General Electric Company (GE) Earnings Call Transcript & Summary

Good morning. I'm Andrew Obin, Bank of America's multi-industrial analyst. We're opening up second day of our Global Industrials Conference with GE. We are very lucky to have with us Carolina Dybeck Happe, Company Senior VP and CFO. I think all of you know what GE does for a living. It has become a simpler company as of last week. I think Carolina has some prepared remarks, and then we'll go to Q&A. For those of you on Veracast, feel free to put in questions, and we'll try to accommodate as many of them as we can. And I have questions of my own. And with that, I'll go over to Carolina. Good morning. Thank you for joining us. Take it away.

Good morning, thank you. It's really good to be here with you virtually, but still. I'll start by saying we shared a lot of news recently and as you said, Andrew, GE is continuing the transformation to becoming a more focused, simpler and stronger industrial company. Before industrial businesses, leading in energy transition, precision health and the future of flight. We are simplifying our structure and significantly derisking trust building on the momentum that we've seen in the last couple of years to drive sustainable improvement across performance operations and culture. Altogether, we're confident that the actions are setting us up to deliver long value -- long-term value for you, for our customers and for our [indiscernible]. So let's start with the news. Transaction to combine GECAS with AerCap. It's really a significant catalyst in our journey to focus on our core. It -- I will have to say, dramatically simplifies our reporting structure going from 3 columns to one column financials after we close. And the more than $30 billion consideration includes 46% ownership stake, right? So it gives us a cash to reduce debt immediately upon close and we're investing in a strong partner to give us upside on our equity as the sector recovers. What this does is it gives us a path to significantly derisk GE and achieve our leverage target of less than 2.5x net debt to EBITDA, including the GE Capital debt over the next couple of years. If you look at the next slide, there's a lot of numbers here. But in our conversations last week, this was clearly an area of interest. So I wanted to take a few moments today to give color on this and also clarity on our balance sheet. Maybe this is more reminder to start with, our starting point here already based on multiyear effort to strengthen our position, right? We reduced debt and factoring by $37 billion over the last 2 years. We have a number of options given our ample sources to bring down gross debt below $45 billion. So let me take you through this one sort of illustrative example, and it's worth noting that for purpose of this slide and our reporting, our gross debt and leverage metrics are closely modeled by the S&P. So let's start with 2021. So we expect to reduce $5 billion of factoring, strengthening our businesses operational cash management muscles. We also expect to pay down debt maturities coming in the year, plus a small part pension runoff. So that's another four. Then right after the GECAS debt closes. What you will see is a net increase of GE debt as capital debt and assets are consolidated. But this is paid with actions to deleverage, right? So we [indiscernible] for $25 billion of bonds with the cost based on the market value of the bonds and market premiums, and it depends really on where the interest rates are at that time. To do this, we have ample sources of cash. To start with, our existing $37 billion of liquidity, plus the $24 billion of cash and $1 billion of notes on cash coming from closing the GECAS deal and not to forget the 2021 Industrial's free cash flow. You can take the midpoint of our guidance there, for example. I would also say, we have assumed that 1/3 of the conservative case for the remaining equity stake in Baker is included in this calculation. Ultimately, we're executing more than $34 billion of debt reduction actions. It puts us temporarily at $70 billion of consolidated gross debt with $25 billion of GE cash on hand post close. So it gets you sort of to the middle of the pit. Then going forward, post close, we'll have a number of paths to further delever and I'm showing here, basically a reduction of total debt by additional $25 billion, and it's a mix of debt and pension. So over the next 2 years, we expect to pay down around $10 billion of debt maturities that we will have, plus an additional $15 billion of deleveraging actions. And that, in here, we've been conservative, so we've assumed that it's all cash, and that would be used for a mix of debt and pension. And again, we have ample sources of cash to do that. First of all, we expect our businesses to be well underway to the high single-digit free cash flow margins in line with our guide. You can pick your value here. And we've only added conservative use of both Baker and AerCap equity proceeds. That puts us below $45 billion of consolidated gross debt and with the $10 billion to $15 billion minimum cash on hand. Clearly, with these sources of cash, relative to the uses that we have, we will have significant resources to deploy back into our businesses and for our shareholders. And that's also why we've commented on that specifically last week, and that's why I'm mentioning it here as well. And I think you can also hear from my comments that we see this as a conservative set of assumptions, and there are many variables that can come into help here to reach this faster. And I'll get more into that on the next page. So if we move to the next slide, and this is really about debt composition, right? So I thought it would be helpful to give a bit more color on the composition of our total debt. Again, this is in line with the rating agency's definitions close to S&P. So you choose how you want to look at it and what [indiscernible] you want to include and what you find most meaningful, but I wanted to show you all the pieces here. So our current $49 billion in Industrial debt includes $24 billion of borrowings and about $20 billion of pension, plus some operating leases on our preferreds. GE Capital's current $55 billion of debt includes $48 billion of borrowings and $7 billion related to factoring. So after the GECAS deal closes, and the first consolidation was, I spoke to on the prior page, the composition would basically be only $2 billion of factoring, slightly lower pensions with the pension roll off, and $43 billion in core borrowings. This then includes the $21 billion of sort of legacy capital debt, which is matched by $21 billion in capital assets. And I think this is an important point. So we talk about $21 billion of debt and $21 billion of assets. And within that, more than half of the assets are highly liquid in the near term, cash and the AerCap stake. In the 2023 plus debt composition, clearly, our borrowings declined significantly, and so does our pension. But we have to keep in mind, thinking this is 2023, the actual mix will depend on rates and the actual -- we basically, we decide to take closer in time. And it's going to be consistent with our targets and our economic framework. So for illustrative purposes, we've put in $15 billion on pension and $25 billion of debt as a reasonable case. So basically, there are several paths of achieving our target structure in this time frame and it's worth commenting on the sort of larger variables again. First, significant core earnings improvement to support our high single-digit free cash flow and guide. Second, pension. Any impact from higher interest rate would be a benefit, right? So if I look where the rates are now, and if they were to hold at that level, our deficit would be lower by $4 billion to $6 billion, and that's without cash, right? We also see a possible upside in both Baker and AerCap equity positions, right? In this construct, we have taken a cut on that. In the end, we will sort of monetize and fully liquidate both of those positions, as we've talked about. Another area is what cash do we need to run the business? We've talked about now needing less than $13 billion, but we do see more opportunity here with the continuous work that we have and the focus on linearity to get to even lower level. And again, this profile gives us significant room for investments in the businesses. If you take the last slide, I would just finish by saying that last week was really originally about our outlook. With the deal announcement, a lot of [indiscernible] on the deal and what it does for GE. So I just wanted to take the time to acknowledge that our CEOs across the businesses and what they presented last week, they gave a lot of important color on our achievement so far and on the road forward. Listening to them, I'm truly excited about our future. And our leading businesses in power, renewable energy, aviation and healthcare and the opportunities we have there. We are truly leading in some of the most important markets and tackling the world's biggest problems. Services remains a core strength, 80% of backlog and 50% of revenue is a key growth area for us. Innovation. We continue to innovate, and we have really exciting technology that we're sharing with you in the world. And all of this is really sort of building on our foundation, where lean and continue decentralization is happening. And the momentum is there. Really, I've seen it first-hand. So together, all of the factors will help us unlock upside potential and deliver value for the long term. And this includes achieving organic growth, margin expansion and for that high single-digit free cash flow generation. So I'm personally very proud to be helping to lead the GE team at this critical point in our transformation journey. And with that, Andrew, I'll hand over to you for questions.

Yes. Absolutely. So thank you so much to everybody for joining us. As I said, feel free to ask questions on Veracast. We have a lot of participants. I think this is the single best attended session of any company that I've ever hosted in my career, looking at [indiscernible] with that. No pressure. But look, I think we've gotten a lot of questions, and I think I know what you're going to say, but just to clear it out, if we look at your net debt-to-EBITDA calculation, the midpoint seems to be around $14 billion, which is quite a bit higher than consensus. Look, I know that, that's sort of not how you sort of approached it, but still, it's there. So maybe we can talk, a, about the key buckets of operational improvement that we should be thinking about over the next 24 months? And then also free cash flow bridge into '22 and '23, what underpins your assumptions there and in particular, what are the key working capital opportunities? So key operating buckets? And how do you think about working capital over the next couple of years?

Yes. So maybe if I start with the comment on EBITDA. The structure of the page was not really there to back in into the EBITDA. It's more about showing how we can significantly deleverage and have a lot of buffer left, right? What I do think is really, really important is you're comment there on free cash flow as well. And I sort of see the EBITDA improvement as part of us getting to the high single-digit free cash flow margins, right? And if we look at where we were in 2019, we talk about revenue levels around $85 billion. And you talk about high single-digit free cash flow, the midpoint gets you to 6 -- between $6 billion and $7 plus, plus billion, right? As I said sort of overall, clearly, it's going to be a combination about top line growth, coming back to those levels, right? But also with the bias towards services, so pushing the mix more towards services. And then the other part is really different cost-out actions. And it's both within sort of COGS and the variable parts, but also on the overhead. And the combination of that driving healthy profit that then converts into cash. And on top of that an efficient working capital management. Maybe a bit of sort of almost -- when you look at that, you always have to look at it business by business and then sum it up. So when we look at the path to high single-digit free cash flow, and obviously '22 is sort of an important milestone on that journey. But if you just look at the path, if you start with aviation, we were sort of high-teens op margin before COVID hit. And from what we see and the combination of our actions, including structural cost out strengthening the business, pushing on services and innovation. We do expect to get back to that $4 billion of free cash flow that we had before COVID hit us. Health care. Well, healthcare, we don't have BioPharma anymore. But as you saw last year, in 2020, we still have [indiscernible] cash flow even without BioPharma. And Kieran has talked about having a healthy top line growth there and investing in organic growth, right? And by doing that, expanding margins with 25 to 75 bps per year. Add a normalized cash conversion of that to almost 100%, and you get the good piece of the puzzle there. And then power. So within power, the main one -- the big one is Gas Power, but also our Power Portfolio. And in Gas Power, Scott has been now talking about high single-digit operating margin, continuing productivity but also cost out on the overheads. And I would say, for both -- or all the parts in power really pushing services as well and focusing on growing services and having better margins on services. And when we talk about Gas Power, we also talked about the healthy cash conversion there, let's say, 90%. And what also happens with the Power Portfolio restructuring, finishing that, you don't have the restructuring cash out and you also have a healthier business combined there. Finally, Renewables. I would say it's all about profitable growth in onshore wind, turning offshore wind orders to actual business as well and then we have the turnarounds in grid and in hydro, that we continue to improve the overall performance here. Finally, just corporate continuing to streamline and becoming a smaller piece of the total. And if you add all of that up and you look at sort of our -- this year's guide, midpoint of that $3.5 billion versus that $6 billion to $7 billion plus, that really is a clear path of getting there. Your second part of the question was on working capital. So the way I see it, first, I would just start by saying, of course, working capital has a correlation with volume, right? So to grow organically, use more working capital versus decline and that goes for us as well, right? But what we have on top of that is we have the opportunity of improving our processes, including the processes to drive or reduce working capital. So I do see working capital as a really good way of becoming more efficient and we saw some of that in 2020. You'll see more of that in 2021. And in a low growth environment and a significant opportunity to improve, that's why you see a big chunk of our cash in '21 coming from improved working capital. I would say as the years go into '22 and '23, I see opportunities to continue to improve working capital, especially on the inventory and on the receivables side. But as top line comes back and we see organic growth, that improvement will help offset the working capital growth that you would see in that environment. So that's really the combination of both.

So just before we get into more operational stuff, and specifically, I definitely want to hit the whole services story. But just on deleveraging, I think you sort of highlighted the pension assumption, for example, already impacted by the existing changes in interest rates. So I just want to make sure I nail the things right. It's that market value of Baker Hughes stake, its potential appreciation of AerCap, it's the impact of cash on pensions, it's potential operational improvement that's not in the numbers. What else am I sort of missing in terms of the potential buffer buckets for delevering. Just descriptive, you don't have to quantify them?

No, no, you have the different pieces there, right? And I do think it's important that -- well, obviously, have our starting point of cash as well, right, with elevated cash levels to start with. And I did mention in my opening remarks, I did mention that we've talked about $13 billion as being a lower number than historically that we need to run the business, I would see that improving as well in that time frame.

Got you. That make -- and we have gotten a couple of questions on that, sort of just you did highlight, and I think Larry spoke about it, but people keep asking, insights into the timing of the AerCap deal? And why did you choose to collapse the balance sheet now? And specifically, what was an internal debate around keeping a stand-alone GE Capital versus combining it as the GECAS, AerCap merger discussions advance because there are costs associated with doing it, right?

So if you start with the deal itself, I would say that there were actually a couple of things that needed to come together for this deal to happen, right? For us to be able do it. The deal itself, it's clearly, for us, a transformative transaction, both on simplifying and derisking and us becoming an industrial core. So I'll talk about that in the second part of your question. But if we look at why the GE Capital and why now? I would have to say, to start with, to be able to combine GECAS with AerCap, I mean that's truly a deliver 1 plus 1 equals 3, right? The combination is a stronger, better company, well positioned to serve customers and shareholders. And frankly, we're keeping 46% of the combination, right? So a really good sort of industrial logic in combining those 2. So very happy to see that happen. The other part is really about us and GE. Like our positioning compared to a couple of years ago, even with COVID and with the Aviation the way we are, we are much stronger now than we were before, comes both from the businesses, but also the stability on the couple of the balance sheet areas we talked about, insurance, pension, but also our liquidity balance and looking at the outlook for the businesses going forward, right? So that was sort of us and where we are on this journey. And then finally, the -- I would call it, the debt markets as well, right? So we had favorable debt markets, and this structure really allows us to sort of have both. So we get a lot of cash now to delever and we have supporting rating agencies both for us and for the combined deal, and we seal that to keep the equity part for -- to really be monetized when the cycle recovers. So I would say all of that had to happen for this to happen now, and we're very happy that all of it came together and that we were able to execute on this deal. I think you can tell from our excitement. The other one -- the other part of the question was, what about GE Capital and folding it into corporate? I would say like this, that we've talked for quite a long time now about reducing the capital asset base and reducing that business. And the reality is that the 2 active financial services business is left in GE Capital is GECAS and working capital solutions. And working capital solutions, that is the factoring business that we have within GE Capital. The third one that is active is not really financial services in that context. It's EFS. And EFS, for us, is really about enabling the orders that we have on the Industrial side on the energy, right, specifically. So when the opportunity came to do this with GECAS, we also looked at the last active financial service business in GE Capital, which was WCS. And really, the decision [indiscernible] was pretty clear to do this and to stop that business and really grow like for the operational muscles on working capital in the businesses and really improving also the bill to collect part and sort of improve the strengthening of that muscle and improving the underlying DSO. So that's why we did it. So it was a decision to do it here and now and I would say that it clearly strengthens our business going forward. And when those 2 decisions were made, basically, what's left, there is no active business left. That's when you get to sort of the $21 billion of assets versus the $21 billion of debt. And that half -- more than half of those assets are highly liquid. So you're left with a very small piece, right? And in that context, there is no sort of GE Capital and active businesses. And that's why the decision was pretty simple that now that we could, we would merge it into corporate and also to make sure that we can focus 100% on our Industrial businesses going forward. So we're really happy to be able to do that now.

And as I just got a question from the audience, as interest rates rise as you have been successful in raising your premiums in long-term care business, any opportunities down the line to unwind that? And how do you think about -- how are you thinking about that?

Yes. When it comes to our Insurance, I would say we continue to run it by actively managing risk and take steps to improve the sort of financial profile of the operations here. I think an important piece is the cost [ claims cards ]. We've talked about that, revealing that in '17 and seeing that hold slightly favorable, frankly speaking. Everything going as expected there. So you saw the LRT, no impact. We recently funded the $2 billion as expected for the CFT. And we have $5 billion to go with the permitted practice through 2024. So I would say we continue to manage it and at the same time, we continue to look at opportunities to reduce the risk, but where it's economically justified, right? So more things there.

So let's jump to operations where I think a lot of value creation that's still ahead. Can you -- so you highlighted service opportunity for GE. So how is your thinking evolving. I think, the management started highlighting a lot more sort of this voice of the customer approach. It does seem to be making a difference internally in terms of changing the culture. Can you highlight sort of specific cases? And how do you think about quantifying the opportunity on services? Because it's interesting to hear because we always perceive GE as this company that was very, very good at services and yet here you are talking about it as being a meaningful opportunity going forward.

Yes. We look, there's always room for improvement, right? Okay. So maybe framing services to GE and where we are now. If you look at us overall, I talked about like half of our sales coming from services, right? It's a bit different though for the different businesses, depending on business model, and I will also say the cycle and the length of the project. So you have Gas and Aviation already today having around almost 2/3 of sales in services. You have Healthcare with around half of sales in services and then we have Renewables, which is around 20% service as a total. And when we look at the different opportunities, and we talked about services growing, I just wanted to be clear that we talked about '21, that is not necessarily -- it's not based on a massive recovery of Aviation. And you heard us talk about that last week, right? It's really about how we are working to grow organically in all the segments on the services side. And maybe to comment on one of them specifically, you talked about gas and what can you do better? What can you do differently? Services is also -- it's also very prone to use lean tools on. And if you take -- in gas, we've talked about how we work on standardizing and improving our processes in executing services and by doing that, it's not so that one size fits all. But what you do is you can sort of modularize the different parts or different pieces of service and how you go about them and do that with lean tools. So basically, do it faster, better. In the end, the customers would be happier and so would we because they will get better services, and we will have better margins on doing that in a different way. So that's why I think we saw a lot of opportunities to improve also, how we perform services, but also making sure that we sell services at every possible opportunity.

You also alluded on working capital. Very interesting how getting rid of working capital solutions could sort of change the thinking at the businesses. I thought it was very interesting. Could you just talk a little bit more about that because that was also an interesting comment. We were at Aviation pre-COVID. We definitely heard some glimpses of that sort of maybe changing relationship with suppliers and more communications, but maybe talk a little bit more what are the cultural changes? And what can be run better in terms of unlocking working capital at GE?

Yes. And if you talk about factoring, so he's never going to forgive me for this for quoting one of our internal CFOs because he said, we used to factor and forget. So if you're billing -- well, everyone's billing their customers, right? But if you know that you'll get the money the day after, so be it, right? You get it from WCS and then you move on with other parts where you can improve your processes. But of course, now it's going to be all up to the businesses to improve the collections. And what we have done is, and we've talked about this, not only in Aviation, but in other parts that it's really about looking at the process end-to-end sort of making sure you bill it correctly and making sure that you have a process of sort of collecting money that isn't, in anyway, set up for maybe not year-end or quarter-end, but really looking at this as a part of daily management. So looking at direct cash flows and making sure that we collect money, not only overdues, but also working with, I would call it, overall DSO to make sure that we have a strong and better relationship here. Gas Power was another example. They also talked about how -- so did Healthcare actually, talking about how the linearity of billing, sort of improving that. So doing that not only at the end of the quarter or a little more end of the year, but actually making sure that you have faster billing within the quarters, and therefore, you'll also have faster collections, right? So it's looking at it structurally into the different pieces of the flow and improving each part of that piece, and that definitely gives results on the DSO. And if I look at last year, of course, it was a year where we had a lot of sort of COVID impact, but all the businesses underlying started to improve their DSO. And Aviation didn't improve year-over-year, but we started to improve in the second half of the year on that. So a lot more to do, but a lot of opportunities here. And once the factoring overhang is gone, we'll start to see that much more clear.

Got you. Maybe we can sort of go to Aviation because that's sort of where we're getting a lot of questions. So GE Shop is a forecast is for slightly better in '21 and then a very strong increase in '22. So 2 questions: A, one positive, one negative. I think our partner, Safran, I think, has been more positive, more constructive on their forecast. I think they're forecasting high single digits. That's part one. Part 2, what about the risks to revenue per shop visit, like smaller scope or increased amount of used serviceable materials. So one positive, one -- one tailwind, one risk.

Yes. So of course, when we compare us and Safran, we don't have exactly the same portfolios, right? We have the narrow bodies, wide bodies, regionals. So there are different dynamics across those segments. We've talked about narrow bodies coming before wide bodies and so on. So you have to take that into consideration. And then you have both, I would say, the flying and the overall behavior from the airlines also varies. But I would say, if you just compare our assumptions on narrow bodies with there, they're pretty aligned, right? Are we talking about sort of the shop visit, both inductions and the scope for 2021 on narrow bodies is pretty aligned. So we're not as far off as it can look. The other question was on the scope of the shop visits. Well, I would say on the scope of the shop visits, there's only part that -- well, you can say like this that is decided by the customers. We can try to influence that, but mainly it's decided by the customers. We actually haven't seen that the scope is significantly reduced. It's more that it's a delay before they come in for services, and they may have to do more. But there's sort of a logic in that, right? You wait longer, you [indiscernible] time and you preserve cash. But then once it goes in for services, it's actually a pretty broader scope of [indiscernible].

So we can sort of talk about just the margins because there are a lot of moving pieces in Aviation. So '21 is for margins, I think, if actually to double on low single-digit revenue growth. But I think there's a lot going on between last year's noncash charges and significant cost-cutting you've done. A, how should we think about sort of cost take out? How much of it is permanent? How much of it will come back? And what's the right way to think about sort of underlying incremental margin for Aviation as recovery normalizes?

Yes. And Andrew, you're right. If you start with sort of 2020 versus 2021, the -- if you look at 2020, we have the 5.6, right? We have the margins we had. But if you adjust that for the mostly COVID-related one-offs, the noncash, you would be on low double digit, right? So even with the slow recovery in 2021, that's why we have said that we expect to come back to low double-digit margins in 2021, right? And then the -- sort of how it moves from there, it's really has to do with the recovery. One thing is how the recovery happens in Aviation and the other part is sort of how does that then affect us. And we talked about the fact that what comes back first is the utilization, airplanes flying right the departures, the utilization comes first, and with utilization comes our billing, and therefore, cash, while the shop visit sort of lags a bit on that, right? So that's why we talked about basically flat shop visits in 2021 and then started to see improvements in 2022. It's sort of the natural lag of that. When it comes to the cost actions, what we talked about last year was big cost actions overall for GE and specifically for Aviation, right? We talked about $2 billion of costs and $3 billion of cash and that $1 billion was Aviation cost and $2 billion of cash. If you look at that $1 billion of Aviation cost-out, you can see roughly half of that is temporary and the other half is sustainable cost-out. So half is sort of the volume drop and the adjustment for that and the other half is restructuring and sustainable cost-out. So you have a carryover effect of sort of that -- part of that $0.5 billion into 2021. Then John and the team also talked about doing more restructuring -- continuing to do restructuring and taking out further cost sort of longer term. He didn't quantify that, and we haven't talked about specifically what that is, but we're clearly working to do more restructuring and have a leaner cost structure in 2021.

Maybe it's sort of -- it's March. I think you guys have provided a lot of updates. But maybe can you just comment how Q1 is trending relative to your expectations before I let you go?

Yes, sure. But I guess to start with it, it's still a tough environment, obviously, for Aviation. We continue to look at Healthcare customer and the spending trends there, right? We have the PTC extension in Renewables. We know how that plays out. And I would say that we see Q1 being in line with our typical seasonality, but we do see the first quarter that we have significantly improved free cash flow year-over-year. We were negative $2.2 billion last year, right? So significantly improved in Q1 and 2021, but still negative. And earnings about breakeven. So that's where we are now.

Got you. Maybe a longer-term question in a couple of minutes. So we did get questions from investors. When will GE be in a position to allocate capital to inorganic growth in your core divisions? It does seem you sort of have provided us a glimpse of this cash cushion that I think has been a year since you've had it. So maybe you can talk about that playing offense?

Yes. I would say it was clearly on purpose that we gave you that glimpse and that we also showed that to the rating agencies, clearly staking that we want to play on offense, right? I would say though that for both Larry and me, when we talk about offense, it's both organic and when we talk about inorganic, it's more about smaller bolt-on to our core Industrial businesses, right? So that's what we're seeing. And I think what's great is that this shows that we have the opportunity to do that very soon. We did a small deal last year. It's a Swedish deal. So I want to call it out on the prismatic, but think about it as a combination of investing in organic growth, if it's R&D or sort of commercial organization and smaller bolt-ons. And with what I showed you today, you can see that clearly room to start to do that rather soon.

And then the last question I actually have, and we've actually had a lot of discussions with investors. Pre-COVID, there was a lot of excitement sort of building over your offshore opportunity in wind. How should we think about that developing over the next 2, 3 years? And should we look at -- offshore fundamentally different on service attachment rate versus onshore going forward?

Yes. I would say that the excitement is still there on the offshore wind. It's stronger than ever. If you look at the deals that we -- the orders that we got last year and beginning of this year, right? So we're really excited about that. First, I would say, the first delivery Dogger Bank 2022, right? We have -- we talked about a 13 megawatt certification and how to move on to 14 megawatts. So I would say, though, that there is a -- you get the orders, but there's a time of when that turns into sales and profit. So we've talked about sort of the mid-20s, but it would be sort of a solid business. So it's clearly ramping up and I would say it's growing faster than ever but it'd be a couple of years before we have meaningful numbers for us within Renewables.

And should we think about offshore having more service business than onshore structurally because that seems to be the excitement?

If you look at just simple fact that onshore is onshore, while the offshore one is out far, far out in the water, of course, there's sort of increased scope of services on that. And I think what's important for us is to make sure that we work with our customers and have a good value proposition to add services. You can say -- I mean, this is all going to be very new installations, right? So it's going to be about services versus risk, right, and how -- what we would do with the services and in the other businesses would have the same connection here, right? When they actually -- things are new, newly installed, it also means it takes a way before they need services though. So one thing is to have a service contract attached to it. And then when -- it will take a while before the action needs to be serviced. But over time, that's going to grow like the onshore wind.

Well, Carolina, thank you so much for joining us. I believe we're out of time. I try to incorporate folks' questions online as well. So thank you to everybody for joining us. And Carolina, thank you so much for making time for us today. Thank you.

Thanks for having me with this big crowd. Speak to you soon, again.

Thank you very much.

Bye.

Bye-bye.