Glaston Oyj Abp (GLA1V) Earnings Call Transcript & Summary

Welcome to Glaston Corporation's Half Year Financial Report Webcast. Today, we are going to discuss about the record high quarterly order intake in the second quarter and also share our revised strategy with financial and new nonfinancial targets. My name is Pia Posio. I lead the Communications, Marketing and Investor Relations team here at Glaston. I have with me our CEO, Anders Dahlblom; and our CFO, Paivi Lindqvist. And they will be going through the presentation with you, after which we have reserved time for questions. You can already, during the presentation, type in your questions, and we'll take them forward in due time. Q2 2021 highlights is the starting point for this session. After that, Anders will share his review. Paivi covers financial development, and then we have slightly specified the outlook for 2021 and more details about that in due time. And also then, we wrap up with the revised strategy for period '21 until '25. With this content and agenda, I'd like to ask Anders to take over and start with the highlights.

Thank you, Pia, and welcome on behalf of my part as well. So I'm Anders Dahlblom, the CEO of Glaston Corporation. Let me first start with the highlights from the second quarter. I'm very happy to share with you today our order received and order intake for the second quarter. We had a growing pattern starting in Q4 last year, continuing through Q1 2021. And now Q2, we have a record high order intake, which is up as much as 175% compared to the previous year. But as well, 48% compared to Q2 2019 pre-COVID time. So all-time high order intake. On the net sales part, the second quarter, the net sales decreased 12%. However, I want to also point out, operationally, we had a small growth in all the business units. But due to IFRS reporting transition that Paivi will share with you shortly, we see a decline in our official figures of 12%. And then the comparable EBITA, we have improvement in our margins, up from 4.8% to 5.5%. And the amount amounted to EUR 2.4 million versus EUR 2.3 million. So we see an increase in our profitability. Paivi will go through the details here. We see some temporary challenges or weaknesses in our insulating glass business impacting the profitability in Q2, but we believe they are temporary and will not be seen in the future of 2021. And then at the same time, we also had a positive impact from a strong service business share in the automotive composite in part of that. Then the excellent order intake is the biggest contributor to the very strong cash flow amounting to EUR 7.7 million compared to a slightly negative previous year. Obviously, a good hold on our net working capital is a big contributor, but really the strong order intake with the prepayment is contributing to this even more. Then also related to the order intake, a sharing of the backlog. So the order backlog improved significantly 79% from EUR 49.1 million previous year-end of June to EUR 87.8 million end of June 2021. So a very positive future look for the order backlog. Let me then share some points on the architectural market. So this included then our heat treatment business and our insulating glass. All the areas improved significantly in terms of new orders. The biggest improvement we saw in Americas, a 3-digit number increase. And also in EMEA, we saw a 3-digit number increase. And then in China and Asia, we saw a slightly lower decrease, but still a significant increase compared to previous times. In general, the good development continued. But really, the Q2 was exceptionally good and strong from the previous month -- or quarter. We saw growth in both the heat treatment and in the insulating glass. One very positive thing is on the upgrade part, which was more to the HT business. We had the all-time high upgrade business, amounting to EUR 3.9 million in the heat treatment, and more than half of that came from the Americas region. And still, the residential construction is the part that is keeping up and growing. And especially Americas there, we see a very strong level of activities in the residential, and the commercial part is more flattish or even in certain areas on the decreasing pattern, but rather stable. Another positive general point is our strategy, building up on the new Glaston with the Bystronic and Glaston offering parts, really being able to sell cross-selling through between our business areas. And one concrete example of this was our release of the Press Glass, a Polish company, our customer, to whom we were able to sell cross area equipment. Very positive, and that does support our strategic road map forward that I will share with you later today. One thing I wanted to mention as well is our supply chain. There are some disruptions ongoing in many businesses as well for us. This is materializing. And as management, we take very proactive approach to this. And so far, there are very, very minor impacts to our businesses, but we keep a very strong, proactive eye on this one. Then maybe shortly around the EMEA. So both upgrading business and the new machinery business developed strongly there. And then service level continued on a good level. And there has been a lot of subsidies in various states and nations. And those obviously have boosted decisions for companies to make machinery equipment decisions, and that we see in our EMEA region. So very strong EMEA. Americas, the stable recovery continued, and I would say, particularly the residential part there has been the driving force. And as said, a big upgrade there, we saw biggest upgrade machine for us, a deal of close to EUR 1 million that we closed during Q2. Service level continued on a good level as well. Some COVID-related restrictions still impacting the way of us to operate and be present on sites for the service concept. Then the Asia Pacific, APAC. China continued very strong. Order intakes there, great. The rest part of APAC, we saw somewhat slower but still growing business, for sure. We talk about China, especially insulating glass, we saw bigger demand for our more advanced equipment, big size, which is very strong, supporting our strategy as well. And service, we saw some challenges in the cost of travel restrictions and local regulations there. So all in all, a very positive architectural market development in the second quarter. Then if you look into the automotive market, Q2, the order intake was strong. Paivi will talk about the details and figures, but very strong. As we talked in the beginning of the year, Q1, the component shortage has affected the production of automotive vehicles. We saw some positive signs towards the end of the quarter, too. And this affected our business also positively. If you look at the areas where we saw the biggest positive development is really in the Asia and China and also in Americas. And then EMEA region remained rather slow for our automotive business and also display. One positive note here, we have -- even though the business is growing in terms of the imaginary part, it's still on a low level. And our service as a proportion of net sales was very much higher than we have in our other businesses, obviously, also contributing as absolute profitability positive to our business. Then if I share a few words on the segment and the heat treatment business, a strong growth. We saw postponed projects for 2021 that per material has been activated. So that, for sure, has had an extra boost on the Q2. But Europe and North America, they both were very strong in terms of new businesses there. And APAC was more slower, but still a significant growth. And as said, the upgrade business, which is, for us, the strongest part in the upgrade, is our heat treatment business that was the all-time high and record hot, one single order for that business. And then the insulating glass, also a very strong growth in terms of order intake. And our treatment solutions, we have a TPS, thermoplastic spacer. This has been a strong demand for our new solutions there. Our capacity in terms of production in Germany for the insulating glass is on a very high level, still some areas for increasing, but it's on a really high level, which is a positive challenge for us. So the EMEA region has been super strong in the insulating glass. Americas, good development, strong development. China, very strong. And then the rest of APAC has been the biggest challenge in terms of catching up as high-growth as elsewhere. But we also arranged innovation virtual days in June for our customers. Very happy to see the big interest from many, many customers in all our business areas. And we have seen a lot of interest in our new innovations thereafter, which is a positive sign. On the automotive part, I'll just share with you the market there. On top of that, maybe worth mentioning here is for May, June, we had a temporary shortened working hours in our factory, but we are now back on full scheme again. So that is a positive note there. And Paivi will share with you more about the strong profitability compared to the previous quarters there. With those notes, I'm happy to invite Paivi for the financial session. So Paivi, welcome.

Thank you, Anders. So if we start with the order intake, and now I think it is probably very clear for everybody that this was really a record high quarterly order intake that we haven't seen these kind of numbers ever before. And here, we can say that this is, of course, not then only coming from the kind of weak comparison figures that we definitely did have in the second quarter of last year, but as we also kind of, well, went well over that '19 level, we can say that this is also very much because of a strong market situation. And then if we look at the first half and the order intake of the different businesses, we can see that all of them were growing strongly, the architectural side, heat treatment and insulating glass technologies had over 70% growth compared to the first half of last year. Automotive, a smaller one, where the percentages typically are quite high, over 200% growth. And then services also with 35% growth. Then if we look at net sales in this quarter, like Anders said, 12% decline, about EUR 43 million altogether. And the different product areas, there we can see that especially the insulating glass technologies, net sales went down, percentage-wise, automotive and display also over 40% lower. And for both of these areas, we can say that operationally, they were growing, but we do have this kind of technical reasons, where the comparison figures were rather strong. And they were impacted by several projects, where we had the revenue recognition fully at the time of acceptance, and that acceptance happened during the second quarter of last year. And for that reason, the comparison figure is a little bit exceptionally high and resulting then in negative growth percentages. But like I said, operationally, small growth in both of these businesses. And then we have heat treatment technologies, which for the first half, had 14% lower net sales. In the second quarter, there was already a clear growth in the first quarter. There was a decline. And this is -- the change is coming from the order intake in that business that turned in the fourth quarter of last year, and now we are seeing that gradually starting to have an impact on net sales as well. And then services, with 13% growth in the first half and in the second one -- second quarter, this growth improved. Of course, there also the comparison was weaker last year. If we look at net sales from the region perspective, we did have declining net sales in all of the regions. EMEA continues to be clearly the biggest region with over 50% net sales. And in the first half, 11% lower. This is an area which mostly has been impacted by this IFRS and revenue recognition issue. In the first quarter, we had growth in this business. Then after that comes Americas with 27% of net sales. And in the first half, 16% lower. But here, we see a turn that first quarter was declining strongly as during last year, the order intake declined a lot in Americas, and now it has started to kind of come up quickly as well. And then APAC, 11% down, first quarter was flat. And this region also a little bit suffering from the IFRS transition. Next, let's look at profitability. Our comparable EBITA was rather stable, a little bit up from the second quarter of last year, EUR 2.4 million. And margin because net sales was declining, then is obviously going up to 5.5%, whereas last year, it was 4.8%. If we look at this from the segment perspective, we did see a clear turn in profitability in the automotive and display segment, which was compensating for the decline in Insulating Glass segment. So these are the explanations, I will go through them in a little bit more detail when moving to the segment-based parts of this presentation, which is coming now next. So if we look at the heat treatment first, we can see there that, yes, order intake continued strong, 180% higher than the second quarter of last year, which was extremely low. So obviously, percentages look good. This quarter, 66% in the first half as well, and order backlog now over 50% higher than a year ago. And like I said, net sales now turned to growth in the second quarter, reflecting this continuously improving situation in the order intake. Then if we look at the profit and profit margin, comparable EBITA was slightly higher as well as the margin. There we have a little bit different development in the machine and services business. So machines business had somewhat lower margin for various reasons, kind of some -- a little bit more than complicated -- more than usually complicated projects, some cost increases, for example, in installation and so forth. Also, the fixed costs are higher than a quarter in the comparison period because last year, we had a lot of cost-saving initiatives due to the kind of exceptional times. Then if we go next to Insulating Glass segment, where we have kind of both good news and then not so good news. So order intake, extremely strong, highest ever in this business, and this is coming from both the strong market and then also our ability to execute on the cross-sales opportunities. The press glass order, that's one very good example of this. And then the net sales, the revenue side, I explained already, so declining through this kind of technical IFRS reasons. And then the profit was lower than what we typically have had in this business in the past quarters, and it was lower than second quarter last year. And this is partly coming from the lower machines net sales and then partly from a lower margin in a few as well as fixed cost increase, as we are increasing now the capacity in this business in order to kind of accommodate even higher amount of deliveries in the future. And then finally, automotive and display, which is our smallest segment. And there we have mainly good news. This was a segment where we saw a decline in demand in the first quarter, and now it picked up again. This is quite driven by the situation of the kind of automotive producers, which are then the customers of our customers. And there, we could see that there was a clear increase in demand. And especially, there was, I would say, extremely strong demand on the services side, which was a little bit kind of a reflection in that situation that the end customers were increasing strongly their production during this quarter. So order intake, a strong increase. Still, we are historically quite on a low, modest levels. Net sales, like said, operationally increased, reported decline, comparable EBITA they turned to profit from loss last year. And the reasons are good, high margin projects, first of all, on the machine side. And most of all, the very high share of services business now in the second quarter as well as cost control. In this business, we did not see that much fixed cost increase. And then finally, about the balance sheet and cash flow. Obviously, the record high order intake had a big impact on our operating cash flow. We do get down payments at the time of new orders, and we then also continue to have kind of payments during the project time when it's going forward. And then this did have a big impact, EUR 7.7 million operating cash flow in the quarter, gearing down to 32%. There was quite a lot of debt repayment in the quarter as well. And now, of course, in a way, when these projects are going forward that we have now received orders for, then it means that at some point, there also will be cash outflows related to those projects. So this is now probably going to happen in the coming quarters as well that we have more balanced outflows and inflows than in the second quarter. And this is my final slide, so I would like to invite Anders back to conclude.

Thank you, Paivi. So then some final words on the half year of Q2 before jumping over to the strategy part of this session. So we have a specified outlook for 2021 full year. And we continue -- we are saying that the Glaston Corporation estimates that the net sales will improve in '21 from the level of 2020. This remains unchanged from the previous outlook. But we have specified our outlook for the profitability on the comparable EBITA, where we see an estimated EBITA to increase to a level of EUR 10.5 million to EUR 12.5 million range. And this, obviously, up from the previous year level, EUR 7.7 million. So this is the specified change from the previous outlook that we are happy to share with you based on information here today and on the strong order book we had there. So let's then switch gears. Since I joined the company in January, we have as a management team and broader management team spent a lot of time on strategy work. And I'm very happy today to share with you the highlights on the strategy. Our Board of Directors have approved our strategy earlier today, and we came out with the release as well, which is available on our web pages. Our -- to highlight one note before going into the strategical topics here, we will arrange a Capital Market Day on Thursday, the 26th of August, where we will have a broader participation from the management team. So there, you will be able to hear more details about the strategy and also hear more stuff around our business areas and service. So this will be more on a highlighted level, but we wanted to share it today here since the Board has approved it today. So we have a revised strategy. Time period, we talked about '21 to '25. And the revised strategy here, so the main objectives is reaching clearly improved organic growth and profitability. And this is based on strategical initiatives and at the same time, also an expected market growth. And the road map includes 3 blocks. And that the blocks are the following: The first one is that we have business area-specific strategical initiatives. And I will share with you shortly about them later here today; and then the second one, we have a commercial excellence and operational excellence cornerstone initiatives that will be a base and frame and enable our growth in the business-specific areas. I will share with -- more about those as well; and then the third, which is a very important part, is our leadership. So really execution, how we translate strategy into people and execute that. So that is really the strong part in taking the strategy forward. Another thing that I wanted to mention as well here is, obviously, this is a bold strategy, and we plan to grow above expected market growth. So this will also need investments and especially on innovation and new developments. So that is something where we are planning to invest more than we have seen in the historical years. The second part, which is a change from earlier, is that the sustainability part, we are really in the business with sustainability, and we have an impact on the whole equation. We have embedded sustainability into our strategical agenda, not as a separate thing, it's really part of our strategical road map. So this is bold vision. We have changed the vision actually now. So the new vision reads that we lead the global glass processing industry forward with innovative technologies and life cycle solutions. And I would like to -- I think that the 3 key words here is really lead, and it's innovative and it's life cycle. So those are really the ones that are directing what we want to be and how we see ourselves as in our vision. And we believe really that investing in our competitive advantages that cut across all the BS will enable us to reach this vision. Before I jump into our strategical targets, I wanted to open up a little bit our market, how we see the market and addressable market growth. And we talk about -- we have run through the flat glass market. So according to Grand View Research released in spring 2021, the flat glass market is expected to grow 3% to 4% annually during the period 2021 to 2025. And this is on a global level. And we are targeting end use areas of flat glass that are growing higher than average. Secondly, the replacement investments are not included in these for our customers in a flat glass growth estimation. And this is -- the flat glass here are reported in tons. And when we talk about market growth, we talk about value. So there is an inflation missing in the ton estimation. Therefore, translating this into our addressable market growth, we estimate that to grow above 5% during the period '21 to '25. So this is our thinking when we talk about the strategy going forward. An estimated market growth for us for the addressable market, equipment market is above 5%. That leads us then to ambition slide. And this is the ambition for the strategy by 2025, we want to reach the following. And we have divided our targets into 2 main groups. One is the financial target. And the second one is the nonfinancial targets. And this is the first time we have nonfinancial targets, and we really want to include sustainability as a strategical focus area where we have those set up here. And if you first go through the financial targets, so the net sales target for us, we want to target the annual average clearly exceeding the addressable equipment market growth. So that's our target for the strategy period up to 2025. We also will target an EBITA reaching a percentage of 2-digit number, 10%. And this is an upgrade from 8% previously to 10% in the new revised strategy. And then the return on capital employed, we have also increased that to reflect the top line growth and the EBITA percentage, up from 14% to 16%. So these are our main financial targets. And then we're going to the nonfinancial targets. We want to really promote and focus on customer focus, customer experience and winning with the customers together. And the way to measure, we have selected the Net Promoter Score that we want to achieve on average over 40 as a Net promoter Score with our customers globally. Then the second focus is a safety culture. We want to lift the safety culture higher, both internally in the company and how we work externally towards the customers and in our day-to-day life. And there, the measurement for us we want to measure is the lost time accident. And obviously, we are targeting 0 accident. We want our people to come in safe to work every day, we want our people to go home safe every day. And safety is in our nature, how we work. Then it's very important. People is our biggest asset. We want to make sure our people are motivated, engaged, and they feel that they have a meaningful voice for the company for themselves. And this we're going to measure through employee engagement. We have a target that we will measure minimum annually to have exceed a rate of 75 out of 100 for the employee engagement. The third one is then relating to our own emissions that we can impact directly by our own decisions. And we want to target to reduce our own CO2 emissions by 50%. So halving them by 2025. And that is compared to our 2020 outcome, where we had 2,777 tons of CO2. So this one, we're going to halve by 2025. Then let me talk about the strategical actions a little bit before coming into the must wins for the business areas. So just a general note, I wanted to say, the emerging technologies, we emerged into our operative business by 1st of January 2021. And this is how it will remain in our strategy, so it will be not a separate strategy there. It will be internal development for our businesses, taking care there. And the business areas where we are playing. We are talking about insulating glass technologies, the heat treatment technologies and automotive and display technologies and then services. And services embedded in all the business area technologies as well. And then when we talk about the segments where we are playing. So we have 4 segments that we have selected where we see initiatives and opportunities. One is the architecture, which is the biggest one where we are currently today. We're going to focus on that, continue on that. Then we had the automotive sector where we also want to continue. The third one is the display part. And this part, we divide into 2 parts. One is the automotive part of that. And the second one is the new application, mainly in the architectural business that we focus on. And then we had a fourth one, which is then the solar business, which mainly market is in Asia and China. So those are the 4 areas where we want to focus. And then we have -- on top of this, we also have the Glaston Cornerstone initiatives. And these are really commercial and operational excellence that will enable the growth and profitability going forward. Then I wanted to jump shortly to our business area must wins. So we have said for all of our businesses must wins. Those means they are areas that will have selected more detailed projects that -- where we definitely want -- need to succeed to make sure our strategy will be executed. And before I go into the business areas, I wanted to list up China. China for us is a big market. It's an area where our market share is significantly lower than in other regions. We have a low-cost setup there with insulating glass automotive -- sorry, heat treatment under one roof. So we have a very good foundation to focus on that. So China will be a growth initiative for all our businesses. Then if we talk about the insulating glass technologies, that's where we see the sustainability and the energy efficiency part playing in the strongest. And therefore, the market growth expectation is slightly higher there than in our other businesses. We see opportunities mainly in North America and also in Asia Pacific, where we want to target market growth above -- market share growth, so growing above the market. And those are both big markets. We want to press further on our advanced and our automating offerings. We believe this is one strong ingredients in our competitiveness going forward. Then if we talk about the heat treatment technologies, there, automation is a big word. Automation in glass processing on large scale is only starting. And we see we have a good potential and big role in this development. We also want to broaden our offerings, tempering business, our biggest one, we see that we have opportunities there that we want to execute in the big segments, especially in certain areas and regions. And then in the lamination, we want to broaden our offerings where we currently have a more limited market share than in the tempering business. Then there are also things like ways of measuring the optical quality. There are many different kind of features where we have clear road maps that we want to improve to have a very competitive offering. Then if you go to the automotive business, it's a more cyclical business than the other ones that we have. And here, the question is the market bounce back timing, but also the intensity of the bounce back. And we also know that the market -- or the glass used for vehicles is increasing, both outside and also inside in the display. And also we talk about lighter estimation of the glass products going forward. Here, we see that having a combination of heat treatment products and also our pre-processing offers and integrating those will play a strong advantage for us going forward. Also the display part, we believe, and we see that it is estimated to grow, and that is the focus area that we will also utilize. Then if I move to the service, and obviously, service goes for all of our business technologies, and we know we have a service share of our total revenue varies from regions to regions. It is between the range of 25% up to as strong as 50%, which means we have different opportunities in different regions. But if I divide it the 2 parts, so we have current offerings, which is spare parts, field service and upgrades. So we want to make sure we systematically improve everywhere. So it means spare parts. We want to make sure the ease of purchasing, et cetera, are focused on a lot, so customers will feel that benefit. The field service part, our accessibility is an example of that, where we want to improve, so the customers see also the benefit of that. And then the upgrade part, we have seen at the HT business, we have been able to build an upgrade business, partly also coming up from the automotive. And in the insulating glass, we especially see a similar opportunity where we are just about to start that. Then also new service concepts and models are very important. And those will come through digitalized solutions, artificial intelligence, as an example. But a lot of key here is really the access to data, that is the way how we feel that will enable us to execute and find growth in our service business going forward. So that's shortly about our business-specific must wins. And then I wanted to talk about our cornerstone initiatives before closing the session here today. And as said, this is really the foundation and frame of everything as One Glaston. And this will really support the business initiative and growth through improvements commercially and operationally. So it's really commercial operational excellence that these cornerstones are about. And we have divided them to -- grouped into 5 different ones. And each of them are very important. And obviously, you have a clear ownership in the company. The first one is innovation. I've talked about innovation and succeeding with customers. We want to strengthen the technology leadership within the company. The integration between customer and our understanding is super important, and also the competitiveness of our product portfolio, and especially understanding the regional differences there. Also that we are fast enough and we develop them jointly within the company is important. Therefore, we have made 2 nominations in the company. So we have established 2 new roles, one person taking the responsibility of our innovation in the architectural business and another person for our automotive and display business. So this is one clear milestones, how we want to start focusing more on the innovation and make the customer voice and integration seen. Then we have the digital transformation. Here, we want to make sure that we lead the digital transformation. We have divided them more into 2 parts. One is what we see internally. We have our internal systems as a part of the acquisition and merger, we need and we want to harmonize our own systems to be able to utilize the full potential of our data information in our company. Second one is what is visible to the customer. So automated offerings and other things that will really be visible for the customers and make their lives easier. Those are ones that we want to execute below the second part. Then the third one, very important one. So this relates really to execution of the strategy. We talk about empower our people or Glastonians to thrive. So how do we translate the strategy to our people? How do we build up the right culture that we want to achieve that we feel is going to make sure we can execute the strategy well. So here, leadership, we have laid out new leadership principles within Glaston. This is one thing where we are trying to harmonize our culture, the ways of work and the ways of behaving, how we want to see the role as a leader and leadership to bring things forward. So this one is one that is very much linked to our execution. Then we had the fourth one. It's about sustainability and continuous improvement. This is really talking about the long-term success for the company. We believe this is must. Continuous improvement, I see that as a fundamental thing for a successful company. We need to make sure we can do better tomorrow than today. We need to have that in our DNAs everywhere in the company, every day in the company. And the second one is the sustainability. And this is what we also have now laid out. We have the first time concrete KPIs and targets for the sustainability goals. So we are starting that road map now, and we want to make it systematic so we can speed up and reach all the things out there in our business. And the last one goes to sourcing and manufacturing, master global sourcing and manufacturing. And this is really something where we see enabling operational efficiency and growth through harmonizing these 2 functions. So as said, foundation frameworks that will support the growth of our business initiatives. So with those words, I'm happy to move to the following part of the session today, which is questions.

Thank you, Anders, and thank you, Paivi. Let's start with the margins. So margins by division. Are the automotive margins sustainable going forward? Or was this caused by an unusual mix, meaning high services? And how soon do you expect the insulating glass margins to improve? Thus, the increase of fixed cost prevent margin increase despite recovering sales?

So maybe if I start with -- I understood there were 3 questions. So I'll start with...

They were quit many. So we actually do have quite many questions here.

I will start with the first one. So are the margins in the automotive business sustainable? I think the answer to that is, as Paivi shared, our share of service was up to 50%. And we believe once the market bounce back and we increase our machinery sales, these margins will be lower. But on the other hand, the volumes will be higher. So they are not sustainable. But that's the one part of it. Then the second one was about Insulating Glass. So Insulating Glass, we see it as a pretty much Q2 temporary profitability. So what we believe going forward, as you can also see in our outlook guideline that we believe the margins to come back during Q3 and also continuing through Q4. And then the third one was around the fixed cost.

Does the increase of fixed cost prevent margin increase, despite recovering sales?

Well, I think, of course, it all depends on what you compare with. I would -- short answer is no. But of course, when volumes go up, there will be certain fixed cost increase and especially compared to last year when we did have a lot of cost-saving actions because of the situation. And none of those are there anymore. Still, fixed costs are lower than normal because marketing traveling type of costs have not yet normalized. Let's put it in that way. So in a way, short answer is that, yes, of course, we do expect margins to improve with volume. But to a certain extent, fixed costs are also increasing, but not preventing the margin increase.

Thank you. And then we go to component shortages, I suppose broadly covered it in the presentation. What are the Glaston ways to solve the component shortage issues? And the person is also helping us with some options, bigger own inventories, acquiring of new suppliers or something else?

That's a good question. And this is obviously something that many, many companies are seeing. I think the thing we want to do, we want to make sure we are proactive. So we look at various options. I would say it's a combination of all of them. So we want to make sure certain components, we store them up, and that will increase the inventory slightly. But also, we have to look at other sourcing ways, other sourcing partners. So it's a combination of all of them.

And how fast can you pass on the component price increases to own prices? There must be a lot of mix -- fixed-price contracts, but also some price escalation clauses in your agreements?

So in the machinery business, we are pricing -- most of our projects are project priced. So in those, we take into consideration all available information in every deal we make. And then we have the service business where we also have a must to think about our cost component impacts to our prices, and those will be shared and discussed with the customers so that we make sure that flows through. So there is always -- you can talk about a delay or not small, but we believe we are able to swiftly take this impact into our new deals business.