HEXPOL AB (publ) (HPOLB) Earnings Call Transcript & Summary

Hello, and welcome to the HEXPOL AB Q4 Results. [Operator Instructions] Today, I am pleased to present CEO, Georg Brunstam; and Deputy CEO and CFO, Peter Rosen. Please begin your meeting.

Good afternoon and welcome to our Q4 presentation for this year. Speaking is Peter Rosen, the CFO of the company, and you will -- we will start with going through the business performance, and then we'll go into a theme for this presentation wearing e-mobility, go over to the financial overview, look at the focus for next year, 2021, and then finish off with the Q&A session. And that being said, I hand over to our CEO, Georg Brunstam.

Hi, Georg here. I am happy to announce and comment on quarter 4, which is the best -- actually the best quarterly results we have had ever. And I should say some more in that. I'm reasonably happy and pleased with the result in quarter 4. And the environment is volatile, and it's volatile up and down. But on the other hand, we at HEXPOL, we are very good in handling volatility. That has always been the case and it is the case. We have a business model where we make things to order, which means that we do see things early, and we do see things in a way that we can handle swift, both up and down. And in the quarter, we have been handling the good volumes from the automotive in a good way. But more importantly, we have handled the COVID-19 situation. It's a tricky one. It's difficult, and it's today, maneuvering. Our focus is, of course, health and safety of our people. But at the same time, we're trying to have a very strong customer focus that we are very alert and on our toes with the customers because things are happening for them all the time as well. In general, the COVID uncertainty is everywhere, but it's mainly in some parts of the U.S. for us, some parts in U.K. a bit on Sri Lanka, a bit in Mexico, but it's all over. And it means that we have, from time to time, quite a number of people in quarantine, and we do quarantine, of course, the department and the people who tested -- personally tested positive on that. So we are, of course, following all these rules and regulations and things are happening all the time. Our decentralized organization is an extreme asset in these days. [indiscernible], a Managing Director -- is a Managing Director. And then he or she is handling his or her people and safely in the right way in the local environment. Coming to the results. Very strong volume development in quarter 4, and that is very positive for us. It has been negative before, but improving. But now we have a strong volume development versus last year and versus the previous quarter. We still have a quite negative FX effects, and we do have a lower sales price taking the sales down, but the underlying volume growth is good, and that's the reason together with a much lower cost base that we are delivering a very strong result. As you can see on fixed FX rates, I mean, the sales decrease isn't that big. We see, of course, especially a strong recovery in the automotive sector. We see the recovery in all regions, but in particular, in China and a little bit slower in the Americas than in the others. Recovery in automotive is strong in all regions, though. It's important to say that the lower cost base we have is in absolute majority strike. It is, as I said, the best quarterly result ever so far. And we are 90% up with a very strong margin at 18.3% and also very, very good is our strong focus on working capital, resulting in a record cash flow quarter with more than SEK 1 billion in operating cash flow. Then I turn the page. And this is happening because we are really executing strongly on an updated strategy, including an increased customer focus also in the short term. And we had updated our strategy in a good way. And we have also updated, and I will come back to that, our purpose and our mission ambition. If I look at the business areas then in HEXPOL Compounding. As I said, strong volumes, very strong recovery in China and Europe, but also a good recovery in in Americas. Many industry segments are recovering, but some are lagging and especially strong in automotive, I should say. China, in particular. We have had quite a lot of challenges, not only COVID in the quarter. A lot of discussions handling problems around raw materials, transport. But as I said, we are on our toes. We have a good culture, we are decentralized, and these matters are handled on a day-to-day basis in a very, very good way. But a lot of issues every day. But we are good in handling volatility, as I said. However, very tragically, we had a major fire in beginning in January. In 1 of our 3 Tennessee plants, we have 3 plants in in Tennessee, America. And 1 of them, we have a very tragic firing. It's actually major damage to everything. And we haven't decided whether we should rebuild or not. We will do that within short. We had one operator with severe burns. He's out of intense care. So stable conditions. But it's very unfortunate. But in this tragic situation, we are, of course, showing that we are very good in handling issues and everything from that unit is already transferred, and we are delivering everything, which was supposed to be delivered out of that plant from other plants. We have 14 other units to choose from. And that is, of course, a huge difference if it would have been a single plant operation for HEXPOL. Then, of course, it would have been absolutely devastating for us. But we have full insurance cover and the transfer of the orders, and we luckily enough have capacity, of course. And I must say we've been a little bit lucky and also clever that we did not -- we had some plans, but we did not proceed in closing more units in Americas, which we could have done from the capacity point of view, but we decided during the COVID situation that we will assess that afterwards when we know how the demand situation will be afterwards. And of course, now that meant that we have spare capacity in a number of places. So a bit of luck, but a clever decision in these tragic circumstances. But it's around 3.5% of group turnover. So I mean it is something we can handle. The other business area, HEXPOL Engineered Products had a very strong profit improvement in the quarter and sales in line with last year, which was good. And strong improvements and growth in Asia. And very, very good EBIT margin improvement on decent volumes and a lower cost base. On the M&A side, strong and high focus on that and increased activity levels in the marketplace also from us. But, of course, a lot of challenges in executing meetings and facts and also acquisitions. But things can be handled, of course. If I then turn page again, that's just a quick one, showing that we have a very strong culture in the HEXPOL Group, and we have updated and gone through the values and the purpose and the vision and mission for us, and we have had a lot of internal work on that. And then we have, of course, a purpose, which is a mantra for us, is that we create a material difference. And we create a material difference because of our people, but also because of our materials, our polymer materials. So strong culture, and we are delivering on that. And we are quick on our feet, and we are close to customers. We are, of course, committed and we work hard on the sustainability matters. And we are entrepreneurial, and we are absolutely competent in what we are doing. Just an update for you that we have been working on updating the strong HEXPOL culture. If I then turn page again, I will quickly just show that the FX of cost bigger in Americas, hence, the lower sales figures there. We have a distribution of sales roughly as before, 36% in Europe, 58% in Americas and 6% in Asia. If I then turn the page again, we are coming to what Peter started with one theme every call. And this time, we have taken the theme e-mobility. And if I turn page again, and this is, of course, a question we get quite often. How does the electrification in the transport industry affect HEXPOL? And in particular, the light vehicle production, how does it affect? And this slide explains actually quite in detail, how it affects us? The conclusion of it is that in the mid-term, we haven't got a single segment in the automotive industry, which is going down for us with electrification. The mid-term electrification, we believe, is a combination, of course, of hybrids and fully electric. And as you can see there, I mean, all charts are either equal or up or average, I should say. The biggest application for us is weather stripping and the smallest one is as actually belting and belting is the one which basically takes the biggest hit when you give electric. So you can see on the long-term trend. There are some negatives, but there are also some positives, and I believe the biggest segment, which is weather stripping, will also benefit from a growth long term, although we have a narrow going to the right only. We believe that there are so many more requirements on the weather stripping in an electrical, which will come. And we are extremely well positioned there. So all in all, many opportunities for us in the electrification and absolutely no negatives for us either midterm positive and long term, also positive, in my view, but some negatives, of course, on some applications disappearing, but we are small in these applications. So I thought that it was good to have an update for you on this topic. Peter has addressed it before I know. But this is a little bit more in detail. So -- and then just a little bit of what we are working on the next slide in the electrification. And you can imagine there are lots of new requirements in an electric car. And our products are really coming in there. For example, sailings around the battery housing, more dampening mats for the battery cells, cooling systems, and then, of course, on the fuel cells, a lot of sealings around that and also in the layers in the fuel cell. And of course, around wire and cable and all the connectors. So we are very positive on our possibilities in the e-mobility world. And short-term and mid-term, that is actually a big gain because in a hybrid is actually 2 engines. And we delevered to both of them. So that is just, I think, a bit detailed information around the e-mobility for your information.

Thank you. And if we then move over to the more financial part of the presentation, I ask you to turn to the page on financial overview. And as Georg has already mentioned, we delivered a very strong result in margin in the quarter. And this is despite that we see negative FX effects, both on sales and on profit. And on profit, we're about SEK 35 million in negative FX effects compared to last year. And across the board, we see improvements on profit, on margin, lower cost base, but also a very strong cash flow in the quarter of about SEK 1 billion, which strengthens our already strong financial position. And if I can ask you to move over to the next page, I'll take you through some of the details. That we see here during the quarter. But if we start with an overview over the year to see the developments, we've seen fairly large movements in our sales, primarily driven by the COVID-19. We started the year with a strong quarter, and we -- in that quarter, we had some positive FX effects. Then during the second quarter, we were hit by COVID-19, and we saw a large decrease in demand, especially with automotive customers that more or less close production for a period of time. Since then, we've seen continuous improvement in demand, and sales, both during the third quarter and now also during the fourth quarter. And during this quarter, we saw volumes above last year levels, primarily driven by the automotive picking up, but also building infrastruction (sic) [ infrastructure ] . And sales in this quarter were negatively affected by FX effects. And if we adjust to those effects, sales were more or less in line with last year levels. And if we then move over to the next page. So despite the negative FX effects, we saw a very strong improvement in operating profit, which increased 19% to a record SEK 622 million, and we saw an even higher improvement in our operating margin, which increased more than 30% to 18.3%. So if we summarize the quarter, we saw sales down 10%, primarily negative FX effects, profits up 19% and our operating margin of more than 30%. And if we then move to the next page and take a look at the operating profit, when we take a closer look at where the improvement comes from. So we see somewhat lower sales effect negatively, of course, but this is offset by a higher gross margin of about SEK 150 million and lower OpEx of another SEK 25 million. The higher gross margin is driven by higher volume, combined with lower cost in production. And the lower OpEx is driven by the cost-saving programs that we launched during the first half of this year and where we now see the full effects. And it would then change and move over and look at the profit and margins during the year, we have vigorously worked to bring down our cost base and have succeeded in doing so. Now when the volumes come back up after the second quarter, we see the strong effect it has on our margin and profits. We see margins increasing from 14.1% in the first quarter of this year. And we end up this quarter with 18.3% at the end of the year. That's an increase of more than 4 percentage points over a period of 4 quarters. And if we then move over and look at our 2 business areas, starting with HEXPOL Compounding. Here we see sales of about SEK 3.2 billion, which is down 10% compared to last year. This is primarily driven by negative FX effects. At the same time, profits are up 18% to SEK 580 million, and the margin -- operating margin for this segment is up more than 30% to 18.4%. And if I can ask you to go to the next page, looking at Engineered products. For this area, sales were in line with last year. We delivered SEK 240 million, which is more or less in line, and profit increased 45% from SEK 29 million in the quarter to about SEK 40 million. And the margin improved from 11.6% to 17.3%, which is a net increase of almost 50%. And this is a very good example where we see good sales over a substantially lower cost structure, giving very high margins at the end of the year. And if we then leave the P&L and look at the working capital development. We have a very strong end of the year delivery, and that is after continuous improvement during the year quarter-by-quarter. And we closed the year with a working capital in absolute terms of about SEK 600 million, which is about half of where we started this year. And in relation to sales, we are down to some 4% of working capital in relation to sales. So good improvements quarter-on-quarter, and we closed with a very strong fourth quarter this year. And also we see improvements in all areas across the board. And this, of course, translates into a strong cash flow, which we can see on the next page. We deliver a cash flow of SEK 1 billion, which is then, of course, the result, the combination of both good profit and the improvement in working capital. And this SEK 1 billion is an increase of 40% compared to what we delivered in the fourth quarter last year. And finally, when it comes to the financial overview of the business, net debt. We closed the year with a strong financial position. Last year, we closed with net debt of SEK 2.4 billion. And this year, we closed with 1.6 billion in debt. And that leaves a net debt-to-EBITDA ratio of 0.67. And apart from a strong quarter, that also means that we closed this year financially stronger and we started it despite the substantial negative COVID-19 effects that we experienced over the year. And by that, I hand over to Georg.

And I have 2 more slides here, finally. And one is, of course, just a summary of where we started that this is the best quarterly result ever for HEXPOL so far. And that we are handling the COVID challenges in a decent way so far, but I mean they are getting more difficult every day and hopefully, it turns that there are a lot of uncertainties, a lot of challenges, a lot of challenges around people, a lot of challenges around many other issues as well. So far, we are handled that, of course, challenges. Good volume development, as we said, and structural cost reductions in place and very good and strong margin and extremely strong cash flow. That is giving us a very strong balance sheet, which we, of course, are keen to use in our M&A strategy. And so that is good for us. And that -- with that, I would like to move over to what our focus is for 2021 on the next slide. And obviously, first priority is to handle health and safety for our employees. And then I must say what the lockdowns and closedowns will mean? I don't know. I can only say that we are on our toes for any direction, and we can handle it. But of course, I mean, you can think about who is buying a new car when at home or -- yes. And when the car dealers are closed but hopefully, only for a short while. And then maybe the increase will come in a bigger way. But there are many scenarios here, but we are not lost, we can handle it. But for sure, the forecasted light vehicle production for 2021 is an increase versus 2020. And we are, of course, planning for that, and we are quick on our faith, and we can handle that. And we think that there could be a volatility in demand and then the short-term volatilities. And we are good in handling that with our order and customer order based business model, and with our decentralized organization. I mean we hear right now of component shortages in some places and the schedules and the scheduling from the OEMs are changing, both up and down. And -- but we are calm. We are handling that. And we had many units, and we are close to the customers. We will, of course, continue when things have settled down to evaluate our manufacturing footprint, like we said before, that's still of the agenda. On the agenda is, of course, to continue to improve our market shares. And we feel that customers do appreciate that we are extremely close to them. We have very short lead times. We had a shorter transport cycles. We are close to them, and there are a lot of problems by importing-exporting materials. And we are local. And we see that as a big advantage for us and our customers appreciate that. We also feel from the raw material side that it's getting to a very tight market. It's actually difficult to the haul of raw materials in some places as well. But I think our position as market leader is actually helping. We get priority there. The M&A focus is strong. It's always been, but it's particularly strong now because we think there will be more possibilities coming. We see that already. But there are also some challenges in the M&A practical handling. Yes, we can do virtual plant visits and so on. But we also need to meet people, and we often acquire companies where we keep the management. And yes, some practical challenges, but they can be hard. We are also planning a Capital Markets Day in order to update many of you on the business. We are planning that first half of 2021. It will be, of course, business oriented, sustainability oriented as well. And then that was the last slide. And overall, I'm reasonably happy with what we have achieved, the best quarterly results ever so far with a lot of record margins and record cash flows. But I have also confirmed the focus for 2021. With that, I'll leave it open for questions and answers.

[Operator Instructions] Our first question comes from the line of Erik Golrang of SEB.

I have 2 questions. One is on the -- perhaps mostly related to the savings you've had through the course of 2020. You say that a lot of them are structural, but could you in any way help us think about how much of the savings you see now are more of a temporary character, i.e., how much could come back here if we get some kind of normalization? That's the first question. And then secondly, if we look on the gross margin, you said that volumes were the main driver for the pickup. I'm thinking that there has to be a bit more to it than that. Should we read anything into the fact that inventory-to-sales fell a bit quarter-on-quarter typically goes up, i.e., is there a very beneficial raw material margin in there or something similar?

Okay. Erik, Peter here. I'll take the first one. When it comes to the savings that we've done during the year, we are very comfortable where we are right now. And I think when looking ahead and trying to have a picture of what that means. And when we say that the majority or -- of the savings and structural I think one can take a look at the last 6 months of this year and see that we've come down a bit from Q3 into Q4. And I think that's a reasonable base to look at us. Then what can happen next year or this year is, for example, COVID-19 disappears or when it does, we will see some increases when it comes to travel and these kind of activities and therefore, this social-related costs will go up a bit. But those are the cost movements that one can expect. So take a look at what we've done the last 2 quarters. We're very comfortable and then some costs might increase due to, for example, travel.

I can take the second question you had, Erik. Obviously, the result is driven by good volume development and a lower cost base. But also, we have a much better mix in our sales, and we are gearing, steering our business towards that. And in addition to that, I think we have been quite good in price management. It's been a big focus for us as well. So I mean, savings and volumes, yes, but also moving to a better mix and also some good price management.

Just one follow-up on that. I mean we've seen quite big swings in raw material prices, which typically creates opportunities. Is that something you've been able to capitalize on? And has that sort of made it a bit more tricky for clients to really follow the underlying raw material cost? And assuming they cool down a bit, could that be a potential headwind?

I think we are good in handling this. We have a lot of contractual customers as well where the raw material mechanism is just a mechanism and hence, we have a lower sales price and the raw material has been lower. So I think we are always going up and down with the raw materials, of course, because it's a transparent business model. But of course, I mean, we try to maneuver everything we can. And if we feel that we have priority, we want some suppliers, both in terms of availability and purchasing power, we use that, of course. And also on the custom side, the ones we negotiate, we, of course, negotiate in a fair and open way. But I mean, this is, of course, a skill to handle the price management as well.

And our next question comes from the line of Douglas Lindahl of Kepler Cheuvreux.

Georg and Peter, hopefully you can hear me. Georg, welcome back.

Thank you.

I just ask you what your -- I was going to start off by asking what your main role as new CEO would be, but you already answered that on Slide 24, to some extent. So I'll try and ask you instead, what your sort of long-term vision is for HEXPOL as a company? Where do you see HEXPOL in the next 10-or-so years, would you say, start off with that one, please?

It's a good question. It's a fair question. And the strong, strong use of that. I think we are a high-quality company. I mean, you are a high-quality company if you had 18%-plus on your operating margin or at least between 17% and 18%, and that is where we are in the last couple of quarters. So a high-quality company with strong, strong cash generation in our business model. And that means, of course, that the vision is that we should be much larger in the areas, in the polymer areas, where we are today. And we can, of course, possibly add an adjacent area, but we have a lot more to do in the areas where we are already. And we have management to deal with it. We have cash and we have cash generation to deal with it. And then I think the possibilities are coming stronger going forward. They are there much more right now than before as well. I see big opportunities in Rubber Compounding. It's absolutely not ready in the consolidation and lots of players. We have come a bit far in Americas than we've done in other places, but a lot more to do. And on the TPE, we've had that journey laid out for long, but there are not so many sellers that we are growing organically nicely, and there will be sellers, and then we will be there. And on the Thermoplastic Compounding, we see big growth opportunities for us. We are a small player there, we're a decent player in Americas. We are very smaller, nonexisting in the other areas. And the Mesgo acquisition, we are going to build on that, both by acquisitions and cross selling. Very good acquisition, and so it was preferred. So we are building on the 2 very good recent acquisitions. And long term, I see good growth opportunities and good acquisition opportunities in the areas.

Okay. Thanks very much for that answer. Going back more to what's going on right now. Obviously, we've seen strong indications from the automotive industry and you're vocal about this as well. Can you give some sort of number on what changed year-over-year you're seeing in Q4 in terms of volumes in automotive and also now during the first weeks of 2020 -- 2021, sorry?

It's very, very tricky. But I think I do agree to the official numbers I see from IHS and the market and so on. I mean China was very strong volume development in Q4. It was a little bit less in Europe and actually more or less 0 or maybe even a slight negative in Americas. But going forward, I see forecasts from all institutes that we will see an increased light vehicle production next year. But there could be volatility between months, of course, and maybe even quarters. But overall, I see increased light vehicle production -- light vehicle production next year in all regions.

And just in that context, during previous quarterly results, there have been discussions about HEXPOL having a sort of more volatile business model given that it is outsourcing solution for many. Do you agree with that as well going forward, I guess?

I do agree that there is outsourcing and in-sourcing, but our business model is more volatile, I do not agree on that. But what I've seen over all the years is that there's always been in-sourcing, there always been outsourcing and the net has always been a positive for outsourcing. And we see many opportunities in the outsourcing today, and we actually have many discussions on people who have been in stopping the mixing during the pandemic. But then -- and we, of course, commence on to say that you don't need to restart. I mean we can do it for you. You can see that. So I do not see that we have a volatile business model in this. But of course, always in-sourcing and outsourcing. And you know, we acquired a big unit from Trelleborg some years ago. That was their compounding facility. And that was an outsourcing in a big way, wasn't it?

Just 2 more questions, if I may? So you're obviously confident that you will retain your high margins when volumes recover. And you've been very successful with cost reductions. Is there any potential for even further cost reductions going forward? That's my first one.

Peter here, Doug. No, I don't think that you should expect substantial further cost savings. Of course, we will continue to work through our cost structure, but we've taken out substantial savings during 2020. And I think that's a reasonable pace to move on from.

I mean I can add that, Georg here. We are, of course, evaluating the footprint. So there could be one potential saving if we come to a conclusion there. But I do agree for what Peter is saying, of course.

But nothing in the line with what you communicated with -- in accordance with Q3 going into Q4, for example. That's clear. And my last question then is more on sort of the technology or the innovation of the industry. I was wondering if there are any sort of themes that you're seeing in the industry. So are customers demanding more and more sustainable raw material usage, for example, in your continue products? Are you seeing something like that? And how are you working with that?

Absolutely. We see that accelerating, and we've been ready for that for a while. And we see that accelerating now. And that is very positive for us. And I think we have proved a lot of things, but I would also give you a teaser that, that would be one of the themes for the Capital Market Day to show how we can handle that and I'm quite optimistic on. We've always been in the forefront of sustainability. And we are ready with lightweight materials. We are ready with bio-based materials, we are ready with recycled materials and not always are the customers and the suppliers ready, but we are ready.

And our next question comes from the line of Karl Bokvist of ABG Sundal Collier.

And yes, I want to extend a warm welcome to you as well Georg . Welcome back. And first…

You know that what I've just described is that sustainability is a major focus area for us. And in sustainability, recycling is a big part of that. And I see myself as part of the recycling.

Yes. Well, hopefully, that's the kind of natural recycling that we want to see.

Absolutely.

Well, first question revolves around Jonesborough over the fire. And I'm just curious when you say that you were very well able to shift production to other sites. I mean if we move one facility such as Jonesborough, does this mean that it could limit your impact to grow as the overall market recovers?

No, I don't see that. And we were holding back on the plant closures, the manufacturing footprint evaluation. Not for this reason because that was obviously nothing we expected. But we were holding back luckily and cleverly because we didn't want to have is -- it's a big operation to move a customer from another -- from 1 unit to another unit because there's a lot of approvals involved, also for the end users. And we were holding back on that. And we said that Ken and I am Peter, we said that let's hold, let's wait and see. And I think that has been very fortunate for us now when volumes or recovery. And on top of that, we had a fire. So yes, we have had good capacity to maneuver at that. Of course, we have been forced to run overtime, we've been forced to run extraordinary things and so on for it. But that will stabilize later on. Now we can handle that, and then we can also do some -- we have already started that discussion, do some debottlenecking in some of the other plants for it. So that is how it is. And maybe we were clever, maybe we were lucky. And so it was a good combination recently.

Yes. Well, thankfully. So only -- no one got hurt seriously. So -- well, relatively, so to say. But anyway, my second question was about your comment on market share. Is it -- I know it's difficult to sort of specify the addressable markets for you, but is it possible for you to give an update on your current market share today?

That is always a tricky one. It's always been there. There's no industry statistics that there is nothing supply to an industry federation, and they are compiling things. So that is nonexisting. And when I -- what I'm facing, my feeling that we take share on is that, that's what we hear in the marketplace. We see some increased splits, what we see when we are 2 suppliers and one customer, we can gain a higher split than we had before. We can also see some customers who haven't been with us for a while, coming back. And we also hear from the raw material people that our volume wishes and volume outtakes are higher. And that's where I based my statement on. Then, of course, safe people always say that we take share.

Understood. And then thirdly, you -- well, we had a few years or 2, perhaps 2 in particular, not so long ago, where we did see price pressure from customers on top of general raw material surcharges. And I'm just wondering if -- do you see any of this coming back now once the market starts to go from a sort of pandemic management into more looking forward to a normal market?

I think it's a fair comment you had. And there is, of course, a bit of a risk that focus from customers and even ourselves, I mean it has been tending to maneuver difficult situations and then, of course, to secure supplies. And then, of course, in a more stable environment, that there could be more price discussions, of course. I mean, I don't give you wrong lead there, but I think we can handle that. I mean we have -- I think we have put ourselves in better positions lately.

And finally, the working capital situation, what you've done recently and so on. But looking ahead, what do you see as a more kind of normal working capital relationship when you start to grow now?

It is, as you mentioned. I mean last in 2020, we saw a gradual improvement quarter-by-quarter. And then we had a very strong post last quarter here. Going forward, I think one can reasonably expect to see that we're not going to see as big improvements going forward. I mean, we go into next year with a lower level than we've seen for many years. And that will most likely be more stable next year than seeing any big improvements and it showed big improvements.

[Operator Instructions] The next question is from Johan Dahl of Danske Bank.

Good to have you back on the call, Georg.

Good to speak to you, Johan.

It just sounds a little bit of that you've already completed some sort of strategic review here since you took over with your…

Thanks, Johan.

So could -- I understand the mission and vision part of it is very interesting. But if you focus solely on sort of growth strategies looking forward. What would you say are the main sort of updates or changes compared to how this company has been driven previously?

Very few. Very few. I think we have a good and have had a good strategy from for many years. And so the updates we have done on the strategy is more on the details. It's probably more of the tactics than the strategy. I think we've had a very good strategy for a number of years. I think we are executing better on it now. And that's been my primary focus on it. But we have updated it. We've gone through everything. And we have strongly agreed on everything, and we have strongly agreed on the actions, and then we are strongly executing on the actions. And we are quick on our feet. It's a fast organization. I must admit I do know them, pretty well all of them. And Peter, I got to know in a very good way and a quick way. So we are very aligned. But I mean, the recent acquisitions, they are perfect, and they are absolutely perfect in the strategy we are having today as well.

Okay. That's interesting. Would you say that if you look on potential platform acquisitions in TP or acquisitions on polymer compounding are you taking over sort of a developed pipeline in that sense? Or you sort of -- yes?

Yes/. Absolutely. Very good pipeline. There's been a very good job on that, which I knew, of course.

And I think -- I guess, what would you say is the priority there? If you compare sort of bigger deals to your sort of smaller compounding deals in polymer compounding?

We're actually quite keen on both. And on top of that, we've also seen on the mid-sized bolt-ons maybe in a geography where we are not so strong. So I'm actually keen on -- and we have the balance sheet to support all 3 areas. So we're actually very openminded in that.

Yes. Just a final question. If you could just address the risk of CapEx boom here in HEXPOL going forward. CapEx has been very light in the last couple of years. And also, when you talk in your CEO comments in the report about how clients appreciate your closeness and proximity to their production, what does that actually mean for the business dynamics or the math for the P&L basically?

If I take the latter part of your question first, the closeness means, of course, that with all the problems in the COVID period, people -- customers do want to 0have shorter supply chains. It's a big, big matter for them. I mean orders are closed. Trucks doesn't travel, boats doesn't go. Tariffs with the trade wars are going up and down. And people are very scared of that. So that do benefit us. I mean we are close to the customers. And we see, for example, in Mexico, where there have been some imports of competitive materials out of Europe, for example, and also out of U.S., I mean, that is going down. And we are local. We have 3 big plants in Mexico, and we do benefit from that. And also, in the U.S. -- also in Europe, but in the U.S., by American is pretty strong. And we are there. So we do benefit from that, both short-term and long term, I think. What was your first part of your question?

Was the risk of…

CapEx? CapEx, sorry.

Delays of CapEx, yes.

Yes. I do not have a pile of requests on my desk, which I haven't approved. I do not have that. But on the other hand, we might we might increase the speed in some CapEx, also due to the fire in Jonesborough. Some debottlenecking investments and also in the medical area, we've been running very strong, and we are going for CapEx there. So yes, we will go back to a tat bit higher that around depreciations, I guess? Yes. It's not going to change it from a cash flow perspective. It's nothing will change that big.

As there are no further questions in the queue, I'll hand back to our speakers for the closing comments.

And thank you, everybody, for listening. Thank you for your questions regarding Q4 and also going forward. We wish you a very [Audio Gap]