Belysse Group NV (BELYS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Third Quarter 2020 Results Announcement Call. [Operator Instructions] I'm now pleased to present Cyrille Ragoucy, Chairman of the Board and CEO; Jan-Christian Werner, CFO; and Emmanuel Rigaux, CTO. Gentlemen, please go ahead.

Thank you very much, and good morning, everyone. This is Cyrille and welcome to Balta's 2020 Third Quarter Results Call. If you have not already done so, you can download the earnings statement and this presentation from the Investor Relations section under baltainvestors.com. On Page 2, I need to start to -- with bringing you to your attention the disclaimer. I will not read it out, but please do make sure that you have. So on Page 3, just the -- to go through the agenda, I will start with an update on COVID-19, our latest news on Balta strategic initiatives. Emmanuel Rigaux, our CTO, Chief Transformation Officer, will then elaborate in more detail on our next year or year-to-date next achievements. And then JC, Jan-Christian Werner, our CFO, will take us through the financial review. We will end this call with a question-and-answer session with the analysts following our stock. So moving to Page 4, with an update on COVID-19. I guess, unfortunately, COVID-19 is not gone. The pandemic remains an unprecedented disruption to our business and a material challenge to the industry. The health and safety of our employees and customers remain our first and foremost priority. We were able to minimize the contamination rate of the virus within Balta as we immediately implemented strict golden hygiene rules, including social distancing, in all our premises and supplied personal protective equipment to all our employees. Following the latest restriction in Belgium, home office is mandatory for those who are able to do so, and we are continuously monitoring what additional measures we should take to keep our employees safe and healthy. As of today, we have in the group more than 120 employees in manufacturing that are not coming to work because of COVID-19. We have very strict rules, and we apply them. By the way, the fact that I'm saying that there is 120 -- more than 120 employees not -- in manufacturing, it doesn't mean that all of them have COVID-19. But it means that they have been in contact with someone at risk. Obviously, missing these employees impacts our manufacturing capacity as we have for some period bottlenecks, and it impacts our costs as well, as we have more overtime. In the last week, actually, European countries announced the new restrictions, and we might see new ones as well in U.S. We will handle the second wave in the same way we were successfully handling the first wave there by being agile and flexible. The largest difference with the first wave is that we do not see a cliff in our order books and all our customers have confirmed their orders. And even in some cases, order some additional volume. They did so because their inventory is low. And this is what we're seeing across the board. So from what is coming from our order books and from our customer's feedback and if everything remains as we know it today, we currently do not expect a reduction in any of our manufacturing activities in Q4 for our Rugs and Residential division. What we expect is the day-to-day demand for some customers to be lower as the footfall is affected even if the stores are open. We are entering this new wave with a strong cash position and a deal on our RCF, both provide us with increased cash comfort versus the first wave. Obviously, the situation can change, especially if we have a burst of COVID cases. Therefore, based on what we know today, I'm expecting NEXT to continue during Q4 and to deliver some results. Let me provide additional detail on the third quarter. Our revenue shortfall -- where our revenue shortfall was significant in the second quarter of 2020, through most of our region, we still saw the same impact in the third quarter. Rugs and Residential fully recovered their normal revenue in third quarter. In Commercial, where Q2 reduction was less severe, volume rebounded less strongly in Q4. And I must say that we see the same trend in October. Since the start of the pandemic, we have focused on the reduction of our operating expense. We have been managing tightly our cash flow. We have drastically reduced discretionary spend, lowering our sampling cost and deferring expenses. Nonessential CapEx has been restricted to short payback terms. In the third quarter, we kept on successfully managing our working capital. In the fourth quarter of 2020, we anticipate some of the working capital savings to unwind as we ramp up and normalize. Moving to Page -- to Slide 5 for the summary of our third quarter, and I will not go in detail. JC will do that. But obviously, you will notice that the third quarter of 2020 was strong for Balta. We fully recovered revenue in Rugs and Residential. Commercial will take somewhat longer to return to normal level year-on-year. We ended up with a revenue of EUR 144 million, which is 7.2% below last year's third quarter. Our adjusted EBITDA ended well above last year's third quarter with an overall margin of 15.1%. The profitability improvement reflects, among others, the strong margin upside of NEXT initiative, our continuous cost savings and the tailwind in the raw material cost. The adjusted EBITDA was EUR 21.8 million or 26.3% up compared to last year. In September, we had, from a volume point of view and EBITDA perspective, a good month. We've seen the same trend in October. Leverage reduced to 4.7x, while net debt declined from H1 with 12% or EUR 38.9 million to EUR 281 million, and JC will provide us more detail on those financials in a short while. Moving to Slide 6. As we communicated in March, Balta identified 3 strategic priorities, which we believe are crucial to drive the long-term value of our business. And this shouldn't be any surprise to you, the first one is NEXT. So our first strategic priority is NEXT -- the earning enhancement program will deliver sustainable growth and improve our commercial excellence. The focus on e-commerce channel, our direct route-to-market approach in our European commercial side and the launch of sustainable products will represent material additional sales over the next few years. Operationally, we resumed as of July, the journey to increase our cost competitiveness through programs in lean, supply chain and procurement. We will deliver the planned savings, albeit some -- with some delays due to a decision made during the first wave of the pandemic to delay some of the investments. The second strategic priority is environmental, social and corporate governance. We strongly believe that sustainable and recycling products are key for success with our customers. This is why the design to recycle principle drives our product development pipeline. Operationally, we continue to reduce emission and waste. On the social aspects, the One Balta For Safety strategy made good progress in 2020. We keep on with increasing our safety awareness with our 5 golden safety rules and have enrolled the 5 golden safety -- golden hygiene rules to protect us against COVID-19. My goal as CEO remains zero harm for everyone working at Balta. Obviously, we are as well active on emission reduction and employment equality. Our third strategic priority is digital transformation. This is starting with our customer, making sure that doing business with Balta is easy and digital. We launched digital solutions to enhance as well the customer experience. But this include as well all product lines and processes from production to supply chain, planning and sales and continue the digital transformation of our operations. So this is a short summary of our strategic priorities. Now I will ask Emmanuel to go through our -- to go through the next -- our next program. So Emmanuel, our Chief Transformation Officer, will walk us through the -- that program from now on. So Emmanuel, the floor is yours.

Thank you, Cyrille. So moving to Page 7 for the year-to-date numbers of our top line growth initiatives. First, as you can notice, we are well on track to achieve our additional EUR 85 million with EUR 56 million of cumulative sales since we started NEXT. We achieved EUR 31 million additional revenues in the first 3 quarters of 2020 versus 2019. And to give you some -- a little bit of breakdown on e-commerce, we saw solid incremental growth with EUR 5 million during the first 9 months of 2020 and this was achieved through both our operational e-commerce fulfillment center in Georgia as well as through our partnership in Europe with a limited number of leading digital platforms where we operate on a vendor basis. So e-commerce gross revenues year-to-date in 2020 have nearly doubled both for pure players and omnichannel resellers. We have developed for that purpose, 250 new designs, specifically for e-commerce through pure players. And in the U.S., we have increased the percentage of next-day deliveries to 40% of our e-commerce shipments. So we've made quite some headways in terms of mastering the logistics. The second topic is our direct route to market, direct route to market approach to architects and designers as well as other high-growth segments, and that's particularly health care and education, international tiles which has delivered EUR 8 million of incremental sales versus last year. Of course, the enhanced use of digital presentation and sensing ordering tool strongly helped us to continue delivering on this initiative despite, of course, the environment and very restricted visits to customers in the U.S. and in Europe. Last, the other revenue initiatives continued to deliver strong results with EUR 18 million of incremental sales year-to-date and this was achieved particularly through the launch of very market-specific products in line with customer expectations. So let me illustrate this with a few examples. Turning to Page 8. In Residential, we successfully rolled out high-end collections in particularly Northern Europe markets, which have remained strong all throughout the year, and we continue to see growth in 2020 on premium products with a strong focus on comfort and durability. In Rugs, if you remember, we launched our new sustainable qualities with a high percentage of recycled content or single material products designed for easier recyclability early 2020. And ReGen and NewGEN, which are brand names, quickly became strong sellers this year. Of course, we continue to develop our Papilio brands, particularly through our omnichannel resellers. Last, we successfully launched the EliteFlex product range in the first quarter of this year in the segments of health care and education with unique features such as thicker backings for [ sand ] reduction and lasting resiliency or thermoplastic layers to provide an impermeable moisture barrier. So these were very successful in the Healthcare and Education segments. Now turning to Page 9 for a quick update on our cost and margin improvement initiatives. Of course, due to the adjusted production volumes related to COVID-19, we saw limited NEXT benefits in lean and procurement from March to June. So we put on hold new lean related CapEx investments until early July, where we gradually ramped up productions starting from May in our Belgium plants, whilst production at Bentley actually continued steadily throughout 2020 with continued benefits from their lean action plans. NEXT initiatives resumed in full swing in July for the rest of our plants in Europe and Turkey. And in the third quarter of 2020, we relaunched multiple waves in parallel in all our 8 plants as we had started at the beginning of the year. So we have delivered EUR 10 million of cumulative margin improvements since we initiated NEXT in 2019. We achieved EUR 4 million incremental in the first quarters of 2020 versus 2019 and the strong pipeline of new initiatives to compensate the material part of savings that were frozen during the second quarter. I would like to turn to Slide 10. Just to give you an example of a nice achievement, which is interesting both because it brings margin improvement and it's also a good example of what we are doing in sustainability with innovation that plays an increasing role in our lean program. So in our Residential plant in [ Baafs-Vijve ] in Belgium, we rolled out what is called in-house regranulation of PP yarn waste, where we actually reuse PP yarn that otherwise would have been discarded. So the CapEx there had a payback of less than 2 years, and the regranulation materially reduces our cost of raw materials. Also, it improves our environmental footprint, and we estimate the potential there to use 1,000 tons per year of waste in our SBV plants. We are also exploring potential of further PP waste reduction in all our plants. So with this example, let me conclude by saying that NEXT is well on track, although as Cyrille mentioned, with a delay due to the uncertainties of the pandemic and some investment timing. So Cyrille, I will now give you back the floor.

Thanks, Emmanuel. So I'll move to Page 11, talking about sustainability, and this is our second strategic priority. And we're quite excited with the results that we currently can present. So I won't talk about health and safety -- our health and safety commitment because we talked about just a few minutes ago. But our sustainability strategy is an integral part of our business strategy. The primary goal of our product development process is to increase the level of recycled content and make products easier to recycle and therefore achieve a fully circular life cycle. Our commitment translated in the third quarter of 2020 in some important milestone. During the summer, our Belgium sales business, Modulyss, was awarded Cradle to Cradle certified platinum, gold and silver certificate for 127 products. Our Cradle to Cradle certified products are CO2-neutral, following the core initiative, setting the standard for the floor industry. In September, Modulyss launched a new circular backing to Cradle to Cradle certified gold award ecobacking -- EcoBack. EcoBack is a PVC and bitumen free and has a minimum of 75% recycled content and is recyclable at the end of the carpet life. In Rugs, our sustainable products with a minimum content of at least 40% recycled material or single material rugs already account for 17% of the division quarterly revenue. We already have 10 sustainable collections. On the operational side, Bentley successfully completed the NSF/ANSI 140 audit, which is the highest U.S. standard of environmentally responsible carpet products. The audit addressed the 3 aspects of economic, environmental and social -- societal through supply chain and assure sustainability over our products' full commercial life. These successes show Balta's commitment to have a positive impact on planet and people by establishing a circular economy on the flooring industry. Moving to our third priority, digital transformation at Balta is accelerating, and this is on Page 12. For Balta, the digital transformation encompasses both managing customer relationship and bringing operations, logistics and planning to the next digital level. Let me provide you with 2 examples of better digital customer relationship. First one -- first example is in the third quarter, we strengthened our social media presence with a strong focus on architect, designer and influencer to support our direct route-to-market approach. Second, our physical fairs and events were canceled by COVID-19 restrictions, we organized virtual events to launch new collection digitally with digital showroom tours, webinars and digital brochures. Third, we enhanced our digital tools for online sampling order books in Bentley and Modulyss. The latest software allow us to create highly -- high-quality rendering of our carpet tiles. That was for our customer relationship. And in production and logistics, we have launched an integrated sales forecasting tool available on the mobile device of all our sales force. This online data feed materially improve our production time. It will fully -- it will be fully operational in H1 2021. We developed as well an integrated solution to predict maintenance more accurately. And all that, obviously, what I'm explaining has some -- will be part of NEXT and has some impact on NEXT. Our pilot program for that digital integrated solution maintenance will be -- have been tested in the plant over the summer. This is part of our next program and entails significant savings. It will be fully operational in all our plants of the group in Q3 2021. Finally, we rolled out the bidding platform for transportation, materially reducing cost and time. With that, let me give the floor to JC, who will walk us through the -- our strong results for the third quarter of 2020. JC, the floor is yours.

Yes. Thank you, Cyrille, and good morning, everyone. Turning to Page 13 for the third quarter revenue bridge. As already highlighted by Cyrille, the third quarter was a strong quarter for Balta, while the second quarter was heavily affected by the COVID-19 lockdowns, especially April and May and stores were partially closed, we saw shops reopened in the third quarter and demand coming back strongly, in particular in our Rugs division. Our third quarter revenues were EUR 144.4 million, a year-over-year decline of 7.2%, while a huge increase versus the second quarter, an increase of nearly EUR 40 million or 35%. Revenues fully recovered year-over-year in both our Rugs and our Residential business, including a material year-over-year increase of 11% for Rugs. Commercial will take somewhat longer to return to more normal levels, but remains more or less stable at current levels. In Rugs, third quarter revenues were EUR 48.3 million, 11% up versus last year. Especially, our Rugs U.S. business showed a strong recovery versus the second quarter and outperformed last year's third quarter. Also, our U.S. e-commerce business continues to grow. Although year-to-date, e-commerce sales increased strongly to EUR 8 million, profiting amongst others from the COVID-19 situation, it remains impaired by fixed cost, as the critical mark has not yet been achieved. Our Commercial business declined year-over-year by 23.7% to EUR 44.5 million. While due to its nature,our Commercial business remained more stable during the first COVID-19 wave as projects continued to be executed and continue to be completed, we experienced deferred lead times as well as more cautiousness on starting new projects. While the overall commercial market is a bit more cautious, we see that our direct go-to-market approach continues to deliver. In Residential, revenues also rebounded to EUR 47.1 million, in line with last year's third quarter. We benefit from solid demand in the U.K., in France, in Benelux, representing also for Residential, a strong recovery versus the previous quarter. In addition to the substantial sales recovery, the share of higher-margin product continues to increase steadily and is now at 40% of the division's revenues for the third quarter. Turning to Page 14 on the third quarter adjusted EBITDA. Despite the overall economic environment still being affected by COVID-19, we achieved a consolidated third quarter adjusted EBITDA of EUR 21.8 million, up by 26.3% versus the comparable period last year. Year-over-year slightly declined revenues. This represents an adjusted EBITDA margin of 15.1%, up 4% year-over-year from the 11.1% during the third quarter of 2019. All divisions continue to benefit from strict cost control as well as implemented saving initiatives, resulting in cost savings of around EUR 4 million compared to the third quarter of 2019. In addition, with average selling prices slightly increased versus last year, lower raw material prices also supported the EBITDA margin increase. Rugs adjusted EBITDA in the third quarter was EUR 6.9 million, up EUR 2.6 million -- up from EUR 2.6 million in the same period last year. The adjusted EBITDA margin increased strongly from 6% to 14.3%, while last year's margin was extraordinarily low, being negatively affected by one-off items. In the third quarter, we experienced strong positive impact from higher volumes, higher plant utilizations, better product mix, lower material costs as well as strict cost control and NEXT initiatives. Commercial adjusted EBITDA in Q3 was EUR 7.1 million, down from EUR 10.5 million in the same period last year. Despite the material COVID-19 related volume drop, the adjusted EBITDA margin remains fairly stable at 16.1%, underlining the strong resilience of our Commercial business. We also adjusted our mode of operations to the current business environment, benefiting from introduced fixed cost savings made in the U.S. and Europe as well as the positive effects coming from our NEXT initiatives. Residential adjusted EBITDA amounted to EUR 7.3 million. The adjusted EBITDA margin of 15.4% was substantially increased versus the 7.5% margin achieved in the third quarter 2019. Residential benefited from NEXT initiatives, strict cost control and lower raw material prices as well as the before mentioned continued increasing share of higher-margin products. As we started seeing raw material price benefits supporting P&L margins during the third quarter, we expect lower raw material prices to remain as long as the COVID-19 driven depressed oil demand and therefore, lower oil prices, persist. Considering it typically takes between 4 to 6 months until the raw material price reductions become visible in our P&L, we expect to see positive margin impacts resulting from lower raw material prices to sustain well into 2021. Moving to Page 15, third quarter cash flow. As already announced with the training update on October 9, we hold a Q3 ending cash position of EUR 117.9 million, including EUR 72 million drawn under our revolving credit facilities. This compares to EUR 87.5 million at the end of the second quarter, and therefore equals an increase in cash of EUR 30 million during the third quarter. As can be seen on Page 15, this strong cash increase is largely a result of the strong business recovery outlined previously, tight working capital management as well as disciplined CapEx spending. With a CapEx of EUR 4.6 million for the third quarter and EUR 16.5 million year-to-date, we remain well within our guidance of below EUR 30 million provided earlier this year. While we have restarted NEXT as well as some other projects with short paybacks, namely mostly below 2 years, we might incur a bit higher cap during Q4, but we expect to end the year more in the low to mid-20s. However, the key driver for the remarkable positive cash flow is our tight working capital management, which added nearly EUR 30 million during Q3 after having contributed already EUR 17 million during Q2. The working capital improvement mainly relates to 3 areas: first, inventory reduction. We reduced inventory levels, driven by volume reductions as well as raw material price reductions year-to-date by more than EUR 30 million, of which we consider around 50% to be sustainable as a mix of structural improvements as well as reduced raw material prices. In the third quarter alone, we managed to reduce inventories by EUR [ 15 ] million. Second, trade receivables, trade payables resulted in a positive third quarter cash flow of around EUR 10 million and largely reflects the special COVID-19 situation in 2020 with lockdowns during Q2 and ramp up during Q3 as well as respective collection and raw material replenishment cycles. The year-to-date cash impact is close to 0 as structurally, as of now, we do not see material changes in payment terms, factoring levels or bad debt. Third, other working capital contributed to around EUR 5 million in Q3 is largely related to the deferral of social security payments and will reverse during December when the governmental scheme ends. Moving to Page 16, net debt and leverage. Our net debt position, including EUR 40.4 million of debt related to IFRS 16 amounted to EUR 281.4 million at the end of September. Excluding the IFRS 16 related debt, net debt stood at EUR 241 million, a decrease of EUR 36.2 million versus the second quarter. The reduction in net debt is primarily driven by the EUR 30 million -- EUR 30.4 million improved cash position as a result of the strong recovery in sales in combination with the achieved working capital improvements during the third quarter, as outlined earlier. Therefore, resulting from the increased EBITDA and reduced net debt, our net leverage for the third quarter decreased considerably from 5.9x at the end of Q2 to 4.7x and remains well within our covenants. Similar to the second quarter, Balta did not make use of any potential EBITDA adjustments as precautionarily agreed with its lending banks for the impact of COVID-19. In line with the comments made earlier, in respect of the sustainability of working capital improvements, we do expect parts of net debt reduction to be sustainable, while other parts will reverse over the next quarters subject to the surrounding business environment and to seizing of governmental measures. Moving to Page 17, financing structure. Following the early repayment of our EUR 35 million short-term loan in the first quarter, we focused on the extension of the existing European RCF facilities, which we successfully achieved and communicated to the markets during October. As highlighted in the communication, the agreement extends the maturity date of the Super Senior RCF facility from August 2021 to at least June 2022. In addition, already agreed on the contract is an automatic mechanism that extends the maturity date further to June 2024, subject to a refinancing or an extension of Balta's senior secured notes, which for the time being, remain due in September 2022. As communicated in the third quarter press release, the transaction closed earlier this week, well ahead of schedule. I have to say, I'm very pleased to have received the strong support from our existing banks, especially as they know our industry and its long-term prospects very well and have been very supportive during the RCF extension discounts. With the RCF extension signed and closed, we now have gained additional time before any material maturity becomes true, which will be earliest June 2022. And we will use the time to continue to review our capital structure options. With that, I will give the floor back to Cyrille for closing comments.

Thank you, JC. So before we move to the Q&A, let me conclude this third quarter earnings presentation. So first of all, obviously, we had a good third quarter, and our results are strong. We saw full revenue recovery in Rugs and Residential versus Q3 2019. Our Commercial business is still impacted by COVID-19. In Residential, our strategy of focusing on higher-margin products in combination with NEXT enhancement action is paying off through improved margin. Our Rugs business more than doubled its adjusted EBITDA margin versus Q3 2019. Our U.S. revenue are well above last year and e-commerce business continues to grow, but is still burdened by its fixed cost until we reach critical mass. Commercial saw more extended impact from COVID-19 in the third quarter. In spite of the volume drop, the adjusted EBITDA margin of 16.1% was only moderately down versus Q3 2019, thanks to fixed cost savings and the positive effect of NEXT initiatives in our U.S. business. Overall, we are seeing the same trend for October. With the NEXT initiative in place, we expect material earnings enhancement in the next year albeit with a bit of delay due to the short-term uncertainty created by the pandemic. While strict working capital management resulted in sustainable inventory savings, our cash position of almost EUR 118 million at the end of the third quarter provides us with a strong buffer for the next months. However, macroeconomic conditions remain uncertain, and we are keeping a close eye on the COVID-19 development. Based on what we know today, we're confident on how to manage the current second wave. As mentioned before, we have successfully handled the first wave. Our plants and other facilities have been upgraded and are COVID-19 safe. We expect no cliff in our order book as customers confirm their orders as their inventory is low. Finally, we entered the second wave with a strong cash position and a deal with -- on an extended RCF maturity, both providing us with cash comfort versus the first wave. So thank you for listening. I would open now the floor for questions if any -- if we have any questions.

[Operator Instructions] The first question comes from Wim Hoste from KBC Securities.

Then 2 questions from my side, please. First, on e-commerce. You gave some numbers in the presentation under the NEXT initiatives showing, I think, EUR 10 million additional revenues in the last 1.5 years or last year and 9 months to be more precise. Can you maybe split them between U.S., Europe and also what's your kind of projection going forward, certainly for the U.S. part? And then by when could we see full fixed cost absorption and a shift to profitability for that U.S. e-commerce business. So that is kind of the first question. And the second one is on the NEXT savings. You highlighted also in the presentation that there were roughly EUR 10 million savings captured overall. Can you explain what the momentum will be on the remaining EUR 6 million savings? Will these be gradually spread over the remaining time frame until end of next year? Or given the kind of stoppage of initiatives in the second quarter, will there be some hockey stick effect towards the end of next year, for example? Can you give some comments on that also, please?

Thanks, Wim. So this is Cyrille. I'll answer a bit on both questions, but the more detail will be answered by Emmanuel. So on the NEXT side, the savings on EUR 10 million overall, what we have said and is obviously NEXT has been restarted at the early July. But however, what we have done is delayed part of our investments. And by delaying part of the investment, obviously, it has been delayed as well some of the savings. Emmanuel will go more detail into that, but if we have more detail. But we won't share the full numbers, but we can expect some savings in 2021, but as well flowing in 2022 a bit as well. On e-commerce, do you want -- Emmanuel, do you want to take over on the NEXT savings and then you can answer the second question after.

Sure. So on the net savings in Q3, we realized close to EUR 1.5 million just on Q3. Obviously, for some initiatives, it took a little time as we resumed the NEXT initiatives. I can just give an example with a robot that we've installed, commissioned in August and which took a bit of time to install because of COVID, and we are now seeing the full benefits of that and we expect to see the full benefits for one of our largest customers. So we are not, in the third quarter, completely at the full run rate. On lean, certainly, we expect to continue improving the level of lean initiatives. And we have largely caught up with some of the lean savings that we were not able to realize in Q2 or we will have for this year.

Thanks, Emmanuel. And so on the first question, Wim, on e-com, we won't split U.S. and Europe because we don't want to do that. However, what I can tell you is the U.S. side, we have multiplied by 4 what we're doing last year. So it's a significant improvement. And I would expect that kind of hockey stick to continue next year. And by next year, we should be able to say that -- we have a significant warehouse there. So I'm expecting by the end of next year to be able to absorb all the fixed costs that we spend in U.S. Emmanuel, do you want to add something on the European -- U.S., European side?

Sure. So we have a base, a platform -- an existing logistical platform in the U.S. that is designed and set up to process and ship a lot bigger volumes than we are today. So this -- and we see a quite impressive growth, particularly from pure players where we operate on a first-party basis or vendor basis. And in Europe, we are going with a slightly different strategy, which is more gradual and leveraging the existing partnerships that we have on platforms and with our existing omnichannel resellers, but we see good potential there as well.

The next question comes from Maxime Stranart from ING Bank.

I have 2 questions as well. First of all, looking at Residential and the new lockdown decided in the U.K., I would like to know a bit more what is your expectation in the fourth quarter of 2020 and also the first quarter of 2021? And secondly, on the raw material side, I estimate that was quite a tailwind over the third quarter or do you -- and -- well, if you expect it to normalize, when do you expect this to materialize?