Basler Aktiengesellschaft (BSL) Earnings Call Transcript & Summary

I'm not sure. Hello, everyone, and welcome to the earnings call 2022 from Basler, we wait for another, let's say, 1 more minute to see that all the participants are getting in the call, and then we will start in about 1 to 1.5 minutes. We are still waiting for some participants. Yes. Many people already entered the call, but we are still waiting for some more that are coming in now. So as we have 1 minute after the hour, I would like to start our today's annual report earnings call, welcome you very warmly. And I will present you today, light and shadow. Light on the results with regard to the last year on record sales and also a lot of strategic progress, shadow more on the guidance for this year. What is in front of us later in the presentation. Before I start the presentation, I would need to remind you or carefully refer to our disclaimer message that this presentation is containing forward-looking statements that are all based on information that we have right now, and there are obviously risks involved. Now let's come to the agenda. Again, a warm welcome, and it's the standard agenda of also the last call. I will give you at the beginning, an executive summary and overview of the year 2022. We then dig into the financials in the second part of the presentation. Coming to a quick land at the share price development over the course of 2022. Coming to the outlook at the end of the presentation. And after the presentation, we have time for Q&A and the last preface. Let's start with the executive summary, and I would summarize it as that we have achieved great results in a very challenging year, and maybe reflecting a bit and remind on last year because it's quite already quite some time ago, but we were struggling all over the year with regard to the COVID situation in China, the Zero-COVID policy on the supply side, but even more so on the demand side. So in the market in China, especially in the second half of the year last year was pretty weak and also tough to manage due to the multiple lockdowns in the area. The chip crisis also continued in the year 2022 after hitting the whole industry in 2021 already. We have experienced a relief in the second half of the year, but for certain parts, there are still constraints and especially the year 2022 was difficult on that side. Also a quick reminder, we were hit severely by a cyber attack in 20 -- end of 2021, specifically in November. We were at the beginning of 2022 still struggling from recovery, especially on the systems on our development side. I mean the production was running, and we could fulfill orders -- we concentrated on this recovery, and we were able to recover there within two to three weeks. But for the rest of the company it was quite of a severe or a lot of work in the first -- especially in the first half of last year. In parallel, we executed three M&A transactions, two in South Korea, one in Italy, and we also entered into a joint venture in France in order to execute on our strategy for the direct market access. We were working heavily last year on the last miles also on our switch from R3 to S/4HANA on a worldwide basis besides Korea and besides China. So heavy undertaking 2 years of projects. We were very happy to go live on January 2, and we are running at the moment and working on the new system on the new infrastructure. And not only the IT infrastructure was totally renewed. Also, we had a heavy building project. Our headquarter was expanded over the last 2 years actually and over the change from 2022 to 2023, we moved in. And this I would also give you a little bit of an impression of the new headquarters or the expansion of the headquarters. What you see in this image here in this picture, the gray part of the building in the front is new. It's about 10,000 square meters on top of the already existing 20,000 square meters headquarters in the back. It contains only office and, let's say, workshop elements, very new building with new infrastructure, especially towards the hybrid work, modern infrastructure, also modern restaurants workshop environment. And hopefully, it works. I would like to show you a little video that you get an impression of this building before we continue with the presentation. It takes around 90 seconds. I will start the presentation -- the video now. [Presentation]

So this should just give you a little impression. So at the end of the day, it's one element to be an attractive employer to offer an attractive place to work, an efficient place to work that also is offering hybrid work and lots of collaboration possibilities. Yes. Coming from this more general parts to the more specific highlights. First, the market environment. Last year, the German industry for vision components, billings were up by 14%. So we increased our sales by around 27%. And the bookings were up 5%. So as mentioned before, the whole industry was hit still by the chip supply, especially in first half year, and then certain relief started in the second half of the year. We have seen that the high order backlog of the -- to 2021 and also the first half year fuel billings in the second half of the year. So because supply was better and people were working on the backlog and getting products out. And interestingly, we saw significant regional differences with regard to market -- the market development. China last year was very weak, especially in the second half of the year due to the very strict zero-COVID policy. We have seen that in this weak market situation, the competition intensity even further increased, especially the local suppliers who were caught in the local markets were really fighting for the business domestically. The market significantly declined in Asia and North America in the second half of the year, not in sales. But in bookings, you have also seen this in our numbers, and this was specifically connected to the weak markets in consumer electronics and logistics for the CapEx investments in those verticals. And very nicely to see, but to a certain extent, surprisingly strong and robust, the European market. This continues so Europe is much more robust and much more stable, and that has been the rest of the world as what we can see still right now continue. Consolidation trend is ongoing and flipping over to what we did because we also were part of the consolidation trend. Also, as mentioned earlier, we closed and started to integrate three distribution companies that we acquired, two in Korea, one in Italy, and we closed a joint venture with our French distributor, with the goal to take over the remainder of the shares in approximately 1.5 years from now. So we successfully did go live with S/4HANA. It was quite a challenge 2 years of a project, heavy investments, heavy workload on the whole organization. We are happy that the system is running, and we are now, I mean, as normal going through a challenging hyper care phase, but the system basically is running, we are able to work on it. But now we need to continuously debug and improve the system performance but very happy to work based on the new modern IT infrastructure. Record billings, 27% up. So -- and our bookings, on the other hand, there we already see some of the shadow were down 23%, especially due to the [ bullwhip ]. We had very strong bookings in 2021, also continuing in the year of 2022 in the first half year and then the backswing started. And as a result, you can see that the bookings were significantly behind the previous years' bookings. We had also on the gross margin side a weaker gross margin, so around 48%. The main reason behind that were the crunch that we were in. On the one hand, the supply constraints and many spot buys on the other hand. We also had only the chance to increase our prices to a certain extent, especially we were concentrating on increasing on par with structural cost increase but not with temporary cost increase through broker buys. This hit our gross margin, but also the M&A effect because what we have done is when we acquired the distributor, we also acquired a lot of accessory products. These accessory products have typically a lower gross margin. We also acquired products, Basler products sitting on the inventory shelf of the distributor and we need to turn them around. And for those temporary period of time, we have lower margins. So there were all sorts of effects at the end of the day, ending up in a lower gross profit margin. The pretax earning margin was 10.4%. It is below our long-term approach of being around 12%. However, we were in the light of all the market dynamics, the chip crisis and such we are happy to have achieved this. We are also ending or we started the new year with a relatively high order backlog still of EUR 100 million. I'll come to this later. And we were growing very fast in the year 2022. We come to this also, we exceeded already in the first half year the 1,000-employee thresholds, but I come to more specific numbers later. Another highlight I would like to give or to encourage you to go on our website and have a look. We totally renewed our sustainability report. It is now much more information on what we are doing with regard to ESG topics. As you know, we already for decades work very strongly on the social impacts, but we are now also step-by-step taking the ecological aspects more serious, integrate measurable goals in our strategic system. And to just give you a glimpse also on the ecological side, we gave ourselves ambitious goal setting. We would like to reduce our carbon footprint significantly and contribute to this part until 2030, we would like to go to get to zero emissions in scope 1 and 2, and we are still working on let's say, reasonable goals for Scope 3. I mean this is not an easy task, but we are definitely working on significantly reducing our Scope 3 emissions in relation to sales as we are a growing company. Yes. I would like to encourage you to have a look. It's a big step forward, I think, in transparency and giving you much more insights in what we are doing and giving also measurable goals. Coming back to the organization. With the strategic measures that we integrated came also a lot of organizational growth by M&A, but also organically. We grew the company from around 900 employees, full-time equivalents in 2020, end of 2021. So almost 1,150 by end of last year. So an increase of almost 250 people within a year. The split of the employees on the share has changed a little bit, especially due to the M&A transaction on the distribution side. Our marketing and sales portion grew, as you can see from 35% to 37%. And also, the rents kept stable besides production, also admin stays at 15% because we hired a lot of IT specialists working on modern infrastructures for the IT architecture. With regard to R&D investments, we also continued to stay on the gas pedal. Last year, we invested around EUR 33 million or EUR 34 million in R&D, a little bit over 12% with regard to sales. On the product launches side, I mean we launched tons of new products, but we had quite some expansion on the new H2 product platform with regard to new sensors, but also we introduced new interfaces like GigE. On our higher-end platforms, so-called boost, we also integrated new sensors. We also integrated faster interfaces and also combine this with -- nicely with special so-called frame grabber cards or preprocessing cards you can see on the lower left-hand side. And then as our ambition is to be -- to become and be a full line provider for our clients, we also added a lot of accessories. We had special focuses last year on lining. But also more cables, more lenses also more interface cards that are available from us. In the center of our R&D work and product launches were clearly our software SDK called Pylon. Pylon is the framework that connects the different hardware elements and also connect the hardware elements to the machines of our clients or to make the integration within the machine of our clients or devices, and the very new thing in Pylon where the so-called vTools. So this means we are no longer just offering a framework that is able to acquire an image. We also starting to offer tools, so-called vTools for the customer that can process the image, like you see it below either measuring something or final effect or reading a bar code or matrix code, for example. So this is also part of our full line provider strategy, offering all components our OEM clients need to build efficiencies. Looks like this from a pictogram. So pylon is the interface for our clients, so the R&D person at the customer. Pylon connects all different hardware devices, software interface standpoint also for other actors in the machine of the customer. And then on top of the standard product which is our main business -- around 80% of our revenue, we also offer customized solutions where we integrate or customize a single component or fully customized subsystem for the customers, depending on the business case and the attractiveness of the business. Yes. To summarize this, most of you know this picture. We are step-by-step making progress in our, let's say, journey from a camera company that is focusing on factory automation towards a full-line provider so the y-axis here, adding all products to our portfolio and entering different kind of markets and applications and becoming a computer vision full range provider. And we have made nice progress last year, especially also with the new products, with the M&A transaction on the channel side to really execute on this strategy. Yes. That's the executive summary. Let's come to the financials, giving you more insights, and we'll start with the bookings and billings. What you see here are our bookings. So the light blue bars and the billings in dark blue bars over the course of 2021 and 2022. And here, we can nicely see the [ model ] effect, and I will refer to this later on because we see other effects that as this happens in our, let's say, our financial KPIs. We had really a run in 2021 in the second half and the first half of 2022. Our bookings went up from roughly originally EUR 50 million level to EUR 85 million, and stood at the level of EUR 85 million or in the midst of EUR 80 million for four consecutive quarters and then in quarter 2 of last year, we saw already a decline, but still on a high level, the bookings, and then the slipping or the tipping point was actually the third quarter and the starting of the second half of 2022, where the bookings start to go down because the supply is -- the customers also adopted their buying behavior. They were irrationally behaving also and over ordering and this then started and you see the significant decline in bookings that happened then especially in Q3 and Q4. So bookings in Q4 were at a very low level of around EUR 39 million. What you see in the blue bars here in the lighter blue on top of the bookings, we show you the cancellation that we got in the fourth quarter, for example, EUR 3.1 million from orders we already received a year before because this gives you a better indication on the real demand situation. If we just deduct this and then you cannot as well interpret the situation. But what you see is bookings were really going down and very weak at the end of -- in the fourth quarter. Billings were high because of the supply we got. We got a little bit of a hit in the fourth quarter because due to the S/4HANA switch we closed production around two weeks earlier, so mid of December, this had impact on the revenue side. This also had an impact on the margin side. I come to this later on. All in all, we ended the year still with a backlog that was above normal with around EUR 100 million. So normal backlog would be around EUR 60 million. So we still talk about an excessive backlog situation of EUR 30 million to EUR 40 million when we entered from 2022 to 2023. From a regional perspective, the picture has not really changed when we look through the -- all the regions. So revenue, we achieved EUR 272 million, over 50% or 53% were in Asia. This is a little weaker than normal, but it's still very high, 29% in EMEA and 18% in Americas. What changed is the mix within Asia because we have experienced a very weak market situation in China on the one hand. On the other hand, due to the M&A effect and also in other areas in Japan and Korea, we experienced a stronger business. So there were some shifts within Asia to different country markets. Yes, let's have a look to the gross profits and the gross profit margin. In general, I mean we started the year with approximately 50% of profit margin. I would say this is not stellar, but this is a little bit weaker than normal on average. In the long-term track, we are around 52%. Beginning of 2021, we had very strong gross profit of 54%, but this was also in a long-term trend, pretty high number. So we started a little bit below our normal level, and we were not able to catch up. I mean in Q3, we were able to catch up a bit. As you can see in Q4, it just fall again. There are some special effects in the fourth quarter due to -- that caused this weak gross profit margin. On the one hand, we still have the spot buy effect because even though we were making less spot buys in Q4, we still have a lot of material in our raw material stock, and we need to first turn those around to see the effect. But we had also inflation compensation payments that were -- and that hit the personnel costs. These were extraordinary payments in the fourth quarter of our operations. So production and purchasing. And last but not least, we had another effect in the fourth quarter due to the S/4HANA switch. We closed our production, as mentioned earlier, roughly 2 weeks before the year-end. And this meant we were selling more, let's say, non-Basler product in the second half of December. So the product mix shift in artificially towards non-Basler products with lower margins due to this system switch. And this altogether ended then in a relatively low gross profit margin in Q4. So looking at the earnings margin. Also here, you can see quite some up and down, mainly dependent on revenue levels. Also here, the due to the lower revenue due to the special effects mentioned earlier, the earnings margin in Q4 was weak with 6% and we were flipping around and I mentioned already, on average, we were at 10.5%. Now summing up the year compared to the year before, order entry minus 23, mentioned the sales, record sales, EUR 272 million. Gross profit in absolute terms grew 17%. In relative terms, we were from 5 percentage points down due to the variety of effects I mentioned earlier. The profitability more or less stayed at the same level, depending on what profitability parameter you look at. But so this means in a nutshell that we significantly increased sales, but due to the weaker gross profit margin and due to the vast increase of our organization, we were not able to increase the earnings in absolute terms. And the relative earnings margin went down compared to the previous year. On the cash flow side, also here worth to mention multiple special effects. When you look at our cash flow here, you can see the operational cash flow in dark blue, the free cash flow in gray and light blue the financing cash flow. So we started the year with very -- with a significant minus free cash flow, especially due to the M&A transactions and the payments for our M&A transactions in Korea. In the second half of the year we went back to normal with regard to the investing cash flow, but the operational cash flow was weak because also the revenue was not that strong. And then in Q3, with a strong revenue, we had good operational cash flow, but we invested and had M&A transaction again for Italy and also the joint venture stake we acquired. So also here, again, extraordinary effects kicking in and in Q4, you could then see, okay, with high revenues in Q3 and Q4, no extraordinary M&A transaction effect. The free cash flow was back to a higher level of EUR 6 million or EUR 7 million. Also here on the cash side, maybe a summary for the year. We started the year with a cash account of around EUR 55 million. Cash flow from operations were EUR 12.4 million. And you can see compared to the previous year that this was not as strong as in previous year. This was mainly related to the raw material increase when the -- now the COVID effect was starting to flip to the other side. And also due to the high revenue growth and also the M&A transactions, we have built up more accounts receivables and this cost also or increased our working capital. On the cash flow from investments, you can see significant investments compared to the year before EUR 44 million mainly driven by M&A transaction by S/4HANA investments and investments in the building architecture and IT, modern IT architecture because the building itself is a leasing contract, but the internal IT infrastructure was also a heavy investment that we have kicked in, in the second half of last year. All in all, free cash flow, minus 31 -- or EUR 32 million. And below, you can see the effect on the net debt side, I mean our liabilities to banks increased by roughly EUR 20 million. And the net debt increased from 2021 to 2022 from EUR 19 million roughly to EUR 27 million due to the multiple investments we did for the future of the company. On the balance sheet side, don't dig into every element here, but let's have a look at the overall balance sheet sum, the sum increased by 17%. So overproportional to sales -- underproportional to sales, excuse me, and the main growing positions are on the intangible and goodwill side due to the M&A transaction and the S/4HANA infrastructure investments. And then on the building side, there's also IT equipment and modern IT equipment and infrastructure and also the buildup on the inventories due to the chip prices and also on the finished goods side due to M&A transaction. With regard to the liabilities, I mean -- what you can mainly see is, I mean, equity increased by 9%. So under proportional growth of equity, which means we have invested have financed these investments I was talking about mainly by the increase of liabilities over the course of last year. But in long term liability to increase to EUR 51 million or EUR 52 million to EUR 78 million. So let's have a look to the share price. Also here on that side, I mean, we see the effect of -- especially the second half of the year, we had high book -- high billings. But I mean, it was already visible that the bookings were going down and also I think this was an effect why we were not able to keep the very high valuation from the starting of the year. We started the year with EUR 53 per share and ended around EUR 30 per share at the end of the year. So from a dividend side, we -- as a management team and also together with the Supervisory Board, we were talking about, okay, how is our dividend proposal for the main shareholders' meeting in May. We came to the conclusion because of the outlook, and I come to this in a minute that we want to be careful and that we want to deviate from normally the 30% we are paying out because we want to consider the special situation, high investments last year, as you have seen and gloomy outlook for this year. So considering both elements, we will propose a 20% payout ratio for the earnings in 2022, which would mean a EUR 0.14 per share dividend. Yes, this was the year 2022, and let's take a look into 2023 and also beyond. So what are we expecting for 2023 as we are already 3 months now in this year. And we have to face the reality here that we came to the conclusion to give a gloomy market outlook because we are still seeing that the order entries are staying on a low level. In the first quarter, this is what we have seen. We also expect that they stay on a relatively low level slightly increasing by relatively low level in the second quarter of this year. And we also see still cancellations kicking in mainly from China. So also this effect is not stopping at the moment. We definitely believe in a recovery in the second half of the year. But what we have to consider is also that we are now for quite some quarters, the billings and the bookings are weak and they went down. They are stabilizing on a low level. It's not -- we don't believe it's further going down, but it's making side move or a slight improvement. But at the end of the day, they are on a low level, and we need to face this situation. We also still, as you know, have a lot of geopolitical uncertainties, and we have seen them especially due to the lockdown situation and especially to the weak markets -- weak market situation in China that the domestic competition and the intensity of competition is very high, and we expect this to continue in 2023, even though we expect the market starting to come back and have a rebound, but the competition level and intensity will stay. On the gross margin side, we see due to the less spot price and step by step, we will turn around our inventory levels. We will we expect, let's say, an increase and positive effects on the gross margin side on the one hand. On the other hand, there is a certain risk in involved in China because of the strong prices or radical prices that we see in this market, specifically in the domestic market. On the gross profit or the margin side. We are, let's say, seeing now this pressure. On the one hand, we have headwinds on the market side. And on the other hand, we see a cost increase due to the high number of new employees we acquired or we acquired and M&A only hired and also the cost of living increase that the salaries are going up. I mentioned in one of the earlier calls that our salary increase across the board globally for this year is around 6%, 6.5%. So this definitely is bringing us into a sandwich position at the moment and is definitely putting pressure on our earnings margin. And reflecting this situation, our guidance for 2023 is our revenue, EUR 235 million up to EUR 265 million from the EUR 272 million last year. So we expect a decline in sales. I know the corridor is pretty wide due to all the unknowns at the moment due to the geopolitical situation. And in this pressure with regard to the cost increase and the, let's say, all the right things we did strategically to move forward the company -- this hit us now, I would say, in the wrong timing, but it is what it is, the earnings margin will be at around 5% to 8%. So below our steering point of 12% where we want to have the company back in the long run. However, in the year 2023 for us. This year seems to become a transitional year and we have to manage this out carefully. With regard just to set the right expectation with regard to Q1, this will be in line with this guidance. We had a slow start into the year. On the one hand, we have high back orders or backlog, but what we were experiencing is that the back orders, so the unnatural backlog portion, a large percentage of our, let's say, product constrained materials where we have limited supply. So we are still facing supply issues on the back orders. And on the other hand, we are also struggling at the moment in the hypercare phase with S/4HANA on process issues especially in outgoing good process lead. So also, we are here struggling in the first quarter. So that quarter will definitely be in line with our guidance here, which is a weak guidance obviously that we are giving for 2023.. This means for us, we have to react, and we've already reacted, management team, Supervisory Board and also the whole Basler team. We reacted to fix, let's say, kind of a savings program. We stopped all further expansion of the organization. I mean we have grown a lot. So we stopped this personnel increase already. We flexibilized HR costs next to also other OpEx that we have where we cut down on that side. We're also cutting variable income, especially for management. And we are working very tight on the capital -- working capital and the cash flow side in order to manage well through this transitional year. And as mentioned earlier, the dividend proposal is part of this package and is in line with this program. So this whole program will already impact our P&L positively in the beginning of April. So we have watched our bookings closely over the last, let's say, quarters and months -- we were having this plan in the pocket and we are now being forced to execute because of continuing low bookings in the first weeks and already almost 3 months of 2023. So we see this, and I want to make this very clear. We see this as a temporary effect. We have experienced this before. Maybe it's stronger than what we have anticipated. But we have experienced this before. We see a market weakness combined with a bullwhip swing back from the chip supply. So both come together now. We see a very stable European market, but we see in the rest of the world, all the same effect in Asia, North America and China specifically is still suffering from the situation of the zero-COVID policy and still everyone is waiting for a rebound, but at least in our markets, we can't see it yet. This means for us sooner or later, the bookings will rise again. I mean we are integrated in thousands of customers of machines and the business is for them is all down. And sooner or later, it will start again to grow. And this is why we believe in our 4-year plan, the 2025 plan, where we want to achieve EUR 400 million in sales and be back on the sound profitability level of 12%, also a sound cash conversion rate of 70%, excluding M&A transactions. Having this said, we now have time for Q&A, and I'm looking forward to a lively debate. You can now ask your questions either in the chat or you can also jump in verily if you -- whatever you like.

Yes, hello from the chat side. Hardy, we have the first questions from Mr. van der Horst.

I have two actually. You said that the first quarter is somewhat in line with the guidance, but I think you meant like is already reflecting the guidance, right? Because I would expect that especially the first quarter where you don't have short-term labor schemes implemented yet. I expect Q1 to have like a significant lower margin than corridor you've targeted for the full year, right?

That's correct. Thank you for the question again. I was maybe not as precisely as I should have been with regard to bookings and billings, but absolutely on the profitability side, you are correct because the effect of the savings programs will start to kick in April -- on April.

Okay. Perfect. And a small follow-up question. You mentioned that you've been now more constrained on working capital to set free some cash. But just to how much room for improvement is there? Because as I understand it, especially the high inventories are mainly a result of shortages, which is something that you, on an individual basis can't easily influence.

Yes. So there is quite some optimization possible, I would say. And when I mean quite -- I'm talking about EUR 5 million to EUR 10 million. so significant number. However, there will be a bit of a lag effect because we, let's say, in our behavior of ordering, we slowed down already our ordering of material end of last year. But we have still for many materials very long lead times. So under the -- we will see the effect it will take some time and most likely the majority of the effect even if we're already working on all these elements to optimize working capital and adjust according to the market demand, it will mainly kick in, in the second half of the year, the positive effect. And until then, we are still in this crunch of getting material in and the demand is going down at the moment. So we also have to be careful with certain critical components because we still will run the policy to have higher safety stocks on these very critical parts because there is the risk in the market when the markets come back, consumer electronics comes back, automotive come back, China is coming back that these critical parts, again, are getting short because the capacity has not been increased. So it's a classic bullwhip situation at the moment, but underneath for certain critical parts, the situation is still the same. So we also need to be careful envisioning what will happen when the markets come back.

Okay, understood. And one last follow-up question. During the shortages, you have been quite forthcoming towards your customers when it came to price increases and didn't actually increase your prices if the material cost was basically driven by extraordinarily high spot prices. However, we are now in a situation where the cost increases you face this year in part are like wage increases. So will you be able to pass some of those who will, I think, be sustainable in some way on to your customers and how do your customers react to those like cost or wage inflation related cost increase?

Clear answer. The time for cost increases in our markets are over on the demand side. So because the demand is cooling down, the shortages are going -- are getting out. So the customers are back to normal, and they don't accept price increases, and they especially because we have B2B customers, they don't expect price increases because our R&D force, our sales people become more expensive. So we need to become more efficient. This is the answer.

So let me ask some more questions. First is coming from Ms. Anne Gronski. She's asking, are we disclosing our carbon dioxide emissions via CDP?

Anne, the numbers first time are really published in this report. I don't have them at hand at the moment. But yes, we are reporting these numbers in line with international standards. Please have a look at the report. And if you have more questions, let us know we come back to you.

And her second question is, have we joined a scientific-based target initiative?

I'm not sure what you mean by that. Maybe we need to tackle this offline to give you a proper answer. I will make a note, and we come back to you, Anne.

Then we have Mr. [indiscernible] with us, and he's asking, don't you think that on the electronic market part of it will go away from China to Thailand, Vietnam, China and Korea? China will be a domestic market on its own. So China recovery may take more time. Wrong or right? Can you elaborate?

Yes. So I mean this is the million-dollar question, but in general, I mean, what we have seen is especially due to -- in the Covid times that this decoupling between Western and Eastern World, between Western and China has been accelerated. And for sure, this also means for us with a certain exposure. I mean, this exposure went down, this China exposure because of the weak market situation last year. But in general, this also means to us that we need to watch this closely. And we also believe that the decoupling trends will further on go. And this means for us, we need to watch closely what market -- how will the China market domestically develop? What maybe is starting to being built up elsewhere? I mean we see it in consumer electronics at the moment that the contract manufacturers invest outside China in order to prepare for the further decoupling. And at the end of the day, we need to, let's say, maximize our chances in the world market and invest wisely in that geopolitical game. I mean, with us, it's no different than with many, many other customers who have such a high Asia exposure than we have.

And your second question is, it seems the semi market is reviving. Do you agree and the impact to Basler?

So at the moment, what we are seeing is that the electronics market, so CapEx machines for electronic assembly and also the semicon CapEx investment market is still down. We also expect these markets to pick up in the second half of the year, maybe in Q1 next year. There will be another wave kicking in. We have seen this. I mean it's a normal scientific market, but we are not seeing it yet, to be honest. We see some booming market for battery production, for automotive, solar, but if you look at general consumer electronics, smartphone assembly, display assembly and also the silicon CapEx investment at the moment. On a general basis, the investments are low at the moment due to the weak demand in combination with high inflation rates and high interest rates, but we expect this market to come back either second half of this year, later next year.

And that's all for the moment here in the chat.

Okay. I thank you very much for your attention. In case, some more questions will come up, please contact us so mainly Lorena, you will find her contact information on the website. And so maybe set up another call to give you more insights and again. Thank you for the participation. Looking forward for the Q1 report in 6 weeks from now, giving you also more insight how we run through the new year. And thank you very much. Have a great day.