FLSmidth & Co. A/S (FLS) Earnings Call Transcript & Summary

I would like to welcome everybody to the FLSmidth Interim Report Presentation. I am today joined by Roland Andersen, our group Chief Financial Officer. And if you look at the pictures, I look actually quite happy in the picture because I'm very pleased today that we can actually start to show and demonstrate some potential of what we have for the FLSmidth performance in the coming months and years. And that is especially visible in the legacy FLSmidth numbers. Roland looks a little bit more serious, and he knows that we need to still do a bit of a cleanup in the company. We setup a noncore business segment. We need to do performance uplift for the formatives and crew part of the portfolio. And then of course we need to meet our synergy targets based on our commitment already next year. Pay attention to the forward-looking statements and caveats here in the small print. The most important highlight of the quarter is that mining service order intake grew by more than 50%. And out of that 53%, 46% is from FLSmidth legacy business and then difference is then from mining technology. There is very significant growth. And why we are growing so fast is twofold. Our supply chain works extremely well. We haven't had any major issues in our supply chain for spares and wears at all. Customers are happy with our technical support and support at the sites. So closest to customer support of the operations and supply chain is supporting fast growth in the service business. And our service business line is up and running and they have credit plans for the long-term growth and performance. Then regarding adjusted EBITA. For the quarter, it's 10.1%. From my point of view, it's a decent result, especially given the fact that underlining legacy FLSmidth performance falls around 12.1% and up -- TK numbers are diluting that profitability by 2 percentage points. And we have planned for how to improve that performance. But that is demonstrating potential what we have not only for FLSmidth part of the business, but the future of the mining business as a whole. Cement performance continued as we've been forecasting and predicting and its nice steady 3% EBITA margin. And we also know that there's more potential in cement. We've been derisking cement, focusing on the pricing and profitability and is now yielding some early results and positive cash flow from the operations. One of the most significant decisions that we've done over the last couple of weeks was that we established new segment; non-core activities. And we will separate that fully from the core mining business and cement business, and we focus on exiting all the product lines, all the businesses in that segment. We also committed to higher synergy target of DKK 560 million on run rate. And reason for that was that we've seen more synergies and more synergy potential from our fixed costs, has to do with the organization, has to do with the consolidation of the facilities. And we also signed our first sustainability linked loan to support the financing of the company. The order intake in mining was extremely good, driven by the growth in the service. Capital, in my opinion, was still reasonably okay. We've been de-risking a lot, the capital business and all the new orders what we get in are with higher margin and low risk. And also that there is cyclicality between the quarter's timing of the orders, and we announced significant order in quarter 4, which is in public domain. So I have no concerns about capital business growth. On the revenue side, again, service is driving the revenue growth. And again, that is demonstrating our ability to deliver and how well the supply chain works. And of course that is then supporting the overall profitability development as well. Mining EBITA, as I said in the beginning, adjusted 10.1%. And adjustment between reported and [indiscernible] comes from the Russian-related wind-down costs and then TK mining integration planning costs. It's good to also highlight that when you look at the reported numbers, all the Russian wind-down and exit costs are visible in these numbers, which is tracking down the profitability a bit, but it's all visible here. While we established a new reporting segment non-core, there has been questions about the business case of the thyssenkrupp acquisition. So the business case is solid and is based on purchase price, integration cost and exiting NCA and then significant annual cost synergies and also that there's lots of potential in pricing and profitability improvement for remaining mining capital and service business and our expected payback for the acquisition is around 4 years. Just reminding you what we actually got from that acquisition. High pressure grinding of FLSmidth is the new generation technology. We are absolute market leader in this technology, both for the historical installed base and if I look at the orders over the last 4 years. And also that I would like to highlight that the most important installations for high pressure grinding typically are in the hard rock, which means that it's more wearing application. And hard rock application is copper and coal. And in those applications, for example, we have 67 installations, and the rest of the market is about 16. So we're actually leading globally in terms of installed base and orders and especially in the orders of hard rock applications. New version of the high pressure grinding is -- high pressure grinding, what we call Pro is further improving the throughput capacity, energy savings and roll life compared to the previous version. And the positive thing with this one is that you can do a retrofit upgrade to all the existing installations where we are the market leader. In addition, what we got from thyssenkrupp acquisition is a leadership position in Gyratory crushing, both for the thyssenkrupp technology and legacy FLSmidth technology and also in in-pit crushing and conveying. And this also highlights importance that it's not about any single product or any 2 products. It's important to have a full flow sheet capabilities, meaning that you need to have all the products in the portfolio and also SAG mills, bowl mills, depending on the application, depending on the ore, you need to have a full portfolio to optimize the mine process. And the ones who are maybe all the generation in the audience, now the saying what CS was saying in the U.S. that if we don't have it, you don't need it. So basically we have everything in the portfolio of what any mining company can need for the operations. Cement performance has continued at good level and the mix between service and capital is at a healthy level. Capital growth 44%, service growth 4%, and the mix is still 64% for the service. And also in the capital order intake is mainly products, not projects. So we've done same derisking exercise for the cement, and it will yield over the coming months and years then higher profitability and low risk for the business. So this is really healthy and good development for cement. EBITA of 3% is sustainable as we forecasted. And here, if you look at also the healthy development of the increased share of the service in the revenues, which will continue to support our profitability journey. So we also expect this to continue, and there is still some more potential in cement. A few words about the non-core activity segment. 3 first bullet points are the reason why we established this segment. We felt that the products included in this segment are of not strategic importance for the process flow sheet in the concentrator plant. Those products have no or very limited aftermarket potential. And all the product lines included here are loss-making. There was no viable commercial model to turn those around in the foreseeable future. These are all loss-making businesses that we are exiting. We don't take any new orders here. We are honoring the applications, what we have under the contracts. And we are winding down all the businesses as fast as we can while there might be potential buyers for part of the business or part of the IPR, we don't know yet. But this is a business that we will exit over the next 2 or 3 years. Then looking at the backlog. If you are splitting the backlog in mining between NCA and continuing mining segment, there's a backlog of DKK 3.6 billion that will move into non-core segment and non-core organization. And that is coming half from FLSmidth, another half from TK Mining acquisition. But then if you look at the remaining backlog for the continuing mining segment is extremely healthy. 40% of the backlog is service and also the backlog level of close to DKK 15 billion is actually significantly higher than last year without the TK acquisition. So the backlog is at a good level and the mix is really good. Then I hand over to Roland.

Thank you for that, Mikko. So having a look at the consolidated financial performance for the quarter, revenue up by 21% to DKK 5.6 billion, and our gross margin moving forward by 2.5 percentage points to 25.5%. And that all ends up in an EBITA of 5.9% reported. If we adjust for cost of one-off nature integration costs for implementing or integrating TK and also our Russian activity wind-down related cost of DKK 70 million, the group as such had an adjusted EBITA margin of 8%. If we move on and have a look at our gross margin. The gross margin is developing quite positively. In nominal terms, it's increasing both on Q3 last year and also Q-on-Q and also the gross margin is moving forward. And on the right-hand side, we see that the gross margin improvement stems from both our mining business and our cement business. As Mikko touched upon, I think in mining, the regional organization has done extremely well in pushing the service business in close cooperation with our supply chain on a regional basis that has worked well for us in Q3. On cement, the gross margin pickup is even more significant. It's a blend of the reshaping activities from last year and also continued focus on product mix, our geographical footprint in first half. And a little bit the same medicine we take in cement with derisking, increased focus on product sales and less complicated projects that starts to sit in the gross margin numbers. Our SG&A ratio hit 18%. We have in Q3 included the TK Mining SG&A cost base. There's a few costs sitting here, obviously, of one-off nature, the integration cost of TK of DKK 45 million. Certain wind-down cost activities related to Russia, DKK 52 million, and we also have some currency headwind in this bucket. Our combined or consolidated group EBITDA margin also develops in a good way. We are seeing -- we see an underlying adjusted EBITDA margin of 8%, reported 5.9%. And if you look at the right-hand side, last year in Q3 '21, we had a reported EBITDA margin of 6.1%. Last year, we also have a little bit of acquisition costs related to TK planning, a little bit of cement reshaping another of 1%. So Q3 last year equates an adjusted EBITDA margin of 7.5%. Since then, we have increased revenue, both in mining and also in cement that has yielded 2 percentage points. We have increased gross margin as we just touched upon in both mining and cement of 2.5%. Now including TK, as Mikko mentioned, that's diluting our margin of 2% in the quarter for mining on group level that dilution is 1.5% as we put it here. Then we have extra costs in our SG&A bucket, and that leaves us with an adjusted EBITDA margin of 8%. Now deducting our TK Mining integration costs and also the wind down costs of our Russian activities, we ended a reported EBITDA margin of 5.9%. Our net working capital ratio is flat compared to previous quarter, 9.2%, but improved from last year of 10.4%. Net working capital on the right-hand side here is up by DKK 365 million, of which DKK 296 million is acquired from TK. So net working capital are roughly flat on the underlying business and slightly positive actually from the TK acquisition. And that yields us with a positive cash flow for the quarter. CFFO from the group is DKK 476 million. Then we have a small element of investments and then the acquisition sum of DKK 2.1 billion to the TK Group. And if we look at the free cash flow and adjusted for M&A activities, it was positive DKK 433 million for Q3. And that also means that our capital structure remains well within target equity ratio of 37%, and our debt leverage ratio is 0.7x by the end of Q3. So out of the gate with all acquisition-related cash transfer to TK a leverage ratio of 0.7. Then we are saying welcome to our TK colleagues, and we have the first month included in our P&L September month was the first month of ownership. It's a little bit of a special month. It's a stand-alone month, it's the last month in TK's financial calendar year, they do 30/09 financial calendar year. It's the first month under our new ownership. So there's a number of various costs and postings to this EBITDA number that has to do with year-end and also with costs related to transition into FLSmidth. So if we adjust for that EBITDA margin underlying here is more likely minus 5% to minus 8% or so as we start out from Q3. A few other key numbers here, cash transferred to TK 2.1 billion, which is the EV enterprise value that we have also disclosed and net working capital was DKK 296 million and TK generated DKK 52 million in September, and we welcomed about 2,000 new colleagues in the FLSmidth Group. Then we have also done the first cut on our purchase price allocation, the acquired balance sheet. This is our preliminary cut on that. And according to the rules, we have up to 12 months to fine tune this. This is a good estimate on where we think things should be, and there's a bit more detail on that in our Q3 report under Note 9. And then we are repeating our guidance for 2022, as we set it out on 20 October 2022, when we also announced that we would break out our noncore activities in the separating operating and also reporting segment. And this is a little complicated maybe, but our mining guidance here for the full year for the first 9 months includes all our mining activities and for the last 3 months of the year. It's our forward-looking continuing mining business only. But for the full year, we're guiding for that segment, DKK 14.5 billion to DKK 15 billion in revenue and adjusted EBITDA margin of 10% to 10.5% and an EBITDA margin of around 7.5% in that segment. Cement is not impacted by our noncore move of business. So on the 20 of October, we were lifting the top line guidance a little bit to DKK 6 billion to DKK 6.5 billion for the year and also saying that our EBITDA margin for cement will be in the upper end of the previously guided range of 2% to 3%, and we are now guiding around 3% EBITDA margin for the year for our cement business. Our noncore activities will be a segment that is effective from 1 of October, and we expect to turn over about DKK 0.5 billion of revenue in Q4 in that segment, and we also expect to post a loss of around DKK 400 million. This includes a DKK 300 million nonrecurring exit costs for various costs of legal and renegotiation reshaping of the backlog and so on. And if we add all that up for the group, the group will post a revenue of DKK 21 million to DKK 22 billion. We will report around 6% adjusted EBITDA margin, and our reported EBITDA margin will end up around 4% for the year. And with that, I'll give it back to Mikko.

We are proud that we were able to design the kind of a MissionZero flow sheet for the mine in Kazakhstan. So we used all the competencies in-house regarding how to optimize the mine flow sheet. So it's -- and that order was announced in a couple of weeks back, in Q4, but that's really kind of -- we are proud of that order. We are proud of that mine. And it has been also derisked so that we focus on delivering process technology. We also established a consortium to look how to reduce CO2 emissions in cement, together with the universities in Denmark, Germany, Norway and a few other places. Regarding our KPIs, we are doing well regarding Scope 1 and 2 emissions and safety is improving, not yet at the target level, but compared to year-on-year. And we are not happy with our target of -- we're happy with the target, but not happy with the achievement regarding women managers. So we are putting more focus going forward of diversity and then that is not the development that we are proud of. But all in all doing well regarding sustainability and developing MissionZero flow sheet for the mines. Then I would like to welcome you all to the Capital Markets Day in January 18 in Copenhagen. And hopefully you can all join to that event. And then we go to the Q&A.

[Operator Instructions] And we'll take our first question from Magnus Kruber with UBS.

Hello, Mikko. I'm Magnus here from UBS. A couple of questions from me. And I wanted to turn to the TK Mining margin, and Roland already gave us sort of a good update on the, I would say underlying margin in the quarter. I think you said negative 5% to 8% or something like that. It's still quite a bit below the 9 months average of low single-digit negative on EBIT that we talked about a couple of months ago. Is the sort of the underlying profitability deteriorating here? And if that's the case, what's the reason for that?

Yes. Thank you for that, Magnus. And as I said, now we are voluntary this transparency right, it's only 1 month. That's a little bit of a month with a number of different postings. But I think the way we look at TK, we have acquired a part of that business that is healthy and that we will grow. As Mikko talked about, the service business and a number of the products, including the HPGR. And then there's a part of this business that is significantly loss-making. And that part, we will move to our noncore activities bucket as and from 1st of October. And then we will accelerate on -- as a third thing, accelerate our synergy takeout as we have communicated as well. So the big chunk here lies in the mix between service and then the loss-making NCA business. In terms of 1 month only, it's not reflective of any underlying run rate.

Okay. Got it. So -- but even if I calculate sort of what's implied on the profitability on the core TK business, it still looks like it's sort of low single-digit loss making for the balance of the year. Is that right? Or are there too much into those numbers?

Yes, that is absolutely right.

And then I think also you mentioned in your report that you sort of focused a bit more on the products and services and so on in the mining business and stepping away from projects. How sort of was the underlying growth rate in the business in the quarter? And can you also comment on with stepping away from this business, how much sort of would orders have been last year if you didn't sort of take businesses that were a bit more risky just to see sort of what kind of drag we have on orders into next year from that…

So if I look at the continuing mining business, so we just got significant order for Kazakhstan, which is kind of full flow sheet products, everything what we have. And it meant that we are delivering process technology to that particular site. But we don't do any civil or any of the extras. And in reality, we might lose a bit of empty revenues, depending on the site, 10%-20% of the extras, but those extras are high risk and typically loss-making end of the day. So I don't believe that we really lose business too much based on the approach because we still deliver full flow sheet. We keep the process guarantee for the performance, but we are just pushing out everything which is not related to our core technology. So in that sense, I don't feel that we've lost any orders as a result. We made a couple of conscious decisions this year not to take few orders, and that was the overall risk assessment of the customer and the case as a whole. And again, if we assess that it's -- there's a potential that, that case would become loss-making, then we don't take it. So -- but if I look at the market share development, I don't think it has -- we haven't lost any markets. We rather have gained markets in many of the product areas. So -- and we are working better for the EPCMs, which is typically most of the capital projects. You have 2 interfaces, you have a customer and then EPCM, which is during the project management. And we work better with them because we don't step into each other's post. So they are doing their bid, and we are supplying process technologies. So I don't think we've lost any business. But area where we have not taken volume is the noncore products. Even before closing of the TK deal be very selective and made lots of noble decision for the ports, ship loaders, end loaders because that's just a loss-making business, whatever orders you take in. So we actually stopped taking those orders to a large extent a year ago. It has not been visible because the market has been good, but we stopped that a long time ago already.

I think maybe just to add a little granularity on numbers, I understand the question. So if you look at the backlog that we are now moving to NCA, that's DKK 3.6 billion loss making. And we're saying we're going to run that off over 2 to 3 years. So that's an average annual revenue of DKK 1.2 billion to DKK 1.5 billion. And maybe that gives a little bit of direction on what we forward-looking will not do. And that is absolutely -- that is absolutely as exactly as we wanted because it's empty revenue and in certain instances, loss-making revenue that, as we said in the beginning, is not strategically important for us. It's not boosting our service and aftermarket business. It has significant execution risks assigned to it and there has been loss-making. So that's the level of reduced MC revenue, if you will.

And we will take our next question from Vlad Sergievskii with Bank of America.

I assume all of them are to Roland place. So you recognized about DKK 1.8 billion of goodwill in relation to GTA deals. And the total price paid was DKK 2.1 billion. That means that identifiable net assets, excluding cash and TK mining were less than DKK 300 million and tangible net assets actually close to zero on my calculation. So given that, how do you plan to pay back TK Mining dealing 4 years, given that according to your own assessment, there are hardly any identifiable net assets. Are you paying more than 100% return on those assets? Or I'm missing something here?

Thank you for that question. We were actually trying to answer that one on the -- on one of the slides that Mikko brought, right. Because the way we see it, we have a cash payment for the business, then we will have cash layout to take out the synergies. And then there will be some cash that has to be paid in the loss-making part of the noncore business. And the benefits that we get from this business is the synergy takeout and it's a service business and installed base that we can grow significantly and also a few healthy products that will complement our full flow sheet offering in total. And that is basically making up the value of why we did it. And in cash terms, we estimate that the payback of this acquisition will be less than 4 years once it's fully synergized. That's how we look at it. Then there's a bit more accounting technical on how you put value on different assets and so on. So I think that is the crunch of why we did it.

Understood. And if I can ask on provisions in TK. I mean, based on your disclosure, there are DKK 600 million of provision seeking in there, which is somewhat higher compared to about DKK 200 million provisions that is in itself recently disclosed as related to their mining business. And basically, 2 questions here. Have you used this purchase price location accounting to basically increase TK mining provisions without impacting the P&L if that's what happened? And also second, related to that. Are those provisions somehow linked to this DKK 1.3 billion loss that you expect cumulatively in noncore or those provisions are on top of this 1.3 loss?

So these provisions when you do the PPA, you do a proper valuation of both your assets and your liabilities. And this first cut on the PPA includes provisions that we need on the projects as they look today and also estimated warranty provisions for a normal payout on warranties. That's what it includes. It does not include future losses, does not include future losses.

And final one from me, on financing actually. Obviously, you have an ambitious turnaround strategy ahead of you. Things costly successful. The question I have is how are you going to fund those costs related to this turnaround? Because on my numbers, you are likely to have cash flow headwind from integration costs, losses in noncore provision utilization, as you mentioned, and likely working capital headwind as you downsize the project business. And you already have close to half of the -- your credit facilities utilized. So, where the funding is coming from? And what's the current cost of this finding? Maybe you will be able to share the interest scores on your RCF right now? That's the final one for me.

Thank you for that, Vlad. So as you can see, we have a leverage ratio of 0.7x out of the gate, which is not huge in any shape or form and well within our capital margin targets or leverage targets. So that's one thing. Second thing, we're actually converting almost DKK 480 million of EBITDA to cash in our current operations. So to the extent we will continue that next year, converting DKK 300 million, DKK 400 million, DKK 500 million of cash every quarter. That will significantly fund the journey. And then leverage expectedly will go up along the way, but not in any dramatic fashion, and we expect to stay within our leverage targets.

Any color on the interest cost right now for you or interest rates you're getting on the RCF including?

We're not disclosing those.

And we will take our next question from Nick Housden with RBC Capital Markets.

My first one related to some of the earlier conversations about being more selective on the mining equipment orders that you're taking. Can you give us any sense of how much higher the average margin of the equipment orders that you're taking now compared to, say, the average order of the equipment orders that are in the backlog, please?

So, we've seen some percentage points improvement in order intake margin. But the bigger thing is that we are not losing the margin in execution. So the issue in the past has been that even with a decent order intake margin, we've been losing revenue profitability or the cost of runs and with the risk. So basically, the quality of the order intake and order intake margin is much better. So it's up a bit. So we are improving there. But at the same time, we believe that we can actually execute on that margin. That has been the bigger issue than order intake margin, if I look back to, yes.

And then looking at cash flow, that looks like a very strong number in the third quarter, but that's almost unusual, I guess, given what we've been seeing from some of the peer group so far this reporting season where cash flow has been weak because of working capital build and then currency and inflation effects on top of that. So I guess, what would be quite helpful if you could maybe give us some thoughts on how we should be modeling that going forward? And just in terms of the balance between building net working capital so that you can actually deliver on the large order backlog that you've got and then the extent to which backlog conversion and rising margins and payment collection will be offsetting this?

Yes. So just briefly on our cash flow. So as some of you will recall, we received a lot of prepayments on a few large orders, Q4 last year. And those prepayments we have actually spent in H1. So that's one thing. Second thing is, like, as you say, other players in the industry, we have built up inventories during first half to safeguard or secure our ability to deliver regionally to the customers, especially in our service business, but also on the capital products. And that we succeeded with that is actually one of the benefits you see in Q3 with a huge order intake that we have seen. That is because we have built that up. That is now being steered a bit more firmly. So we don't expect the inventories to increase so significant anymore. Prepayments have been, to a certain extent, spend and we are now starting to clear work in progress and so on. So expectedly, our working capital will not deteriorate as we saw it in H1. And moving forward, you would expect a working capital level of 10%, 11% of revenue. And that's for the next year or so. Moving forward, if we get an even higher share of service, you would expect working capital go much higher because receivables and inventory is a more significant part of the service business than it has been of the capital business. So for the next 3, 4, 5 quarters, 10% to 11% of revenue, plus/minus. And then on the longer run, if we build up the service business more significantly than we have to do as a ratio of revenue, it could go slightly higher.

And then just finally, on the -- you had the slide on the high-pressure grinding rolls in quite a few of your rivals are talking about this as being quite an attractive market to be in as well. So I guess 2 just quick ones on the back of that. Firstly, how quickly do you see this market growing? And then secondly, what share of your service orders or revenues are related to this business?

So we see steady continued growth in that market. But as I said, it's not -- there's not going to be a revolution in the mining market, and I think that that's not going to happen. It has been around for kind of 15, 20 years. And this has been used in certain applications, but there are also applications that is less suitable. So that's why I was talking about full flow sheet of capabilities, having everything what you need possibly need to have. So regarding the service share, we don't give out the numbers for the individual product lines, but service share of this one is very high. And I mentioned that it's especially high in hard rock applications, and that's why I was talking about copper and gold because, of course, the harder the rock, the more wearing it is for the rolls and for the piece of equipment and the higher the aftermarket. And that's why we are proud that we are kind of dominating that part of the market. But we try to keep maybe some more color on the product line, then in the Capital Market Day. But at this point, we are aligning ThyssenKrupp reporting with our product line reporting and then -- but it's very aftermarket-driven product, especially in Hard rock. And we believe that our kind of leading position in the market in terms of installed base and new units sold, I think we can leverage that one.

[Operator Instructions] And we'll go next to Claus Almer Nordea.

I will first start off with a clarification question. Did you say Roland or was it Mikko that the margin thing in today is 2 percentage points higher than this underlying 12% you delivered in Q3? That would be the first.

I was talking about the top line margin, product margin, basically order intake margin rather than EBITDA margin. So top line margin is improving a bit on capital side, a lot in service side. And -- but then the quality of the order intake is better. What I meant that basically, if we get order intake at as-sold margin, we're expecting that as executed margin will be the same. The issue in the past has been that because of the risk, higher-risk exposure we'd losing too much of that margin between order intake and execution. So capital order intake margin is much better quality than before. So meaning that then it will turn better into EBITDA and then revenue as well.

And then more down that road, could you talk about the pricing power in general between service and capsule orders? What do you see both in cement and mining?

So we've been able to -- if I start from mining, so we've been able to improve in service order intake, top line product margin a fair bit. And that has been on back of the good supply chain. So if the availability and service level is good to the customers, they will accept higher prices. So we've been able to do inflation plus increases total service. And then on the capital side, it has been also been inflation plus, but with the less margin, but on the capital, the quality of the order intake is better. But then in cement, we've been also improving -- we've been improving both in capital and service, also the order intake margin. And that is partially now coming through in cement results that both in service and capital, it has been above inflation.

Then my second question goes to the noncore segment. I'm just trying to figure out how much profitability will improve once exited or divested. I know you said accumulated the value is DKK 1.2 billion. That is a one-off cost, but I guess also provisions for future losses. So what is actually the underlying EBIT improvement per year?

Yes. So that's a good question, Claus, right? This is a very volatile business. But if you look at, for instance, Q4, so in Q4, DKK 500 million of revenue and DKK 400 million of losses were of DKK 300 million is of one-off nature. So that indicates a 20% loss. That's a good guideline for the whole thing. So underlying loss of 15%, 20%, 25%, and then we will have a one-off cost of winding the whole thing down.

And we will take a follow-up from Magnus Kruber with UBS.

Actually was on the same topic there. Could you expand a little bit on what the margin is on the non-core legacy, FLSmidth's mining business? Is it comparable to the 20% that you just mentioned?

I think that the issue is that the also. So if I look at the order intake margins for that part of the business is a bit like a made-up number because there's so much risk in that business that if I look back the order intake margin, then executed margin, they are kind of a mile surpass. So reliability of that number is not there. So if I look at the order intake margin, maybe it has been somewhat in line with rest of the capital business. But in my opinion, it's a bit of an immaterial number because of the risk in that part of the business. So it's not reliable comparison.

But realize this should get negative as well, I guess.

So in that noncore segment, everything is loss-making if we consolidate the numbers by product lines.

And then I want to check if you could say anything about the invoicing patterns in TK through the third quarter. Was it sort of back-end loaded or fairly even in the quarter? Or how did the orders and invoicing develop year-over-year in sort of full Q3 if you do have that for the TK asset?

Yes. So I think the invoicing in TK happened relatively. Even now we've only had them for 1 month, right? But the order intake was about the same level as revenue. And also, we actually generated positive cash flow from operations. So collections were relatively better than we had expected. So invoicing on the service business is going on a regular basis on the projects business or the NCA part of the business, it's driven by milestones. So I think this is not for a lot of use for you, but more than half of their business is now service. So that's a regular invoicing, but the other stuff is more milestone-driven.

And there are no further questions at this time. I will turn the call back over to the speakers for any closing remarks.

Thank you for your time and interest for FLSmidth. I think Roland is fair to say that we are proud of the quarter. I think there are signs that demonstrate the future potential of the company, but we still have a lot of work to do to restructure the company and uplift the performance. So thank you for being with us on this journey, but we'll just press on as presented earlier. Thank you very much for your time.

Thank you.