Georg Fischer AG (GF) Earnings Call Transcript & Summary

[Operator Instructions] Ladies and gentlemen, welcome to the GF Mid-Year Results 2025 (sic) [ 2026 ] Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Anna Engvall, Head of Investor Relations. Please go ahead, madam.

Good morning, and thank you to everyone for joining GF's Mid-Year Results. I'm Anna Engvall, Head of Investor Relations. Joining me today are Andreas Muller, CEO; and Mads Joergensen, CFO. In terms of agenda, Andreas will kick off with an overview of key developments in the first half. Mads will take you through our financial performance and thereafter, hand back to Andreas for the full year outlook. We will finish the session with Q&A as usual. Before we get started, please let me draw your attention to the disclaimer regarding forward-looking statements and alternative performance measures on Slide 2. With that, I will hand over to Andreas.

Thank you, Anna. Also from my side, a warm welcome, and thank you for joining us this morning. Before diving into H1 performance, let me take a moment to highlight what is currently top of mind for the GF management team, including myself. operational execution and excellence, free cash flow generation and debt reduction; and finally, profitable growth. These important priorities shaped our first 6 months as a pure-play flow solutions leader. In the first half, we delivered solid growth with order intake up 15.1% organically in a challenging market environment. We secured several large multiyear customer agreements for mission-critical solutions in fast-growing end markets. We implemented proactive pricing measures to mitigate rising raw material costs. We also initiated fundamental changes to enhance the way we operate. By streamlining the organization, we are well on track to exceed our CHF 40 million Fit for Growth target, enabling reinvestment into areas that support customer proximity and future growth. And the closing of fresh cards towards year-end will substantially contribute to debt reduction. Our work is not yet complete. To further improve performance, we took targeted actions in Building Flow Solutions Europe in Q2 to simplify our product range and sharpen customer focus. The remaining measures will be implemented in the second half of 2026. We are also rolling out supply chain initiatives to reduce working capital and improve free cash flow. Looking to H2, we see a strong order book underpinned by a record semiconductor-related order intake and infrastructure contract wins. As such, we are raising our sales outlook to mid-single-digit organic growth, previously low single digit with an unchanged comparable EBITDA margin of 14% to 16%. Let's now turn to Slide 4 for the mid-year key figures. Sales in Flow Solutions were close to CHF 1.6 billion, reflecting solid organic growth of 5.7%. Comparable EBITDA margin was 13.4% and comparable EBIT margin 10%, in line with our expectations for the first half. We also progressed towards our 2030 sustainability targets. Our sustainable portfolio increased to 77% of sales against our target of 80%, demonstrating how our business and sustainability are closely intertwined. Moving on to Slide 5. We see that Industry sustained last year's performance, supported by growth in solutions for data center and Life Sciences, compensating for a generally weak European industrial business. Sales in semiconductors were stable in Swiss franc. Also, order intake was exceptionally strong. Based on secured projects in Asia, we are confident this business will deliver its full potential over the coming quarters and years. Infrastructure showed strong momentum with 6.4% organic growth despite adverse weather conditions in Q1 and a continued weak Chinese gas market. Buildings outperformed subdued construction markets with organic growth of 3.3%, driven by a strong Q2, particularly in North America, Switzerland and the Nordics. The first half was marked by 2 distinct quarters. Organic growth was minus 1.3% in Q1, largely due to severe weathers in Northern Europe and the U.S. This affected Infrastructure and Buildings, both in terms of growth and profitability as a result of underutilized plants. Growth accelerated to 12.5% in Q2 as we regained momentum with order intake well above prior year levels. We also saw solid growth in buildings with announced price increases leading to selective prebuying. Profitability also improved sequentially driven by operating leverage, product mix and Fit for Growth measures. Moving on to Slide 7. With the acquisition of Uponor and the transformation, we are executing 2 distinct programs to support profitable growth. Through our value creation program, we have simplified the portfolio, optimized our footprint, achieved procurement synergies and continue to realize commercial benefits from customer and channel synergies. At mid-year, we had achieved annualized run rate synergies of CHF 35 million, keeping us firmly on track to deliver CHF 40 million to CHF 50 million by 2027. Launched Q4 2025, Fit for Growth targeted CHF 40 million of cost savings, now raised to CHF 60 million by creating a leaner, more customer-oriented organization. Based on secured savings, we are well on track to reaching our raised target. We streamlined the organization and rightsized corporate functions. We closed production units in China, Malaysia and Oman and exited certain non-core businesses such as marine services in the Nordics. We also reduced OpEx through tight cost management. In addition to certain counter effects, we are reinvesting in promising end markets. We made strategic hires of around 150 people in our growth areas. We also strengthened our technical and commercial sales team to support Building Flow Solutions full initiative. Let's now take a closer look at 2 key areas of reinvestment, our semiconductor and data center businesses on the upcoming slides. The semiconductor industry is gearing up for a strong new cycle. [indiscernible] investments until 2030 are expected to exceed USD 1 trillion. GF is well positioned for this up cycle as a leading innovation partner to the industry. With our new solution, SYGEF Ultra, we are offering the highest purity level. Importantly, the rinse time in a refurbishment is down 80% to only 5 days compared to today's technology. As I mentioned earlier, we have recently signed several multiyear agreements with some of the largest customers, securing a record level of committed orders for more than 50 projects globally. A portion is already reflected in order intake for the first half, which doubled compared to prior year. We are scaling up production to meet this demand. Moving on to data center. Sales reached nearly 20 million in H1 with a strong order book on hand, still primarily in facility cooling. As said before, we aim to extend our presence into the white space where we have already completed several successful proof of concepts. This lays the ground for being part of the next-generation cooling designs. Surging AI demand is driving a wave of investment with global data center CapEx expected to reach USD 1.7 trillion over the next 5 years and computing demand to set to more than double by 2030, exceeding 200 gigawatts. One large 100-megawatt data center, if liquid cool creates an addressable opportunity for GF of around CHF 15 million, supporting our midterm sales target of CHF 300 million for this segment. Polymer-based solutions have several advantages over stainless steel in terms of energy efficiency, installation speed as well as total cost of ownership. On the slide, you can see our new multi-control valve, a mission-critical component for efficient thermal management in the data center, key to winning in this market. This is now included in multiple test installations with customers. First sales are expected by end of year. Before Diving into the performance of each business area, please allow me to take a minute to provide an overview on Slide 11. We have a naturally hedged portfolio across multiple subsegments with an ambition to establish or maintain market leadership in each. Industry supplies mission-critical solutions for diverse end markets, including water treatment, semis and chemical processing. Our key markets are the U.S., China and Germany. Infrastructure provides solutions for water infrastructure, including storm water, potable water and gas distribution. We are strong in the U.S., Europe and Brazil. Buildings supplies hot and cold water and heating and cooling solutions in Europe and North America, serving primarily wholesale, but also the do-it-yourself channel. With that context, let me now move on to the performance by business area, starting with Industry on Slide 12. Order intake was strong, driven by data centers as well as semiconductors, which accelerated to a record level on the back of announced fab projects and multiyear customer agreements. Organic sales growth was 5.7%, supported by demand in the U.S. and parts of Asia, Europe and North Asia remained subdued. Comparable EBITDA margin was a strong 18.8% given significant ForEx headwinds and cost inflation. These pressures were partially offset by pricing actions and Fit for Growth. Looking at Slide 13. Let me briefly go through key market drivers and our differentiators. Our portfolio is aligned with a number of structural growth drivers ranging from water reuse to data center build-out. Our right to win is based on decades of experience in mission-critical applications. Taking semis as an example, we pioneered ultrapure water conveyance 45 years ago. Today, we are the leading innovation partner for the industry and are well positioned to expand our share of wallet with key customers by addressing adjacent areas. Turning to Slide 14. We saw strong momentum in order intake and sales driven by sustained demand for water distribution and storm water systems in Europe and in U.S. gas distribution solutions. Structural issues in the Chinese infrastructure market are weighing heavily on gas and water distribution and [indiscernible] Chinese business and GF's Chinese business is severely affected. We progressed the integration of VAG with a particular focus on capturing cross-sell opportunities by strengthening the technical sales force and joint product management to unleash the potential of VAG. Comparable EBITDA margin was 9%, still shy of our strategic target. Negative ForEx effects and unbalanced production load and raw material cost inflation were partially offset by price increases and cost-saving measures. Going forward, we are confident in increasing the margin by leveraging our comprehensive offering, which I will address on the next slide. Taking a look at market drivers on Slide 15, we see that aging networks and regulatory changes support steady growth going forward. We are well known for being the sole comprehensive solution provider, including for valves with VAG and repair systems. In gas distribution, we are benefiting from the ongoing build-out and modernization of the network, especially in the U.S. In Engineered Infrastructure solutions, including storm water, demand is driven by climate-related flooding, aging networks and regulation. In response, we have brought to market pressure management chambers, which offer significant growth potential and attractive margins. As for Buildings on Slide 16, we outperformed the underlying construction markets, delivering positive organic growth in both Europe and North America despite a weak Q1 due to severe weather. Order intake grew by 7.3% organically with a good book-to-bill ratio. Net sales were up 3.3% organically. In Europe, market conditions have stabilized, and we saw good growth in the Nordics and Switzerland with our heating and cooling portfolio contributing. The Home Depot expansion is well on track with a confirmed target of 100 stores by year-end. The pricing measures implemented from 1st of April contributed positively to performance and led to selective prebuying during Q2. Comparable EBITDA margin remained broadly stable. Pricing actions and cost savings from Fit for Growth helped offset the impact of raw material prices and negative ForEx effects. Even in a difficult market, our U.S. business continued to deliver EBIT margins in the high teens. While the U.S. market has certain structural benefits, we are taking measures in Europe to close the gap, as mentioned earlier. Turning to Slide 17. The buildings market across the U.S. and Europe is highly subdued but has stabilized. Long-term demand for water supply and heating and cooling is supported by structural housing shortages, increasingly stringent drinking water regulations and building renovations, coupled with heat pump adoption. GF is well positioned to benefit from these trends through its leading market positions in Europe and the U.S. with strong brands and deep expertise in drinking water applications. In the growing heating and cooling market, especially cooling, we are well positioned with integrated solutions such as the Ecoflex VIP 2.0 systems together with the Smatrix Intelligent indoor climate control platform. With this, I will now hand over to our CFO, Mads Joergensen, to go through our financial performance.

Thank you very much, Andreas, and good morning, everyone. Before we dive into the numbers, I would like to provide some important context on Slide 19. The transformation continues to have a material impact on the presentation of our financial statements. And for this reason, I will present both the group results and the GF Flow Solutions. GF Flow Solutions corresponds to our continuing operations in our financial reporting. However, please be aware that continuing operations still includes certain impacts of the casting divestments, specifically the previously communicated CHF 172 million deconsolidation loss in the first half. This is adjusted in the comparable figures, along with other items affecting comparability. We do acknowledge that these transformation-related effects adds complexity to our reporting. Fortunately, the transformation will be completed with the closing of the Precicast divestment. We will then have a cleaner view on the underlying operating performance with materially lower adjustments in 2027. In the meantime, we are maximizing our efforts to be as transparent as possible. Now let's start with Flow Solutions sales bridge on Slide 20. FX movements had a negative impact of approximately CHF 88 million. Organic growth amounted to CHF 84 million, reflecting both positive volume development and pricing measures as described earlier by Andreas. In addition, the consolidation of VAG from January 1 contributed CHF 81 million of sales. Moving on to the bridge on Slide 21. We start with the prior year Flow Solutions comparable EBITDA of CHF 208 million. FX negatively impacted EBITDA by CHF 20 million. The net impact of price increases and raw material costs was CHF 1 million, while volume and mix contributed with CHF 11 million. The booked savings from Fit for Growth amounted to CHF 20 million, offset by reinvestments and other items, implying a comparable EBITDA of CHF 212 million for this half year. Moving on to Slide 22. We have today provided additional transparency on the profitability of the 2 business areas within Industry and Infrastructure. It is important to note, however, that Industry and Infrastructure operate as highly integrated and synergistic businesses. As a result, the financial metrics presented here are indicative and divide by applying defined allocation methodologies. Starting with Industry, sales grew 5.7% organically, while delivering a strong comparable EBITDA margin of 18.8%, reflecting its mission-critical and specification-driven applications. Turning to Infrastructure. The business continued to benefit from resilient demand for water infrastructure solutions and a solid project pipeline. And of course, VAG contributed inorganically. Structurally, the margins are lower in this business area. Nevertheless, we expect to move towards our 2030 targets of 13% to 15% EBITDA margin by leveraging our position in higher-margin integrated solutions for water infrastructure. Buildings grew 3.3% organically with a comparable EBITDA margin of 12.6%, broadly in line with prior year. As Andreas mentioned earlier, the margin improvement will come from our pull initiative and a reduction of complexity in our European operations. Moving on to Slide 23, which summarizes the full set of GF Group, GF Flow Solutions and the divisional numbers. At the Group and Flow Solutions level, reported EBITDA -- reported EBIT and the net profit were impacted by the divestment-related deconsolidation loss of CHF 172 million. Let's turn to Slide 24 for an overview of such items affecting comparability. Restructuring was CHF 15 million, of which Fit for Growth was the lion's share. The impact of the Casting Solutions divestment was CHF 172 million. And then we had other items and impairment changes totaling CHF 11 million. In total, at the EBIT level, these items amounted to CHF 197 million. Given the significant one-off effects in the first half, we show a normalized profit on Slide 25. By adjusting the group reported net profit for the impact of the Casting Solutions divestment of CHF 172 million, the sale of real estate in Biel, the restructuring and certain non-recurring taxes and other items, [ we derive ] at a normalized net profit of CHF 170 million. As seen on Slide 26, the first half was again characterized by significant currency headwinds. Almost all major currencies weakened against the Swiss franc with the U.S. dollars representing the largest negative impact. As a result, foreign currency movements reduced group sales by CHF 91 million and EBITDA by CHF 20 million. Assuming the current spot rates do not move materially, we expect a much less pronounced foreign currency impact in the second half. Moving on to the group balance sheet on Slide 27. Cash and cash equivalents amounted to CHF 448 million, reflecting free cash flow development as well as M&A. Overall, total assets decreased to CHF 3.264 billion, mainly driven by the divestments and the resulting deconsolidation effects. Noncurrent liabilities increased to CHF 2.182 billion, reflecting new corporate bond issuance and the refinancing of existing liabilities. The total amount -- the total equity amounted to CHF 27 million, reflecting the net result, divestment-related effects and other movements. As seen on Slide 28, group reported EBITDA amounted to CHF 29 million, including the non-cash deconsolidation loss related to Casting Solutions. The total net working capital increased by CHF 145 million due to normal seasonality and substantially higher accounts receivable driven by the strong sales in the month of June. Interest paid decreased, reflecting the repayment and refinancing of Uponor-related acquisition debt on attractive terms, while cash taxes were also lower. After adjusting for non-cash items, including the deconsolidation loss, cash flow from operating activities amounted to CHF 22 million. Capital expenditures decreased significantly compared to the prior year, mainly due to the divestment of Casting Solutions. Group cash flow -- free cash flow before M&A amounted to CHF 35 million. It includes CHF 70 million proceeds from the sale of the Biel real estate. As can be seen on Slide 29, net debt was around CHF 1.6 billion at mid-year, corresponding to 4x net debt to EBITDA as defined by the lending banks for applicable covenants. By year-end, we expect the leverage to be around 2.4x to 2.8x, reflecting the cash proceeds from Precicast. Parallel, we are already implementing other debt reduction measures such as inventory optimization, which will continue into the second half. With that, I will now hand back to our CEO for the 2026 outlook.

Thank you, Mads. Let's turn to Slide 31 and our outlook for the full year. Looking to H2, we expect to benefit from a strong order intake in Semiconductors & Infrastructure as well as implemented price increases, cost reductions and product range simplification measures. Taking these factors into account, we raised our sales outlook to mid-single-digit organic growth with an unchanged comparable EBITDA margin of 14% to 16%. Turning to the final Slide 32. We have made solid progress on the execution of Strategy 2030, which remains unchanged. Excellence in execution will remain top of mind going forward, along with free cash flow generation and debt reduction as well as profitable growth, as I emphasized at the very beginning of this call. Supported by strong megatrends, we are confident in delivering on our Strategy 2030 targets and driving sustainable value creation. Thank you, and I will now hand back to the operator for the Q&A session.

[Operator Instructions] Our first question comes from [ Mr. Bitusanayakumar ] from [ Vader Europe ].

Just 2 questions on my side, please. So the first one will be on Flow Solutions. So it delivered another good performance. So could you just help us understand which of the 3 segments, so industry, infrastructure or buildings will be the largest contributor for the growth during the second half? And then the second question is regarding the guidance upgrade. So we understand that it is going to be upgraded in terms of sales nevertheless, what could we expect in terms of margins? I mean, we know that the range has not been changed. But what should we expect? Where do you place yourself within the range? And did your view change before the first half '26 and after, especially with the rate target for the Fit for Growth program.

Thank you very much for your question. I think I will answer the first one in regards to our sales expectations in the second half of the year, and our CFO will give you a bit more background on our profitability. As we have seen that the order intake has been exceptionally strong in our Industrial segment also driven by attractive end markets, we assume that an over proportional part of the growth is allocated to our industrial business, namely by semiconductors, but also by data centers, but also some increased activities in multiple industrial niches.

Your second question, the guidance on sales has been upgraded. That is correct. Now in terms of profitability, it means that the second half will be more profitable than the first half, as you can see from the numbers. We have done our stress test of the scenarios, and therefore, we confirm the current range of 14% to 16% EBITDA margin [indiscernible].

The next question comes from Mr. Jörn Iffert from UBS.

I would have 3, if I may, please. The first one would be, please, on the order intake, which was very strong. I mean, any reasons why we should not take the order intake for H1 as a sales indication for the second half? Or can you give us some more details about longer lead times, longer orders also into 2027 or even '28, which are included here? Second question, the cost of goods sold went only up around CHF 10 million year-over-year despite the oil price increase, polymer price increases. Can you explain what exactly is standing behind this, why it was so low? And the third question is, please, in Building Flow Solutions, very good result in tight end markets. What exactly was driving this as we understood, you are mainly exposed to residential new builds, which was not good on the end market. So how do you explain the good performance? And also, would you say prebuying played a major role here?

Thank you very much, Mr. Iffert. Let's quickly allude a bit to the order intake, and it is exactly how we have mentioned a few of these orders taken in are having tenors which will exceed the second half of the year. So in being cautiously guiding on our growth, we have given also in the scenario planning a bit [indiscernible] certain delays on certain projects. The cost of goods sold will quickly answered by our CFO.

Thank you very much for the question on the COGS. The main reason for the lower growth rate on the cost of goods sold is actually a mix. It's attributable to the mix that we have. We have lower COGS typically in industrial where we see stronger growth. And the same situation, we have a higher COGS in the Solutions where we've seen lower growth. That is actually the real explanation behind these numbers.

[indiscernible]

And Building Flow Solutions, I think it's a very good observation. I think what we did and what we have announced already last year and this year is that we have restrengthened our market presence, particularly also by changing our organizational setup to create more proximity or proximity to our customers by giving the right level of support, but also creating a pull effect in the market that was definitely supportive to sustain the turbulences. The synergies, as we have outlaid them in our value creation program, for example, kicked in now in the first half of this year for the first time. So Switzerland was for us a very strong market. We delivered a growth only in Switzerland, which was above 10% by leveraging the channel. And thirdly, we are known for having a very convincing system when it comes, for example, for the heat pump connections. The heat pump connection is something where GF is focused on. And also in addition with our indoor climate control, we're exactly addressing the refurbishment market, which supported us across Europe. I think that to be said are the main reasons in Europe, in the U.S., we could further build out our positions, particularly here in Canada with a growth rate in the high single digits.

Thank you very much. If you allow me just to zoom in on the second question quickly again because I think it would be good to understand this better. I mean with a CHF 10 million increase in COGS year-over-year, this is really normal inflation if the Middle East something would never have happened and oil price never would went up. Is there any inventory effect we need to consider that you're buying in semi-finished products, which were still not exposed to cost inflation yet? Or did you still benefit from inventories rolling over that you see more cost of goods sold pressure in the second half? Or is this really the underlying run rate we should also assume more or less in the second half in terms of cost of goods sold given the current polymer prices?

So far, the cost increases that we've received in the first half, we have seen no further in -- at the moment. And given that the -- let's say, the raw material environment remains as it is now, we don't see further hikes in the materials. But as you know, I'm not the one that decides on these prices. We just don't expect it in the second half. It is really related to more a mix. The number you see there contains the raw material prices increase, but it also, of course, contains a effect of foreign exchange, which lowers the number again. That's why the -- so our sales number went down by CHF 88 million on FX. You would also have a corresponding effect on the COGS from FX.

A last point to the COGS development is, as we have outlaid in our value creation program, we also did over the last 1.5 to 2 years, footprint optimization of our production setup.

The next question comes from Mr. Martin Flueckiger from Kepler Cheuvreux.

I've actually got 3. Some of them coming back to questions that were already raised, but I would like to get a little bit deeper on those. Just -- but the first one is on the drivers of business acceleration in Q2. Now I realize all the weather issues that we had in Q1 and Q2 was supposed to be better from at least if you exclude any potential impact from the war in the Middle East. But I was just wondering what were the main surprises there for you guys in terms of business acceleration? I mean, 12-point-something percent organic growth in terms of top line, that's pretty hefty in my mind. I'll take one at a time. I'll come back to my second question in a minute.

I think as mentioned and as also the outlaid was we had some spillovers of the adverse weather conditions of Q1 into Q2. That was mainly in our infrastructure business, where we have seen frozen ground in the Q1 for more than 7 weeks in the northern part of Europe as well as worse weather conditions in the U.S. for a period of some 10 days. That created pent-up demand, which was executed in Q2, but this doesn't explain the entire growth. We have seen also various industrial segments picking up. And here, towards the end of Q2, we have realized now on the first strong order intake on our semiconductors, but also the acceleration of our data center businesses. So those 2 were also additional drivers in the industrial sector. We also have seen a strong development in Q2 of our refurbishment and, for example, thermal solutions in our Building Flow Solutions business. So overall, I think that has been -- has it been largely a surprise? I wouldn't say like that, but we have seen how markets were developing, and we understood that we had a very subdued start into the year. So we would balance the Q2. If you would take out the spill-offs, you might would be in a high single-digit organic growth instead of the double-digit organic growth in the second quarter.

Okay. That's helpful. And when you talk about spillovers, you mean catch-up, right?

Catch-up, yes, it would be a catch-up of [indiscernible].

Got it. Okay. My second question is on the outlook for the semiconductor business. If I remember correctly, you guys were looking at an improvement of around CHF 40 million from CHF 160 million last year, so roughly 25% organic growth, plus/minus, yes. Is that expectation unchanged? Or have you adjusted anything there?

I think with the strong order intake in the first half of the year, which was accelerated, we have to say that. We expect that number, which we have tabled in our annual results conference is likely the lower range or the lower threshold of the range what we anticipate for the semiconductor to grow this year.

Okay. And then finally, on the EBITDA margin guidance for 2026, still a pretty large range, 14% to 16%. Just wondering what are the key elements of your scenarios behind, let's say, the upper end and the lower end of that range?

Thank you for the question. The -- as I said, the EBITDA margin for the full year is confirmed. The facts that we have right now indicate we should be in that range. Any movement towards the upper end of the range would definitely require a substantial further increase in semiconductor and data center-related sales. That is the main effect. But we've done our scenarios and it confirms in that range.

Next question comes from Mr. [ Chase Kugland ] from [ Kempen ].

I just have 2. starting -- going back to the organic sales growth guidance of mid-single digit. It implies basically no acceleration in terms of the second half versus first half. And given all the moving parts, the very strong order intake, improving underlying markets, the pricing benefit, I'm curious on why we would not see that accelerate more. Is there some destocking effect you're expecting? Or could you provide some more color around that, please?

As said, normally also the second half is marked by a certain level of seasonality, which is overcompensated by the strong order book, which we have now materialized in the first half of the year. So we are cautiously guiding on a mid-single-digit organic growth.

Okay. And in terms of that this destocking potential, you said there's inventory stocking at some distributors. Is that now given -- at least if you look at construction PMIs, they're still very soft. Is there any risk that you see some destocking in the third quarter, for example? Or is that something you're thinking about?

No, I think since the delivery performance of our business is exceptionally high, we are, generally speaking, not at the highest level with our wholesalers. So we do not expect any severe destocking effects in the quarters to come.

Okay. That's clear. And then my second question would be around the CapEx for this year. Do you have sort of an updated guidance number for what we should expect there? On the CapEx side, we are steering towards the CHF 100 million to CHF 110 million for the Flow Solutions business. Looking at where we are now, I think that's a very good target to have.

The next question comes from Mr. Charlie Fehrenbach from awp.

What are the biggest implications through the ongoing war in Middle East regarding the higher energy prices and possible disruptions in supply chains on to your company?

Thank you very much for your question. I think the biggest impact of the Middle East war most likely is in the range of volatile raw material prices as we have seen commodities being rather volatile, and that ultimately affects a certain portion of our raw materials and resins. That's, for sure, one of the biggest impacts. The business in the Middle East itself is also affected by this volatility. And therefore, it remains and we see a shift in the nature of the business in that region. So we see now an overweight in infrastructure over residential new build. And the war obviously will affect whether there is, say, a normalization of the business sectors as we have been looked after them or whether they will change in their composition going forward.