfolio. This -- if the risk is not really showing up, you could have also some positive onetime effects there. So there's -- I would really propose not to make a quarterly calculation because there's so much volatility in there. So make an average for the year, and it's better because this is also our annual guidance we are doing.

Okay. And then maybe a last one from my side. As we have heard out of Asia, a lot around massive pricing increases on the ABF substrate side, this is something which will simply not be true for you as you have 1 client, long-term contracts. But it's certainly not a negative pricing environment at the moment, right?

Yes. ABF, I don't think we have significant impact from pricing variances. What we need to keep in mind is on the precious metal side, there, we have more challenges in front of us, whether it's gold copper, palladium and so on and so on. This we need to handle very carefully. And binding contracts, I need to also comment on that. We always communicated we have certain line agreements in place. But binding contract is not part of our industry.

And the next question comes from Robert Sanders.