Hiab Oyj (HIAB) Earnings Call Transcript & Summary

Welcome to this news conference regarding Cargotec's Q3 2020 results. I kindly ask you to pay special attention to disclaimer. This call is to discuss Cargotec's Q3 2020 results. Securities laws in the United States and in other jurisdictions restrict Cargotec from discussing or disclosing information with respect to the contemplated merger with Konecranes. Information regarding the contemplated merger can be found at sustainablematerialflow.com. Until the completion of the merger, Cargotec and Konecranes will carry out their respective businesses as separate and independent companies. The information contained in this presentation concerns only Cargotec. The merger and the merger consideration securities have not been and will not be registered under U.S. Securities Act and may not be offered, sold or delivered within or in the United States, except pursuant to the applicable amount of or in transaction not subject to the U.S. Securities Act. Then moving to actual Q3 report. Mika will start with a group level development. And after that, our CFO, Mikko Puolakka, will continue with business areas and financials. Please, Mika.

Thank you, Hanna. Good afternoon from my behalf as well, and thank you for joining the Cargotec Q3 presentation. Overall, I'm satisfied with our performance in quarter 3 considering the market situation. The recovery in our businesses continued throughout the Q3, and especially the demand in Hiab and in Kalmar mobile equipment developed well throughout the quarter. The services have stayed stable throughout this crisis and are actually down only 4% year-on-year or year-to-date. And that decline is primarily coming from Kalmar crane upgrade projects and Hiab installations. The core services have actually fared very well throughout this crisis. Our relative operating margin stayed actually at the same level as last year. This is primarily thanks to the savings, primarily the temporary savings that we have put in place. And those temporary savings are now more and more moving towards the permanent savings as we move towards the Q4. Also, the good margin development in all of our businesses continued. And this is thanks to the sourcing activities we have been able to do throughout 2019 and '20 as well as the pricing efforts we have done in all of our businesses. Also, the stability of our core services, maintenance, spare parts has helped to maintain the profitability at a good level. This also shows that we are able to manage the company throughout the crisis without sacrificing too much of our profitability. I'm also very happy to see MacGregor back in black numbers and the great effort that has been done by the MacGregor team heading towards the profitable business again. Despite the many savings we have done to ensure our profitability, it's good to note that we have continued to invest into our R&D. And our R&D expenses are up again year-on-year in driving our eco-efficient product portfolio, electrification, robotics and automation. It's also good to note that despite the decline in many of our product areas, our eco-efficient product portfolio has actually grown more than 8% this year. As said, the relative operating profit stayed at last year's level, and we have seen a good profitability development continuing throughout this year. The coronavirus pandemic impact was clearly less significant already for us during the Q3. The temporary savings have continued throughout the Q3 and it may, at a large extent, will continue also throughout Q4. And also, we are moving from more temporary savings to more permanent cost savings in many of our businesses. Also behind the good result is the continuous productivity improvements we are doing in all of our businesses. And our headcount has declined so far year-to-date with more than 800 persons. We see a good demand recovery happening, especially in Hiab and in Kalmar mobile equipment. Customers are still clearly cautious about larger investments, such as the port automation. And our delivery situation is back to almost normal situation with no major issues with our component suppliers nor our own manufacturing units. In terms of the activity, today, obviously, we have a very large number of connected equipment that gives us a real-time online visibility on the activities in the different sectors of the logistics. The activity increase has continued throughout the Q3. And in many areas, we are today close to the pre-COVID crisis. The red balloon here shows the Kalmar mobile equipment activity level and the blue, the Hiab crane activity and truck activity in these areas. And as you can see, the development has continued. They are still overall somewhat short from the pre-COVID crisis and last year levels, but that varies from one sector to another and country to another. In some areas, we are already over the activity levels that we had pre-COVID. And in certain areas, we are still well below those activities. So quite a lot of variation in that activity level. But overall, direction is clearly up in all of these areas. In terms of the market environment, obviously, the Q3 was still a difficult one in many areas. A number of containers handled. And the container flow was still obviously down in Q3, but is expected to increase already in Q4. And the estimates are that the next year container traffic volumes will grow roughly 7 percentage points. Obviously, also construction activity has been down, but is now -- we are seeing signs of turning. And for example, in U.S., the housing market index in September was at the record high level. In Europe, the construction activity is a fairly mixed bag today with a large variation between different countries. The market environment in MacGregor continued to be difficult one, and we have seen almost a record low number of new ships ordered so far. However, the market is expected to start to recover with Clarkson estimating about 900 ship orders next year, which is still well below our normal year level. The orders received have bottomed out during the Q2. And especially good development we have seen in Hiab, especially towards September, which was a strong order month, as well as in Kalmar mobile equipment. And the recovery, we also started to see clearly in U.S., especially during September, where we had a good order intake happening, both in Kalmar as well as in Hiab also in the U.S. market. And also, good to note that Hiab order backlog has now actually turned back to growth. In Kalmar, the mobile equipment order intake has developed well, but we have seen postponements in the larger investments, primarily around the port automation. However, the backlog and the pipeline in port automation is solid. We have not seen any cancellations on those ones, but we have seen slowdown and postponements on some of those decisions with the buildup in the pipeline happening as we speak. And in MacGregor, obviously, the low market situation has caused the backlog to go down, but we still have more than 1 year delivery of equipment in the backlog in MacGregor as well. As said, operating profit trend has been good. We have seen clear absolute operating profit improvement quarter-on-quarter this year. And we've been able to maintain a comparable operating profit margin at the same level as last year. The service business has been very resilient throughout this one. And even though we have seen some decline in there, in Kalmar, that decline has almost solely come from larger crane upgrade projects. And the core services have actually maintained their good level in there as well. Also, in Hiab, the service decline has primarily come from the installation and ancillaries, which are related to the new equipment and truck deliveries as well. And the core services have maintained a good level in there. We have seen decline in MacGregor services, and this is primarily related to the access for the ships and the capability to maintain them as well as the low level of the drydocking activities there as well. However, overall, the services and software have maintained a good level. We saw some decline in software sales. This was primarily related to large license deals in Navis and the timing of them, where we actually saw a number of relatively large deals in Q3 last year. And this year, we didn't land any, but we still have good opportunities to actually close some of the license agreements throughout the Q4 this year. With that one, I'd like to hand over to Mikko Puolakka, who will cover the business areas.

Thank you, Mika, and also good afternoon from my side to all of you on the lines. Let's go first to Kalmar. Kalmar mobile equipment was nicely supporting the overall Kalmar financial performance. Kalmar orders were down by 17% year-on-year. This was mostly coming from Automation and Projects division, where customers were holding back bigger investment decisions. As Mika mentioned, no order cancellations, but customers cautious in making big investment decisions. Now looking Kalmar orders further. So in mobile equipment, we saw actually very small decline in the orders. And actually, the mobile equipment orders were improving nicely from the low quarter 2 levels. Kalmar sales were down by 14%. The Automation and Project division sales grew, very much supported by the orders which we have won in '19 and which we are now delivering. The sales in mobile equipment services and software declined, but also like a bit like in orders, also in those businesses' sales, the decline was clearly smaller in quarter 3 compared to quarter 2. So also there, an improvement visible. The Kalmar absolute comparable operating profit declined, very much driven by the sales decline of EUR 60 million. And then we had some costs related to the Kalmar Automation and Project division operating model reorganization. But when we look the comparable operating profit margin in Kalmar, it was almost 9%, and very much supported by the strong mobile equipment performance in quarter 3 and then also the continuous productivity improvements, what we have done in Kalmar as well as the cost reductions. Then looking at Hiab. Also there, order decline. But again, very similarly to Kalmar, the order decline in quarter 3 was much smaller what we experienced in the second quarter. In the second quarter, the orders went down by some 30%, now 11%. Sales were declining 17%. But also here in Hiab's case, the decline was clearly smaller than what we saw in the second quarter year-on-year comparison. Hiab delivered a strong comparable operating profit. Despite a EUR 53 million sales decline, only EUR 3 million decline in the comparable operating profit. And also, the comparable operating profit margin, clearly increasing from last year's levels to 12.2%. The comparable operating profit margin improvement is very much coming from the continuous productivity improvements also in Hiab as well as cost reductions. And currently, we have approximately 480 persons smaller headcount in Hiab compared to last year's situation. Then looking at MacGregor where the heavy actions that we have done in TTS integration as well as overall MacGregor restructuring are bearing fruit. Markets, like Mika showed earlier, are already still weak. Customers are optimizing their cash, which is very much visible in the orders as well as in sales. The bright spot in MacGregor is clearly the comparable operating profit, which is now EUR 2 million for the third quarter. And also there, very much coming from the heavy actions, restructuring, TTS integration. We have approximately 340 persons smaller headcount in MacGregor compared to the situation 12 months ago. The TTS integration and the restructuring is progressing actually better than what we anticipated in the beginning of the year. And due to this, we have increased the savings target for this year from the original EUR 15 million to EUR 20 million. And out of this EUR 20 million, we have now already so far delivered EUR 14 million in the first 9 months. A few words about our key figures. Our sales, total sales, EUR 777 million for the third quarter. This is EUR 124 million lower than year ago. This kind of sales decrease has led to approximately EUR 40 million lower gross profit. To kind of offset this gross profit and sales decline, we have then reduced our SG&A costs by EUR 24 million. And this has enabled us to maintain the comparable operating profit more or less on the same level compared to last year's quarter 3, 7.3%. We had EUR 11 million of items affecting comparability. This are mainly related to the previously mentioned restructuring programs in MacGregor, in Hiab and in Kalmar. Our net income despite the EUR 124 million sales decline, net income was almost on last year's level, EUR 27 million. And earnings per share was EUR 0.41 per share. Cash flow was strong in quarter 3, very much supported by the good performance, both in Hiab as well as in Kalmar, especially in the mobile equipment. And in addition to that, we have been able to reduce the net working capital from the quarter 2 levels, especially in inventories as well as in receivables. Our financial position is strong and liquidity is on a good level. Our gearing was 66%. This is 12 percent points higher than at the end of last year. Roughly 9% of this increase is coming from the dividend payments, what we have done during this year. And the liquidity is at EUR 830 million, so very strong for the current situation. No major changes in our debt portfolio. If we look our debt, outstanding debt maturities, we don't have any major debt repayments coming up in the next 18 months' time. And then our outlook. If we consider the current market environment as well as the supply situation, we expect that the second half comparable operating profit increases from the first half when it was EUR 82.9 million. Then I hand over to Hanna-Maria.

Thank you, Mikko, and thank you, Mika, for the presentation. Now there is a possibility to ask questions. And as a gentle reminder, this event is not to discuss the merger with Konecranes. Handing over to the operator, please.

[Operator Instructions] We will now take our first question.

This is Antti from SEB. Firstly, on kind of the demand trends you're seeing in Hiab and Kalmar mobile. Sorry, there's a bit of an echo in the room so bear with me. Could you comment kind of the demand improvement, where you ended up end of Q3, start of Q3? And how should one think about the near-term demand considering kind of the seasonality, the recent virus outbreaks? And is this driven by robust underlying demand or some kind of a pent-up after a quite weak springtime? Just a bit more color on the demand recovery.

Sure, Antti. Maybe I start and then, Mikko, if you have anything to add on that one. So starting with Hiab, we saw a kind of a month-on-month improvement. Actually, the same trend that we saw on Q2 continued throughout the Q3 as well. And actually then it sort of accelerated towards the end. So September was already a strong month for us. No large individual orders, so it comes from the sort of fairly normal activity. The difference between the previous months and then towards the end of quarter was that we saw the U.S. activity starting to pick up actually surprisingly, a little bit surprisingly well towards the end of the quarter as well. So we see both the European and U.S. market actually showing now good signs of demand. Whether it's a sort of bounce back from Q2, obviously, it's hard to sort of point out specifically where it comes from. But if I look at Hiab equipment activity levels, for example, in the main markets, they actually are surprisingly strong. In many of the U.S. markets, for example, the truck activity index is actually at the same level or in some cases up from that one. And my guess when we sort of look into the data is that the construction activity has sort of really picked up on that one. Now obviously the low interest rates and stimulus packages, et cetera, are partly probably driving that one as well. In Kalmar mobile equipment, we actually see a solid demand there as well in terminals, e-commerce and sort of logistics obviously has been pretty hot throughout the quarter as well. And again, same thing as in Hiab, we have seen strength in demand towards throughout the quarter in U.S. market where, for example, the terminal tractor activity was at very low level on Q2. It has started to pick up again on Q3. And we have seen destocking happening by the dealers and new orders coming in on that one.

Okay. And maybe a follow-up on the Kalmar mobile side. Could you remind about the situation regarding the electrification of your product portfolio, kind of where you stand today? And how do you think this will evolve going forward when you will be selling mostly electric equipment on that side?

It has gone well and we haven't slowed down. As I said, we further accelerated still our R&D investments. And we have announced that all of Kalmar mobile equipment will be available next year, if I remember correctly, on electric format as well. The major demand we see today is around the forklift trucks, those who are operating maybe in the warehouse or logistics yard environment as well increasingly so in the terminal tractor side in -- and really led by probably key customers where the efforts or the focus on sustainability is pretty high, partly also driven by the regulation in the sort of -- in port areas, for example, the diesel engine usage is to be banned in many of the areas as well. So I think, obviously, we will see diesel engines in many of the developing countries, in some other areas where the lack of grid will be a key issue for years to come. But we have seen the pickup and the demand actually continuing strong and strengthening continuously in the electric vehicle side.

I would perhaps add there that if we look at the overall Cargotec level, our eco-efficient or the share of eco-efficient sales has increased from last year's 20% to 24% now.

Okay. And then lastly for me, looking at the backlog decline and duration in the more project-heavy divisions, Kalmar and MacGregor. How should we think about this when we are getting bigger issues regarding workload and kind of the length of the backlog? And then maybe, will the upcoming merger with Konecranes have any impact on what type of savings programs or restructuring are you prepared or planning to do with Kalmar project if that demand doesn't come back in the next few quarters?

When I look at the backlog on that one, and let me start with the MacGregor, where obviously backlog is down. But it's good to remember that when you look at the MacGregor revenue, so much of that one is now services. So effectively, let's say, simplify that the MacGregor revenue would be at EUR 600 million level on annual basis. EUR 250 million of that one is services today. So that leaves you an equipment revenue of roughly EUR 350 million. So today, the backlog extends well into the '22. So there is no short-term issues regarding that one. We do expect that the ship order recovery starts throughout the next year. We have seen record low levels today and the Clarkson estimates now that we should go up to roughly 900 vessels next year, really driven by just simply by the replacement cycle. One additional point on the ship market. One sort of positive thing that we actually have seen throughout this year is that the shipping lines have been, I would say, extraordinarily profitable this year. And it's good always when your customers are making money as well. So hopefully, that gives some encouragement on that area as well. Regarding then the Kalmar, obviously, the mobile equipment, we see now the demand returning as well. So I'm not worried about that one. For the larger automation projects, we have a backlog and the revenues that extend into the sort of mid-'21. We do need to start to see some of these orders finally realizing by summer next year if we want to maintain roughly the current revenue levels. There is a very solid backlog in there. And these projects that we've been sort of entertaining for quite a while have not gone anywhere. But very clearly, the customer decision-making has been disappointingly slow on that area.

We will now take our next question.

It's Artem from Crédit Suisse. My first question is around your comment on cost savings and maybe moving now more of the temporary cost savings to the permanent bucket. Can you maybe give us some color how much of the temporary savings you did in Q3 and how much you expect for Q4? And out of the temporary savings this year, how much do you think could be retained next year?

Yes. So we have made roughly EUR 10 million per month with the temporary cost savings. The main months have been July and August. We have lifted some of the reduced work time savings now in September. There are still some personnel groups which are having the shorter work time. So I would estimate that in quarter 3 more than EUR 20 million are coming from the temporary cost savings. When it comes to the more kind of permanent savings, we have done already during the last 12 months' time continuous product improvement. And as mentioned already during my part in the presentation, in Kalmar, we have roughly 220 persons lower headcount compared to 12 months ago situation, in Hiab almost 480 and in MacGregor 340. So we have been continuously doing productivity improvement, no kind of major restructuring program, but here and there improving the operations, which has been then contributing to this relative comparable operating profit levels in our 3 businesses.

Just to confirm, for Q4, do you still expect the savings to remain at EUR 20 million per quarter?

Some of the temporary cost savings we are converting into permanent cost savings. We continue some temporary savings. For example, our traveling activity is almost 0 at the moment. We are minimizing our external services usage. We have used in the past also external persons to kind of compensate the workload or kind of additional -- cover the additional workload. Now when the volumes are lower, we are doing that work by ourselves. So some of these savings continue also in quarter 4, but we don't disclose the exact amount for that.

Sure. And my last question is about Kalmar margins. Could you maybe talk a little bit about the impact of reorganization of supply chain on margins and whether it was a one-off impact in Q3 or whether we should expect any further headwinds in the future?

As Mikko was saying, first of all, the mobile equipment business margin was at a very good level in there. When we are reorganizing the supply chain, some of that is one-off type of costs. Some of that is caused by the COVID situation. And a practical example on that one, for example, is that some of the project implementation was estimated to be done partly by a visiting Chinese personnel from our joint venture operations. And now due to the COVID situation, we actually have to compensate for that labor with sort of hiring local subcontracting in places like U.S. and Australia. And that obviously has increased the cost. And while those travel restrictions are in place, some of the project costs are higher than we initially estimated. So some of that will linger into the Q4 as well. But the good news from my point of view, that if you look at our profitability development so far, we have done that against sort of negative mix. So the proportional part of the MacGregor and Kalmar project business has actually increased as a part of our revenue. And the revenue in Hiab mobile equipment declined faster throughout Q2 and partly Q3. And what we now see in order development is actually a sort of faster rebound of the Hiab, where the order backlog is already higher and a good recovery of order intake in mobile equipment. So we actually see that mix now turning back to more favorable for us.

But just would it be possible to quantify the impact of those incremental costs?

Not in the detail, no.

We will now take our next question.

Magnus here from UBS. Just a couple of follow-ups from me. If we could look at the growth progression in Hiab specifically, did you grow orders in September at all in any region?

Yes. Actually, the September order intake in Hiab was stronger even year-on-year. So we had a better order intake in '20 September than we had in '19 September.

Got it. Would you favor us with a number there? Like is it 5% higher, 10%?

It is a very healthy growth. Good growth, but it's been fairly steady growth as well. I mean, all the way from sort of April, which was the low point, we have seen steady month-on-month improvement even throughout the holiday seasons. And obviously then September being kind of back to normal, you saw a higher number, but the number was even higher than it was a year ago, so good, strong development there.

Excellent. I mean with volumes coming back also, I think, faster than anticipated on the terminal throughput globally, I think you commented on a 7% growth in '21. What do you expect on the quotation activity? Have you seen any pickup there or is it sort of still very muted on that side as well?

On the larger terminal projects, the backlog is solid in a way that we have not seen anything disappearing on that one. But obviously, disappointment for us is that some of the projects that are kind of already beyond the quotation phase have not been -- we haven't been just able to close them. Some reasons are quite practical due to the COVID and travel bans. Some of them are just sort of careful decision-making process from the customer side. But as such, there is a -- if I look at the existing sort of deals that are on the table at the moment and I look at the prospects going into '21, that there is still a solid sort of prospect list on those ones available.

Okay. Got it. And then another follow-up on the Kalmar and the mix. Did you say you expect the mix to improve into Q4?

Not necessarily into Q4, but then moving -- if this development continues, we should expect to see the mobile equipment ratio to increase moving into the '21.

Okay. Got it. And would it be possible to quantify the impact you had on that in Q3 specifically?

No. No.

No. I'm not sure I would be able to even if I know.

We will now move to our next question.

It's Erkki from Inderes. My questions have already been mostly answered. But anyway, coming back to your guidance, it's relatively loose. You would need only EUR 26 million of EBIT in Q4 to reach the low end of the guidance. Why is that? And where do you see the biggest risks now in Q4 absolute operating profit?

Yes. I mean this was a consideration from us. And we see it, at this stage, we see things actually moving along quite well. But obviously, the COVID situation is quite unpredictable. And I could see risk, for example, with the cluster of infections in one of our manufacturing facilities that could stop production potentially up to 2 weeks or so, and that could impact then. We have taken those risks into consideration in the sense that we wanted to sort of give you guidance that we are comfortable on even in the case of certain negative surprises. We have not seen any of that one happening at the moment and the underlying trend is quite strong. But obviously, there are still risks available due to the COVID situation within the Q4. And those risks, I think, are primarily related to the sort of sudden interruptions in the supply chain.

Okay. And then coming back to Q4 gross margin. The Kalmar question was already asked, but how about Hiab. Will the improving Hiab demand, will this show in Q4 gross margin?

Not necessarily. I mean, it's good to remember that regarding the Q4, the Q2 and Q3 beginning order intake was lower. And obviously, now we have seen September coming back quite stronger so, and that will have a certain impact on the Q4 there as well.

We will now take our next question.

It's Aurelio from Morgan Stanley. I've got a couple, if I may, please. So the first one is more kind of bigger picture. Now that we've seen MacGregor turn into black again, what do we need in terms of sales? Do you see the business doing, let's say, 5% margins? I think if I remember well, you mentioned that you would need north of EUR 1 billion of sales to kind of see 10% margins back in that business. I guess what's next from here.

I think next from here, obviously, first of all, the savings activities and productivity activities we have seen are flowing through. So some of that is fully visible only next year. So that certainly helps us even in that relatively low situation. So even with the low sort of ship order activity, I'm still pretty comfortable with the MacGregor situation, primarily driven right now by the cost saving activities. And if we now assume, and I think that, that's almost sort of clear, that ship orders can only go one way, which is up from here. And nobody knows the speed of the recovery or the scale of the recovery, but we are able to manage that one. What we have said in the past is that with roughly EUR 1 billion of revenues, we should be in the double-digit operating margin situation. And my view on that one has not changed. But the speed of the recovery, obviously, is a question mark. But we are in a much more comfortable situation now that we are back in the black numbers and we can manage then the business and the cost levels depending on the demand.

Okay. And I guess the second question is around some of the different dynamics that you've seen in construction. I think you mentioned that September was already quite strong in the U.S. And we've been getting, I would say, mixed messages from the U.S., especially where the resi side is very, very strong, but we are starting to see a sharp deceleration in non-resi. I guess, do you see any impact from that or any risk from that or are you more heavily skewed towards resi?

We are more heavily skewed towards the residential building than the commercial side on that one. Typically, the applications of Hiab are more applicable for the residential build-out on that one.

We will now take our next question.

This is Johan at Kepler Cheuvreux. I think we -- or you promised us when we spoke the last time an update on the Navis divestment now in the quarter. I might have missed it. But could you give what's happening with the Navis divestment? Are you still having interest and what sort of price levels are we talking about?

What we said, I think, the 1st of October, if I remember correctly, we issued a separate release saying that we have restarted the process with Navis. So we are now in the middle of that, looking at the different options for the business as well. And that process is ongoing as we speak. Then depending and what the conclusions of that process are and where we end up, we will then update you when we have more information. The interest towards the Navis overall from the market has been exceptionally high.

[Operator Instructions] We will now move to our next question.

Just on FX, I think, with recent devaluation of dollar, could you maybe give us some comfort on the fact that Hiab shall be, if rates stay where they're at the moment, that Hiab will not see any material negative FX transactional revaluations on EBIT?

I mean, of course, we don't have the crystal ball, how the U.S. dollar-euro develops. But so far, during this first 9 months or in quarter 3, the U.S. dollar-euro impact on Hiab results was, I would say, single millions, 1 million to 2 million at the maximum. So no major impacts from there.

Okay. And my second question was about TTS savings. Could I just check, please, that EUR 20 million target for this year, is this just acceleration of the overall program or that's an increase to overall targets over the next 3 years?

The overall target stays as it is, but we have been able to execute the savings in a faster speed than originally anticipated.

Okay. Okay. Okay. And the last question, I guess, you mentioned you wouldn't like to discuss the merger, but I'll still try. With the ports business, I guess my question is, could you maybe talk a little bit about where the overlaps with Konecranes are and whether the market should be concerned about antitrust issues?

Like I said earlier, in this call, we cannot discuss any topics related to the merger with Konecranes. So we cannot, unfortunately, answer this question. Thank you.

[Operator Instructions] We will now take our next question.

This is Tomi from DNB. Unfortunately, my line was cut off. So I have to come back to the guidance comments, which I missed unfortunately. So was there something specifically weak you are guiding for the fourth quarter as you are just referring to the second half being above the first half? Just a little bit of clarity on that, please.

I mean what I said is that we just wanted to kind of be comfortable that there are risks, obviously, related to Q4 that are primarily around the potential disruptions in supply chain. Let's say that we would, for example, have a infection cluster in one of our manufacturing units or one of our key suppliers would have a similar situation. And we wanted to sort of give a guidance that we would feel comfortable we'll be able to take some of these hits. None of that is visible at the moment. Actually, the development has been solid so far. But obviously, with the sort of continuously moving COVID situation and the risks are still there.

But the guidance, let's say, who knows what is the level of improvement? But are you, let's say, trying to say that the fourth quarter could be below the third quarter level or is it more likely that it is flat or up compared to the third quarter?

As we said, the second half is better. I'm sure you've already done the math regarding that one. And I said, there are sort of the risks related primarily on the supply chain side. We have not seen any of those risks in or we don't have any of those in sight at the moment. And overall, the underlying development has been good. But you never know, I mean, there are 2 months left here and much can happen as we have seen.

And for example, also in quarter 3, we have been quite successfully been able to advance the projects. So some of the commissioning persons have been able to travel. Should there be more kind of restrictions again for travel or entry to the country, that can also impact our top line. So that's why we have the guidance that we have given.

Yes. I mean we agree that it's a cautious guidance, but then it's a risk, a high-risk environment at this stage. And we just wanted to make sure that the guidance would also cover the potential risks in there.

There are currently no further questions.

Okay. Then it's time to thank you for the active discussion. Our financial statements review will be published on February 4. Stay safe and healthy.

Thank you.

Thank you.