Glaston Oyj Abp (GLA1V) Earnings Call Transcript & Summary

Welcome to Glaston Corporation's first half financials broadcast. My name is Pia Posio and I'm hosting this session today with you with our CEO, Anders Dahlblom; and our CFO, Paivi Lindqvist. And they will share more details behind the second quarter or intake and profitability holding up in this first half of 2023. Before we start the presentation, note that you have the opportunity to ask questions and share those through the chat all the time while we are having the presentation. We have reserved time towards the end to go through them and I will be hosting that questions-and-answers part. But with that, I would like to welcome our CEO, Anders Dahlblom to take over and guide us through first Q2 '23 highlights.

Thank you, Pia. Welcome on behalf of myself. I want to start with the second quarter highlights and order intake and profitability were holding up in the current environment. The market activity in the architectural segment slowed down a bit. However, we achieved growth in Heat Treatment business, order intake and Insulating Glass order intake was slightly under pressure. On the Automotive & Display business area, we had a strong growth in order intake, growing by 32%. The second quarter net sales improved growth of 3% and that was mainly due to the good performance in the Insulating Glass business, but also our Automotive & Display business saw growth in terms of net sales. Profitability-wise, a fairly good achievement, comparable EBITA reaching EUR 3.4 million with the margin at 6.2%. And our Heat Treatment and Automotive & Display both declines, but the Insulating Glass EBITA improved significantly. We also paid -- repaid capital repayment of EUR 0.04 per share that was paid in April this year. And the big change we are planning is reorganization that we informed about in June this year to accelerate our strategy implementation to become effective at 1st of October 2023 this year. Let me open up a bit more the key numbers for the second quarter. So the order intake, as said, a small decrease of 4.6%. We saw growth in the Heat Treatment of 1%. The IG business, we had a decline of 18%. It's worth mentioning that IG is more exposed to the Europe, EMEA region than the other business and hence reverse development here. In Automotive 30% up, this mainly came from U.S. and from the APAC and China. Net sales, the growth came from IG, 70% up, both the machinery business and service grow was a 2-digit number. Heat Treatment business, a decline; 2 reasons here, one is some seasonal differences within the summer quarters and also the service sales were slightly declining. And Automotive, an improvement, 4%, and the Service, in general, a 3% decline. But excluding the upgrade services, looking at our day-to-day service business, we had an increase of 1% in the top line growth. Then the EBITA have EUR 3.4 million, close to same level as last year. Here, the IG business improved quite significantly. Heat Treatment business, small decline, mainly due to the top-line decline for the named reasons. And Automotive & Display business, we saw a clear improvement for the first quarter, but still slightly down from the quarter 2 2022. Here it's worth remembering that our ramp-up of the production in China in Automotive & Display has affected our results, especially in the first quarter, as was mentioned, but to a lesser extent in the second quarter and things are proceeding there according to our plans. Backlog is healthy. Backlog is 8.7% higher than -- compared to the previous comparison. Still, even there is a partial cancellation in one of the IG customer orders, totaling EUR 19.4 million, that's been for -- about earlier this year as well during the second quarter. This means our workload in our factories, all our factories, they remain very good, and we have most of our operations secured for 2023. Then I would like to share a bit about the market environment, and I would like to start with some general comments here. So generally, what we are seeing is that EMEA, so Europe, mainly has been softening what comes to new business, mainly reason behind this is the increased cost of capital and money and then also the construction activities, especially in the new construction business, we see decline in our -- in that environment. U.S., on the other hand, we have been -- has been holding up well and actually we have been doing good business there in the second quarter. And then China market continues rather soft and then when it comes to the supply chain challenges that we have been talking about in the past couple of years, those have been improving quite a lot. Still some electrical and [ programmatic ] components are a bit on a delay, but this topic is moving to now another phase. Then if I go to the EMEA region. So our order intake in EMEA, we saw a decline of 9%, and this is mainly due to the softening market condition. It's pretty clear there. And the residential market is slower currently. Automotive part, that's a smaller market for us in general. This continues on the same level of rather low-ish. And also what we have seen in the second quarter is that the Service business saw some slowness there. But on the upgrade part, the positive note here is that we are actually seeing now upgrade that these orders are starting to recover from the low levels we saw already in Q3 and Q4 last year. So this part is growing. Then moving to Americas. Order intake here, we also had a decline of 9%. However, the level, if you compare -- the orders compared to our total orders, so the Americas business is growing as a proportion and the level we achieved in second quarter is actually very good, so we can be satisfied, in my mind, with that achievement. So, this has been the strongest region, clearly, when it comes to absolute numbers that how we are doing. Regarding the IG business, Insulating Glass, we have been not achieving growth there. So that has been slow-ish for us. On the other hand, we have had pretty good growth in both the Heat Treatment business as well as in the Automotive & Display. The automotive part has mainly been products for more heavy vehicles and recreational vehicles, that's the area where the growth has been coming. But it's a pretty good market there in that part. The Service business, so seeing EMEA being slow-ish in Service, actually, Americas, we have seen very strong growth, and that has been in our both day-to-day flow business and our spare parts, the growth has been actually pretty strong. Our upgrade part there, we have not been able to grow that business, it has been on a slower pace this year than we saw in first -- last year in the second quarter. But in general, Service business, new business in America has been a positive one. Then when we come to APAC, it's a bit too folded there. The China market continues slow. It's pretty clear that the market is not recovering very quickly there that we have not seen in the second quarter. But however, we did very well from an order intake, from a new business perspective. So new business, actually, we saw a growth in the whole APAC region of 19%, whereas China growth was actually 30%. So from that perspective, we did -- we achieved good numbers, and we can be satisfied with the new business there. But the architectural market is continuing rather soft. On the other hand, then when we look at the automotive market, the automotive market has been pretty good. We have also achieved good new deals. And obvious, as part of that, the whole automotive order intake in the quarter 2 was a 30-plus percent growth. Then if we look at the rest of the APAC as we see, so what comes to new machines, new deals, it was rather slow. There are different developments, different sentiments in different markets there. So I would say, in general, the markets are flattish, but we did not get deals closed on a growth pattern. On the other hand, when we look at the Service business, so the Service business, we actually saw very strong growth. So Service growing new business has been a bit depressed. Then I would like to talk a bit about our strategy where we are with the strategy and also the planned organizational change, obviously, has a clear link to strategy implementation. So the first point I wanted to talk about is what we announced during June this year, and that's a planned organizational structural change to take to be effective 1st of October this year. And then the question, what do we want to achieve? Why do we want to do this? There are a couple of reasons I want to mention here. The first one is really strategy implementation, and it's about accelerating our strategy execution. We have been doing well. We have achieved a lot of good things. We are exactly on the right track that we said a couple of years back when we launched the strategy. So the message is strategy targets will remain unchanged. We want to execute the strategy implementation in the parts that we have seen is more challenging with the current structure, but continue with the ones that have been working well. So that's number one. The second one is what comes to customer part. We want to enhance customer experience with a lifecycle solution. The lifecycle solution is something we want to talk with the customers internally and make sure that the customers really experience a lifecycle supplier when we work with Glaston. So this part is going to be emphasized a lot with this new organization change. Then the other part is improving of our cross-cluster and collaboration and unified ways of working. This is something we have done a lot in the past couple of years. Now we want to take it even further to even accelerate that to the next level. And the last one that I want to mention and is very important, obviously, is the operational excellence and efficiency. So we are also going to improve this by this planned organization method. How we are going to structure ourselves is the plan is to have 2 business areas instead of 3 that we have today. And one of the business area, the bigger one, is planned to be a business area architecture. And in the architectural business, we are planning to have the insulated glass business, the tempering glass business and the lamination glass business, which comes from the heat treatment. Then we are planning to form a new unit within a Mobility, Display & Solar. And this business unit content would be the automotive business that we have currently there, that would be both the preprocessing of that and also the vending and tempering what comes to the automotive. So that's a new part. Then the display focus, display is our strategic growth business. We see great opportunities. We want to make sure that we put even more focus to achieve the growth in this area. Then the other part is the solar business that has been part of the Heat Treatment business so far. We want to also make sure this one gets even more focused because that's our strategical area where we want to grow. We see we have great opportunities to continue the growth that we have already achieved some solar deals last year. So these are the business areas. Then on top of that, we are planning to form 2 business functions. One is automation and innovation. The automation part is mainly we talk about the software part to our machineries to the intelligence about that and how we are harmonizing and making sure we can utilize the concept for the whole company more efficiently with the communication of other machineries in the factories. And then also steering the innovation in a more harmonized [ cluster ] way as part of this. The second business function is the sourcing or the supply chain management. Here, we want to make sure we steer and lead our sourcing more globally than we have been doing so far. So more efficiency when it comes to sourcing and logistics. So those are the things we want to achieve with the planned organizational change, which is currently ongoing, the planning -- detailed planning. Then the second one regarding the strategy, I wanted to mention is the ramp-up of the production of our Automotive & Display in China. This project is ongoing according to plan. Now we are planning to close the project now in the next month. So this is a good part here. On the other hand, the more challenging one has been to localize our supply chain in China, which is a big realization has to do with the production ramp-up there. As said already last quarter, Q1 was mostly impacted of this strategical investment. Q2, we had already a great progress there and continuing for the rest of the year, we are planning to have further improvements and beyond the targeted level towards the end of the year. So that's about the strategy. The last thing I wanted to mention before moving to the financial parts is then our sustainability. Sustainability is also part of our strategy as a great roadmap there. We have played a big role in this sustainability society. And a couple of things here. One is the safety. Safety is something we have put a lot of focus on in the past couple of years. Safety continues to be we have a target to have 0 lost-time accidents. We have been doing many things, a lot of things to improve the safety culture. We see a lot of good impacts there. One thing that we arranged as a concrete example in April was the global safety week that was the second time we did it with great achievements. Unfortunately, the accident frequency has been higher than previous year, but we believe strongly that we are going to see improved figures going forward, given we have done a lot, and we have a different culture when it comes to safety. Then when it comes to the Scope 3 or the emissions. As a strategical target, we have already done a lot on our Scope 1 and Scope 2, meaning reducing our own emissions. But now we are talking about the Scope #3, and now we have calculated the impact of the Scope 3, and we see that from 2022, more than 99% of our emissions are accelerated to Scope 3, which means that here is the bit that we want to do a work about. So we have updated this and where we see an increased number in the terms of the Scope 3 emissions, the big -- the main reason here is the solar business. So last year, we were able to enter into the solar business, which is a very positive one for us, but at the same time, solar lines, they use 5x more energy than other normal tempering lines, and therefore, this. On the other hand, these emissions, they contribute to global emission reductions because we are reducing fossil energy or we are actually replacing fossil energy with the solar production. So this is a positive thing, but a bit difficult when we talk about the emissions as such. The other part we have done is that we joined United Nations. This is a dedication, and we are, clearly, we want to show the commitment, we want to be part of this more heavily, and United Nations, we are here lifting things like human rights, transparency of the information and the quality we report about things on the sustainability. And then the last one, which is a big overtaking is the science-based target initiatives. Here, we have delivered our commitment letter, which means that according to the Paris Agreement, we want to commit limiting the global warming to 1.5 degrees. And we see that big part of the scope -- our impact is the Scope 3. So we want to make sure here that we can impact the whole value chain when it comes to the glass processing business. With those words, I want to hand over to the financial part and welcome our CFO, Paivi Lindqvist. Welcome.

Thank you, Anders, and hello, everyone, behind the screens. My pleasure to go through the financial development in the second quarter and first half. And as usual, let's start with the order intake. I think we can describe the order intake as fairly good in this market situation, which has changed to some extent. The order intake total for the group for the second quarter was EUR 53.6 million, and this was 5% lower than in the previous year second quarter. If we look at the orders by product area, we can see that in the first half, the Automotive & Display is really the area where we have experienced growth. The Heat Treatment Technologies have been flat. Insulating Glass Technologies have declined quite significantly. And then we've also had a kind of a smaller decline in the whole Services business, which is very much driven by the lower demand for upgrades. If we look at the quarterly figures by product area, it is quite a similar picture except for the Heat Treatment Technologies where the kind of a declining order intake in the first quarter was then turned to positive growth in the second quarter. So in Heat Treatment Technologies, we had a good quarter. Now the most recently whereas in the -- in Insulating Glass Technologies, the decline even steepened to 28%. Automotive & Display had over 100% growth. Automotive & Display Technologies, the machine side, had more than 100% growth in the second quarter. And services as a whole declined 9%, also that very much driven by the upgrades. And then if we take a similar type of approach to net sales, in the second quarter, we had 3% growth in net sales and very much driven by the Insulating Glass segment, both machines and services had a growth in that segment. And then the other segments had a more challenging development in the quarter. In the first half, so taking both quarters into consideration, Insulating Glass Technologies is the growing area. So it is quite different from how the order intake developed now this year. There we have 9% growth and the other machines area, Heat Treatment Technologies 3% lower, Automotive Display Technologies 15% lower because of very weak first quarter and then Services 3% lower. Then if we next take a look at the regional split of our net sales. EMEA is and continues to be clearly the biggest of our regions with 51% share in the first half. Americas has been increasing its share and is now in the 6 months, 36%. And EMEA declined in the first half, but it actually turned to growth of 5% in the second quarter. So first quarter was clearly weaker. Americas has been steadily growing in the first half and actually even accelerating in the second quarter. And then on the other hand, the APAC has been the region where we have seen the most net sales decline, 33% both in the first half and in the second quarter, and this is very much driven by China, where the order intake in the past quarters has been weak. China's share of net sales has declined from 14% to 6%, both in the first half and also in the second quarter, we had similar figures. The positive news is that the order intake in China increased over 30% in the second quarter. So it is now going to the right direction. Other regions, then next one would be profitability. Also here, I think we can be reasonably happy with the profitability level, as a whole, for the group. In the quarter, EUR 3.4 million, almost the same level as we had in second quarter '22. 6.2% margin, which was slightly lower than '22 when it was 6.6%. Off our segments, Insulating Glass was the segment that improved its profitability and then the other segments went down. I will go through the segments in more detail next. So let's start with Heat Treatment, and the orders, like I said, order intake in the second quarter was good and which was very nice to see, especially after the first quarter, which was clearly a weaker quarter in terms of order intake, 14% increase in machines orders, especially Americas region, very strong here. On the other hand, services order intake went down by 23%. And here also upgrades in a strong role driving this lower. Then if we look at net sales, which decreased by 11% in the quarter, and this happened both in the machines area and also in services. In machines, there is kind of a quite different way how the second and third quarter have turned out now this year compared to last year. So last year, the second quarter was very strong, and the revenue recognition from ongoing projects and kind of the timing of when we receive the components was more before the summer holiday period in Finland, whereas then this year, it's more evenly during the summer and more towards the third quarter. So the kind of -- the quarters will be quite different. Last year, we had a very strong second quarter and weaker third quarter in this business. And now this year, the second quarter is not having that kind of very positive impact that we had last year. Then the services net sales went down by 16%. And here, again, the main reason is the upgrade order intake being lower in the earlier quarters. If we look at the profitability, it went down by 26% and second quarter EBITA margin was 6.6%, which is a good level for the business, but especially because of the abovementioned reasons, last year was very strong, close to 8%. So it came down. And it would have been quite a bit lower if there had not been this very strong improvement in the machines margin, so there has been very good progress in gross margins in the machines area, which is quite a lot softening, this negative impact from the volume and also the fact that the fixed costs were higher. The following segment is Insulating Glass. And like I said, this was the strong performer in the quarter in terms of net sales and profit. Orders were under pressure. And like Anders said, our Insulating Glass business is quite dependent on the European region or EMEA region. And as the market has been somewhat softer, it has also impacted our order intake. On the machines area, the orders declined 28%. But on the other hand, the services orders grew 8% globally. So we saw quite good development there. Good to mention also the fact that the order book was adjusted during this quarter by the partial cancellation of orders by one customer. This is not expected to have any negative or positive material impacts on the net sales of profit this year. So it's more like kind of canceling orders that were supposed to be delivered next year or '25 and is then only having impact later. If we look at net sales, both machines and services were growing nicely, machines by 19% and services by 14%. And volume and margin both actually supported the profitability performance as well, and EBITA margin improved from 6.6% to 7.8%. And this kind of fully compensated and more than compensated the negative impact that we had from higher fixed cost and lower other operating income. And then the final segment, which is Automotive & Display. So this was the segment that was creating the most headache for us in the first quarter with quite heavy loss. And I think the main thing here is that now we were able to achieve breakeven result in the second quarter. If we first look at the order intake, there is a very nice growth in the orders. And of course, in a way, the comparison period was quite low as well, but still 32% increase in orders. And like I said earlier, the machine orders in this area more than doubled. Service orders declined by 9%, because the spare parts business was a bit under pressure. Net sales increased by 4%, and machines -- in machines, the increase was 12%. So that was really driving the net sales growth. Services was down 8%, mainly the spare parts business being the reason for that. Profitability, like I said, was breakeven, whereas last year in the second quarter, we had a small profit there. This kind of year-on-year development is driven by this kind of production ramp-up in automotive standard preprocessing lines in China. But like I said, this is now getting to a lot better situation than it was in the first quarter. So the quarter-on-quarter development in the profitability is to positive direction. And actually, the machine margins in this business developed very favorably in the quarter. The regional mix of the projects in revenue recognition was good. And then that compensated for the kind of lower performance in services and also the fixed cost increase. All right. This was the segments. And then finally, as usual, let's end with cash flow. Cash flow in the quarter was a very small positive figure, and there was working capital increase in the quarter. The order intake, as a whole, is lower than it has been in the earlier quarters, which is then putting pressure on working capital, and that is seen in the numbers. Also, we had, in the second quarter, the capital return payment and also we repaid some debt. And these altogether were more than EUR 5 million, and this then impacted also the total cash flow and then, of course, for the capital return part, also the net debt. Net debt -- net gearing increased to 32%. So it has increased from the year-end level. Usually, the year-end figure is the lowest one and then it increases from there for a few quarters and then usually, at the end of the year, then we get it down again. Now at the end of second quarter, it was still kind of below the level of the second quarter of last year. So this was my last slide. And then I would like Anders to continue with the outlook.

Thank you, Paivi. Let me then finalize this presentation with the outlook for '23. And given the strong and healthy order backlog, we have a growth of 8.7% compared to the previous comparison period. We have a healthy workload in all our factories. So broadly speaking, we have the production fully booked for the 2023. So what leaves us then is the Service business where we don't have an order backlog normally more than days. So that's something that has been this year starting up slower than we anticipated. And the other part that is worth mentioning is also there are a couple of things that affected our result negatively in Q1 and Q2, as you have heard today, one being the supply chain localization in China, there are some differences between quarters and Heat Treatment [ Q2 -- Q3 ]. And then there is a lot of good development that our team has accomplished that is partly not visible in our numbers. So therefore, we have specified the outlook here. We are guiding that our net sales will increase in '23 from the levels reported of 2022, and we specify our outlook for the comparable EBITA and which we estimate to increase to a range of EUR 13.7 million to EUR 15.7 million. And last year, our sales totaled EUR 213.5 million and comparable EBITA was 13.6%. So this was the presentation of today, the first half of 2023. And now I welcome Paivi back up, and we are ready for any potential questions.

Yes. Thank you for the presentation, Anders, and thank you, Paivi. Let's start with some regional point of views on the question side. Can you discuss the expectations related to Q2 insulating glass orders from Americas? You note project shifts to latter quarters of the year. So what are the key reasons for the longer sales cycles? And what are the current ambitions and outlook in terms of winning market share in Americas for IG business, specifically?

So, the IG business, we have been, as a share of the total business, we are lower in IG than in the Heat Treatment business. There we have -- it's one of our strategical must wins to grow the business there as well. That requires also some development parts. So our solutions to the customers, which we are working with. So this will not happen overnight. So that's one part that we have there. And Pia, can you repeat the project part there?

Is the shifting project to latter quarters, what are the key reasons for the longer sales cycles?

And now we're talking about Americas or?

Yes, we are, Americas.

In general, whatever the comes to the shift in production is that the market situation is such that the new residential business is decreasing a bit. It's -- the bigger effect is in Europe than we see in Americas and the whole architectural market. But this is one reason, and the other one is the cost of capital being increased. So for a customer like ours who are producers of glass, it's easier today to postpone the decision with a month than it was maybe when the situation was a bit different. So that's what I believe is the reason for the shifting.

Paivi is nodding. Anything to add here?

Yes. No, no. I agree. I think it is when the customer's capacity utilization is not necessarily full, and at the same time, the interest rates are clearly higher than they used to be and maybe the investment decisions that they have had in the pipeline and the calculations they have done earlier, they might not be kind of accurate anymore. So it means that they have to kind of use more time than they usually do in order to make the decisions.

There is actually a question related to machinery utilization. But before we enter there, can you describe a little bit broadly outside Americas also the regional market prospects?

The market prospects. So, as I said, Europe is the one where we see the maybe slowest with what comes to new business decision. However, we did pretty well in the market environment. So we had a 9% decrease in new orders, which is fairly well in this business in the current setup. So I think Europe is going to be on a slower path for some while, but I think -- I also believe we are -- we will be able to do reasonable business in this current environment. Americas, we talked about there, we have seen the strong growth, the strong part, which we believe will continue for some while. The APAC is a bit too folded. So China market situation is soft there. We see some positive signs we have made -- actually achieved good new orders in the second quarter. The rest of the APAC, I think it has been very slow what comes to new bigger decisions there, but we see growth in the Service business. Actually, we see also good prospects there. So it looks reasonably okay-ish in the APAC market in the current environment.

And then can you discuss the decline in customer machinery utilization and how leading indicator that is to your services activity?

Well, I think it's very difficult for us to have clear figures whether our customers' with capacity utilization, that's a company secret. So we would -- they are not sharing any -- people are not sharing this broadly. But I think it's clear we see the decline in the new construction, especially in the residential part, partly also in the commercial depending on the regions. So it's clear that being last year at a level where people were considering investing in new capacity, the current decline is making some questions in the decision timing here and combined with the cost of capital. So I don't want to speculate what our customers' utilization rate. It varies between companies a lot. And let's say, if you were close to the limit, now maybe you are 2-digit number lower or so.

And the time of lower kind of capacity utilization can also be a good time to do service work and kind of maintenance that would otherwise take the machine out from production. So this is also an opportunity for the customers to think about that.

Can you discuss the working capital and increasing inventories during Q2? Should we expect similar trend in the second half due to reserve commentary on the general market activity?

Well, the biggest inventory component for us is the ongoing projects, you could say the kind of -- in this [ percentage ] of completion method, it's a little bit different terminology, but in true life, it is this ongoing projects. And of course, there is a certain time how long they are in the inventory and then if the order intake is going down, then it takes some time when kind of it starts to show also in the inventory. To me, at least, maybe the inventory figure as such is not the main thing. The main thing is how do the inventory change and then the advanced payment change how are they together. And there we saw in the net increase in the second quarter, because the inventories increased more than the advanced payments. And the advanced payments then are coming a little bit kind of earlier in the timeframe and the new order intake declining is then kind of impacting that to some extent. So the whole picture, I think, depends quite a lot on the new orders.

Right. Let's move to profitability part. You reiterate your 10% adjusted EBITA margin target for '25, latest discussing the reorganization accelerating plant improvement. Can you discuss how meaningful and how fast impact should be expected from the reorganization?

Well, I think we -- when we launched the strategy in 2021, we started with a profitability of 4.6% EBITA. We made a lot of strategical action plans, which we have actually been fulfilling, and we have executed them. Currently, we are up at a profitability north of 6% when we look at the full year 2022. So, what we want to do now is, I think what we have achieved in the past couple of years is a lot. On the other hand, we have also been preparing for future growth. So we have invested a bit upfront. So if we would say market conditions would be same as when we prepared the strategy 2 years back with actions now that we are planning to accelerate, which comes to operational excellence and efficiency and also the lifecycle approach from the customer perspective and other parts as well, and the China automotive move there. We have a plan that this would take us roughly to the strategical result level. However, we know currently the market situation, it's somewhat softer than it was 2 years ago or last year. So obviously, the volume effect from the market situation is, of course, linked with our capability of achieving the 10% EBITA. But action-wise, we believe this with the expected volumes will lead to. The speed of it, it's that I want to layout clear details here. I think we have achieved in the first couple of -- we have now worked 2.5 years with the strategy. Now we are continuing. So things will happen in the coming 2 years with the effects pretty, I would say, evenly in there.

Thank you. Let's then have a couple of questions related to specified EBITA range. So can you discuss a little about the potential factors impacting where in this range you estimate to land?

I think when we look at the order backlog and the workload situation, so this, as said today, we are broadly there. We have the order backlog for this year's operations, what we have seen this year, the service has been slow, especially in Europe and in China and positive in the U.S. and APAC also on a positive note during the second quarter. So, we do not have normally an order backlog for the service business. And this is something that for us is very difficult to sense and see how the second half will really come out. And this has a clear impact on the range whether we will be lower or upper in the range.

Okay. And there was also more specified what are the biggest uncertainties, you mentioned services, but is there something else also to take into account?

Well, I think, there -- to my mind, there are not any particular one-off things that could be -- the Service is the biggest one. Then of course, the normal capability of executing day-to-day matters and have no surprises that normally is not foreseeable. So I think the Service is the biggest part there.

Anything to mention related to the broadness of this EBITA growth range for the second half? Why is it so, I think the Services is also here the main reason that as most of the net sales uncertainties related to Services, which usually have a very high margin, then it means that it results into then potentially higher range for EBITA as well. So far, it seems that we are reaching our last question. There is still some time in the audience if you wish to share some. If we now take a little bit longer perspective and having the current situation as described, how realistic do you consider it is to reach this 10% comparable EBITA target by '25, which is the strategic target range time-wise?

Well, I think that was partly a question earlier today, and I think the actions we have been doing currently, I think there is a lot of great work that is not fully visible in the figures when we compare quarter-on-quarter or year-on-year yet. And doing now the next step reorganization, focusing on operational excellence and the other things that we have mentioned here today, I feel we are addressing and executing in all these areas that we believe will bring us to the targeted level. As I said, the market development, that's something we cannot affect, we can affect our own actions. And if the market situation is weaker than we said when we planned that will obviously have an effect that I'm not able to calculate what is the magnitude of that. So action-wise, we believe we are on the right track, which means we believe we are able to reach the 10% margin. But of course, the market situation is also crucial to that achievement.

Yes. And ongoing consideration and reacting to that is, of course, on the table. And like you said, Glaston has not changed the strategic KPIs for the strategy period.

They remain unchanged. We believe they are the right ones as we heard about sustainability part Scope 3 emission is something that becomes part of the strategical targets that were not in the original ones we launched 2.5 years ago.

With that, I would like to thank you, Anders Dahlblom and Paivi Lindqvist. And welcome our audience to join us again 26th of October when we are ready to publish the Q3 '23 results. Thank you for this.