Honeywell International Inc. (HON) Earnings Call Transcript & Summary

Greetings, and welcome to the Honeywell Portfolio Update Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the conference over to your host, Mr. Sean Meakim, Vice President of Investor Relations. Thank you. You may begin.

Thank you. Good morning, and welcome to Honeywell's Strategy and Portfolio Update Conference Call. On the call with me today are Chairman and Chief Executive Officer, Vimal Kapur, and Senior Vice President and Chief Financial Officer, Greg Lewis. The presentation materials, which include definitions of certain non-GAAP measures and this webcast are available on our Investor Relations website. Our discussion today includes forward-looking statements that are based on our best view of the world and of our business as we see it today and are subject to risks and uncertainties, including the ones described in our SEC filings. For details, please see the information at the beginning of this presentation material. From time to time, we post new information that may be of interest or material to our investors on our website. This morning, we will walk through our latest portfolio update that we announced this morning and outline how this fits within our long-term strategy and will unlock shareholder value. As always, we will leave time for your questions at the end. With that, I'll turn the call over to Chairman and CEO, Vimal Kapur.

Thank you, Sean, and good morning, everyone. I appreciate you joining us today, and let's begin on Slide 2. Last time, we provided a strategic update like this to our investors was almost exactly a year ago to the day when we announced the reorganization of our business around the 3 megatrends, of automation, future of aviation and energy transition. As we continue to simplify our portfolio, and shape it around these compelling megatrends, we have made several significant additions in the last year, committing about $9 billion towards high-growth acquisitions. Today, we have announced another significant step in that process with our plan to spin off our advanced materials business into a stand-alone industry-leading specialty chemicals company with nearly $4 billion in annual revenue. Advanced Materials has been long recognized as an industry leader, and we believe the business is best served going forward as a stand-alone business in which it can set its own strategic focus and capital allocation priorities. As Honeywell focuses our effort towards helping our customers navigate the energy transition, we believe the non-AM portion of our Energy and Sustainability Solutions segment offer more tangible synergies with the rest of the Honeywell portfolio, and were able to benefit more meaningfully from our value of our Honeywell Accelerator operating system. We expect the spin-off of the business in a tax-free manner to our shareholders towards the end of 2025 or early 2026. As we work towards the separation, we'll continue our integration work with our 4 recent acquisitions as well as pursue additional accretive bolt-on aligned to our strategy. Today's announcement does not have any impact on our capital deployment commitment of which we remain well ahead of schedule. Our deal pipeline remains strong, and we continue to plan operationalizing this aspect of our work to continuously improve our portfolio and enhance our financial performance through consistent deployment of capital. Now let's turn to Slide 3 to go into a little deeper into rationale of this transaction. We believe this transaction provides substantial benefit to Honeywell, the advanced materials business and our shareowners, and this is the right time. The spin is another building block towards creating a Honeywell capable of generating stronger organic growth with less cyclicality, requiring less capital to fund that growth and generating best-in-class free cash flow margins. For Honeywell, spinning advanced materials is another important step in simplification of our portfolio, the number of end markets we serve and the supply chain required to meet our customers' needs. As you may recall, between 2016 and 2018, we spun off roughly 20% of our revenue through 3 transactions, creating stand-alone AdvanSix, Garrett and Resideo. Advanced Materials will continue to build on its impressive legacy of innovation in sustainable solutions as a stand-alone company, but we believe Honeywell is no longer the natural owner going forward. AM's mission is not as connected to the energy transition as rest of the Energy and Sustainability Solutions portfolio. This transaction, when combined with our strong strategic road map in UOP, our Sustainable Technology Solutions or STS business, and our recently acquired LNG business creates stronger focus towards our commitment to helping solve the world's most daunting energy transition challenges. For advanced materials, we are excited by the opportunity to create a leading specialty chemical and materials pure play. We believe that a stand-alone well-capitalized AM will benefit from greater financial flexibility to pursue its own agenda and associated investment choices, including distinct growth opportunities, next-gen sustainable refrigerants, specialty electronic materials and highly engineered solutions for health care applications. Now let's turn to Slide 4 and unpack the financial profile and competitive advantage of advanced materials that will make us the leading specialty chemicals company. Advanced Materials will clearly be a standout amongst publicly traded specialty chemical companies. The business is expected to generate revenue of roughly $3.8 billion in 2024, with a global scale and sector-leading EBITDA margins above 25% on an estimated stand-alone cost basis, supported by intellectual property protected portfolio and regulatory-driven demand. The business has a deep relationship with leading customers, enabling differentiated solutions to some of the best, most challenging problems in their respective verticals, notably the transition to low emission solution as customers pursue their sustainability goals. With over $1 billion invested over the past 8 years, AM has built a robust economic moat with an efficient supply chain and a global customer base in highly regulated verticals. We expect a well-capitalized advanced materials business to pursue growth as well as return of capital over time. Most of these details will be formed as we get closer to finalizing the transaction. A stand-alone AM will be able to continue to -- its focus on developing new, more sustainable solutions through next-generation chemistry. Its portfolio is uniquely positioned to benefit from strong macro trends, such as increasing demand for refrigerants driven by regulatory requirements for more sustainable solutions, growing demand for electronic materials, driven by high-end computing, AI and 5G, and growing need for highly engineered solutions for health care applications to name a few examples. Advanced Materials has leading position in low global warming potential refrigerants, specialty electronic materials, high-end armor technology and variety of other industrial grade fibers. AM is also only U.S. manufacturer of uranium hexafluoride making it a primary beneficiary of the resurgence in domestic clean energy demand in the years ahead. Now let's turn to Slide 5 for a little deeper look into AM portfolio and its favorable macro trends. Advanced Materials is a global leader in material science with a portfolio of IP uniquely positioned to benefit from strong macro trends. The long-term demand trend for refrigerant is positive as more of the world's population migrates to middle class, while regulatory requirements for sustainable products with lower global warming potential are taking a larger share of growing pie. AM Solstice molecule is one of the Honeywell's most commercially breakthrough innovation to date and more than $1 billion revenue of its own. AM will be able to continue to invest in next-gen molecule to further grow that business. Advanced Materials will also benefit from growing demand in electronic materials, driven by growth in high-end computing and investments in AI. AM has uniquely manufacturing capability in Continental U.S. that creates a significant opportunity as more of these activities are brought online domestically. Advanced Materials has a global leadership position in industrial strength fiber with an increasing number of high-impact applications and impressive performance with some products 15x stronger than steel by weight. The best known brand in the portfolio is Spectra, which offers fiber and ballistic materials that have been protecting military and law enforcement personnel for more than 30 years. AM engineering is behind some of the most advanced personal protection system in the world keeping both soldiers and police officers safe. And last, advanced materials is also poised to benefit from increasing need for highly engineered solutions for health care application. Led by Aclar brand, AM offers a lineup of leading global packaging materials that protects drug stability by providing the highest moisture barrier amongst all polymer materials. We see significant potential for new applications for this technology and therefore, growing demand. Turning to Slide 6. I'd like to put today's news in the context of priorities I laid out when I became CEO of Honeywell and progress we have made over the past year or so. First, our top priority continues to be accelerating our organic sales growth to deliver the upper end of our long-term target range of 4% to 7%. Internally, we are focused on what we can control such as enhancing how we think about new product innovation, monetizing our vast installed base, accelerating our software offerings and improving our leadership position in high-growth regions. I am confident these self-help actions will help us to achieve this critical goal, but they will work in concert with my other priorities as well. Second, we are transforming how we run Honeywell through the latest version of Honeywell Accelerator operating system. We are scaling our capabilities by business model to drive incremental value, enhancing our growth profile by leveraging the digital backbone we have created over the past 8 years, enabling multiple growth drivers that benefit the entire enterprise. We're also leveraging multiple forms of AI to maximize the potential benefit of our operating system, both for our customers and ourselves. As anticipated, Accelerator is proving to be a powerful driver of profitable growth across all our businesses as well as an important tool to successfully integrate the recent addition to our portfolio. Third, as is probably evident from our comments this morning, we are excited about our progress in our portfolio optimization goals. We are delivering on our commitment to accelerate capital deployment through multiple strategic bolt-on acquisition in $1 billion to $7 billion range, high-grading the quality of our business and financial profile. When the impact of these acquisitions is combined with a selective subtraction we are actioning the result will be enhanced financial performance that will reward our shareholders. Lastly, we aim for the ways to accelerate growth at Honeywell simplification in all forms will be another enabler for that outcome. As we described today, spinning advanced materials dramatically simplifies our supply chain and number of end markets we serve. While our work is far from done, I'm pleased with the early results in executing this strategy. Turning to Slide 7. We offer a nice visualization on the progress we have made on our portfolio over the past 1.5 years. During this time, we have reorganized our business around the 3 mega trends, announced a total of 4 bolt-on acquisitions, plus a handful of smaller but strategically important technology tuck-ins, committing close to $10 billion of capital and adding about $2 billion of run rate revenue growing at accretive rates. Of course, today, we also revealed our plans to spin off close to $4 billion Specialty Chemicals business. While this is a record year for Honeywell in terms of capital deployment towards M&A, it's important to reiterate that this is only the first installment of our commitment to make M&A a consistent part of our operational rhythm. Acquiring accretive bolt-on each year that further enhances our portfolio positioning and our financial metrics. We reorganized the spin-off of this size -- we recognize the spin-off of this size creates some near-term earnings dilution. But over time, we are confident that the net impact of our capital allocation, including additional acquisitions, further share repurchases and optimizing our operations will lead to an enhanced financial profile for Honeywell that is more attractive to our investors. Turning to Slide 8. Looking at Honeywell in terms of verticals we serve, we believe that the portfolio is structured naturally aligns to these 3 themes: automation, the future of aviation and energy transition. Within each, we have several promising growth vectors. With roughly half of our revenue in various automation verticals, we are offerings in multiple growth categories, including building automation, process automation, warehouse and supply chain automation and advanced sensing. Our vast installed base spans across critical infrastructure, buildings, energy, manufacturing and warehouse exposure and we deliver solution to our customers through products, software projects and services. Our Aerospace portfolio draws its strength from breadth across both platforms and applications with roughly 60-40 split between commercial aviation and defense and space. Within each of these categories, we have broad exposure to platforms and content across air transport, business and general aviation and defense. Our technologies are increasingly empowering the advanced aerial mobility market and we are building capabilities to enable that we see the future of aviation through powerful vector in which Honeywell is poised to lead electrification and autonomy. And lastly, when thinking about the greatest opportunity of our age, decarbonization must be at the top of the list. Third-party estimates suggest global energy demand will increase by roughly 50% by 2050, and that can't be met by renewables alone. Honeywell is in a unique position to not only help the world energy producer meet today's energy need, but also enable the energy transition towards lower carbon sources. Each of these megatrends are underpinned by customer demand for digitalization, where we have a unique leadership position with Honeywell Forge. The Honeywell Forge IRD platform increasingly enables the digital transformation for our customer through enterprise performance management with our cloud-native SaaS-based solution providing an OT system of record. And with our substantial focus on decarbonization, let's take a closer look at strategic road map for Energy and Sustainability Solutions segment post AM spin to meet some of these challenges. So let me turn to Slide 9. Post spin, our Energy and Sustainability Solutions segment will be tightly focused on solving the world's most complex energy transition challenges, including both sustaining the production of traditional sources over near to midterm while enabling the emergence of new energy vertical that not only come with a lower or no carbon footprint, but add to expanding global energy stack. One underappreciated fact is that the world needs more energy, and we need to reduce emission and increase the share coming from lower carbon energy sources. Honeywell will play a major role in that journey. Honeywell UOP is in unique position and has a track record dating back to more than a century now of not only experiencing energy transition, but leading them through innovation. UOP is best in the world at separating and transforming molecules. And while the type of molecules will change, the need for UOP's expertise will only become more critical in tackling the major technical and commercial hurdles to scaling these emerging energy sources. We expect to more than double the ESS business ex-AM from its 2020 level to north of $5 billion in revenue through a combination of organic and inorganic growth as the stable core of refining and petrochemical remains fairly steady while robust growth in natural gas production plus the key emerging growth verticals off relatively small bases will blend to an attractive growth rate for overall ESS in line with rest of Honeywell portfolio. We already have key enabling technologies in the attractive growth verticals like biofuels, carbon capture, hydrogen, chemical plastics recycling and multiple forms of energy storage, but these are also areas of interest for established bolt-on acquisition as well as emerging technology tuck-in's to supplement and enhance our value proposition. Meanwhile we believe that natural gas is the transition fuel to make the biggest impact on global emission within a reasonable investment time horizon. We expressed the view through 2 of our acquisitions over the past 2 years, including CCC, our Compressor Controls, and most recently, LNG business from Air Products, which we just closed last week. These acquisitions only further enhance our customer intimacy with the most consequential energy producers globally who share our bullishness on natural gas demand in the decades ahead. And yet, while the revenue mix by end market will shift dramatically in the years ahead as the energy transition gathers stream, one thing we don't expect to change is the business model that made UOP such an economic success for Honeywell. The business model started developing differentiated innovative technologies that make an energy producer's operations safer, more reliable and more energy efficient and then licensing that technology to those customers, building our vast installed base. In some cases, we will strategically deploy some kit or equipment to help our customer to get their new asset up and running, but the value delivered in the technology and aftermarket services and software is unmatched. We service our installed base with not just a replenishment of catalysts and absorbent but also continuously improved products with incrementally higher value to help our customers extract more from their existing asset base. And increasingly, we are leveraging the power of Honeywell Forge IoT platform to connect our customers' assets and directly monitor them to reduce unplanned downtime, increase output and create more value, recurring revenue for Honeywell. Now I'll turn to Greg to look at financial impact of the spin.

Thanks, Vimal. Good morning, everyone. On Slide 10, as we demonstrated here this morning, the spin-off of advanced materials is another important step in the simplification of Honeywell and creating stronger alignment to our 3 powerful mega trends. We will also continue to shift the portfolio towards the optimized Honeywell Accelerator business model. We'll share more with you on that in this compounding construct in 2025. As you can see on this slide, post spin, our business model revenue mix will be about 60% products and projects, which drive expanded installed base, with the balance 40% comprised of aftermarket services and software primarily driven by the incremental value we can offer to our customers within our vast installed base. Critically separating advanced materials dramatically simplifies our supply chain leaving Honeywell with a smaller, less complex manufacturing footprint and lower capital intensity. Honeywell's supply chain operations are now focused on discrete and batch manufacturing, providing a clearer focus with the ability to leverage further synergies within our operations. The result of these efforts is to continue to push our organic growth capability higher while reducing cyclicality, in this case, with a relatively neutral margin impact and ultimately with an enhanced free cash flow profile. For more details on the recent slate of transactions, we've included a slide in the appendix of today's presentation. Looking at Slide 11, it's important to reiterate our capital deployment plans in light of today's news. While today's announcement is a spin-off of a substantial business within the Honeywell portfolio, we've been bulking up our capabilities to execute on accelerated mega trends without compromising our capital deployment capacity. As many of you may recall, at our March 22 Investor Day, we highlighted the significant internal transformation work we had done over a 6-year period, what we call the Great Integration of Honeywell. And at that time, we said once we had built this powerful platform, we expect to turn our attention back to a more external lens, including executing more M&A. Coincidentally, the external environment was also becoming more favorable for an A-rated strategic like Honeywell. At our May 23 Investor Day, we committed to deploy at least $25 billion over the 3-year period from 2023 to 2025. This includes all forms of capital deployment with about $4 billion a year committed to our dividend and capital expenditures and the balance to be dynamically allocated between acquisitions and repurchasing our own shares. And it's important to emphasize this was a floor, not the ceiling, and our robust balance sheet affords us the opportunity to deploy closer to $40 billion over the same time frame without materially altering our capital structure. While we deployed about $4 billion a year on average to share buybacks between 2021 and 2023, we were also rebuilding our deal pipeline with a desire to shift more of that capital deployment towards value-enhancing bolt-on acquisitions and you're seeing those now. So you should view our actions through that lens, a more capable organization with a clear strategic intent executing on the vision for the company. We're pleased with our recent progress closing on 3 substantial bolt-ons and a handful of strategically important technology tuck-ins between 2023 and 2024, representing roughly $10 billion. Coupled with another $1 billion plus on share repurchases in the first half of '24, we're knocking on the door of our commitment a year early, and we don't plan to slow down our portfolio shaping program with a very fertile deal pipeline that we will continue to prosecute. So with that, let me turn it back to Vimal for a few closing remarks before we open it up to your questions.

Thanks, Greg. As CEO, I believe my primary role is dynamically managing our portfolio and balance sheet to position the company to benefit from the more favorable growth lanes within the 3 powerful mega trends in which we have a strong right to compete. These actions are critical to driving the type of enhanced organic growth and overall financial performance I envision for Honeywell. Advanced Materials are a leading specialty chemicals and materials business with global scale and a strong moat driven by differentiated IP portfolio in attractive and often regulated markets and it's going to generate strong investor interest as it pursues the next generation of more sustainable molecules and products. Now is the right time to give it the freedom to pursue its own strategy and investment program, while also further simplifying Honeywell, strengthening our focus on 3 mega trends including the energy transition and ultimately enhancing our financial KPIs and value to our shareholders. While we have made important strides over the past year-plus, we are far from done. We'll keep -- we'll continue to keep up the speed of our progress and our next communication at the end of this month when we report our third quarter results. So with that, Sean, let's move to Q&A.

Thank you, Vimal. Vimal and Greg are now available to answer your questions. Given we are in quiet period, we don't plan on answering any questions about the third quarter or our full year 2024 guidance. As we work towards firming the results, our third quarter adjusted earnings per share is trending towards the upper half of our guidance range. More details will be provided during our earnings call on October 24. Thank you for your cooperation as we stay focused on today's portfolio update. Melissa, please open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Julian Mitchell with Barclays.

Congratulations on the news. Maybe just to try and understand first off. So you'd said, Vimal, around 10% of sales might be noncore, and you said that last year and advanced materials comprises around that share of Honeywell. So as you've looked more at the portfolio and as you see a sort of richer environment for dealmaking in general, has that 10% kind of scope of potential divestments expanded a fair amount as you and the Board have reviewed the business this year? Should investors expect more divestments of scale to occur in 2025 alongside acquisitions?

So Julian, when I started my job last year and positioned Honeywell on 3 mega trends, my initial look was approximately 10% and parts of the AM business was a big part of it. However, when we took a deeper look, we found it more compelling that the broader AM spin makes much more shareholder sense. So the scope of what we initially thought got expanded in best interest of Honeywell and in best interest of our shareholders. Now are we done from our work on portfolio? Answer is no. There are still more opportunities we continue to work on. And what I can only share with you is that as we make more progress, please stay tuned on more portfolio actions. The commitment I can make is that portfolio will be a continuous activity. I've stated that repeatedly that active portfolio management will define my stay as Honeywell's CEO, and this is a step towards that.

And then just a quick follow-up on the SpinCo. So I think some of the public peers are businesses like Arkema and Chemours who clearly trade at a valuation that's different to where Honeywell total is today. Is the argument that advanced materials, when it spins out, it deserves a decent premium to some of those peers, largely because of the margin profile? Is that the way to think about it?

Yes. The margin profile is, we would argue is best-in-class industry and also the growth runway because this position is well positioned to growth with continuous expansion of sustainability materials, the more and more demand for electronic materials, our position in clean energy. So the vectors which this business have uniquely positioned it towards growth orientation and also the margin attractiveness. So we do believe that the business should get attractive multiples compared to its peer in the segment.

Our next question comes from the line of Steve Tusa with JPMorgan.

Congratulations. Any commentary on leverage or any liabilities going with the SpinCo? And then on the revenue for the RemainCo AM or ESS, I think it's like $2.8 billion in sales or something like that. You said it's going to get to $5 billion in the future. Can you just give us a little more color on like what the future -- what timing the future means?

Yes. So maybe I'll start on the leverage side and then pass it back to Vimal. Steve, we expect this to be a strong non investment-grade ratings profile as we spin this company out. So I think that's what we would like people to be mindful of and certainly, what we expect and it's going to be -- it's dissimilar to the prior 2 spins where what's going with it will be the things that are attributable to this portfolio only. So -- and then Vimal, I'll pass it back to you on ESS future.

So the -- I think the ESS future, we do expect -- your question is how long it will take to get to the pathway of greater than $5 billion? I would say that I see strong growth in Sustainability Solutions business. So that certainly is a big enabler for that. We are seeing very robust trends of bookings in 2024. So my belief is supported by that trend. The recent acquisition of LNG business should also support it. So overall, we do expect business to follow on the Honeywell growth rate likely in the upper end of our 4% to 7%. At the same time, we'll remain active on building this portfolio. That's part of the work we have to do, which are going to be more bolt-ons. So expect more things in the whole space of energy transition, our core energy, kind of acquisitions we have done in the space like LNG or CCC. So the time lines, I can't commit to you, but it's not 10 years from now. It's imminently in the next few years. And earlier, quicker, the better for us, and that's what we are striving for.

And sorry, the liabilities and anything there? I didn't quite catch it at the end of your comment on the leverage.

Yes, nothing specific really to highlight there, Steve. I mean, again, what will go with this company will be what's in its perimeter of this business. There's not going to be any special other construction as we have had in a few of our past stints.

Our next question comes from the line of Andrew Obin with Bank of America.

Congratulations. Just clarification to Steve's question. I think, specifically, we've been getting questions, PFAS liability. So does that mean that it's going to be a spread between RemainCo and SpinCo or like where does that end up? Sorry, just to understand.

So Andrew, as Greg mentioned, we are going to spin this business on as-it-is basis, all the capabilities it has, all the offering it has. And naturally, anything associated with that goes along with it. Your question on PFAS, PFAS has captured thousands of chemicals in its definition. And we have been doing work with the regulatory agencies, both in Europe and U.S. for the last 3 to 4 years to make a case for how our offerings are more energy efficient and more environmentally friendly and should not come into the moat of the broader definition of PFAS. So this is nothing new for us. I would say we have been actively engaged on both sides, both in Europe and U.S. At the same time, we have been working to expand the portfolio of the AM business into molecules, which do not come under the definition of PFAS. So to me, this is -- I can use the word, the natural course of the business progression, something we are well aware of for the past few years and actively working to both mitigate the risk, but also create newer opportunities for us.

I guess I'll follow up off-line. And then just a question about sort of UOP future and you've outlined your ambition for growing the business. But what about just go-to-market? It used to be integrated with HPS, within PMT, then we separated them. So given the changes in the portfolio, should we be thinking closer integration with HPS once again? I guess what I'm asking, any changes to a corporate structure between UOP and HPS, given the sort of the diminished size of the business and the fact that we are getting rid of the specialty chemicals business.

Andrew, so what I want to stay focused is build the scale of ESS business. So we are constantly looking at ways and means to expand the current base. We have demonstrated that with 2 actions: creation of organic action of sustainability solutions business, which we did about 3 years back, and that had made very handsome progress. And now addition of LNG business in that space, and we are not done. We're looking at more organic opportunities, and we are looking at more inorganic opportunities. At the same time, the partnership, our corporation between UOP and HPS remained strong. It's a natural process between a large company that we are able to work it successfully on sales synergies, on new products, and we are doing it quite effectively. So I don't see any upside or downside. I think that was a concern raised when we announced the formation of ESS segment. And our facts and data suggest over 1 year, we have very successfully managed the transition of cooperation between the 2 businesses, even though they operate in 2 separate segments. And Honeywell operating system, that's where it comes in. We have a well defined operating system for a reason. So it's not a random set of actions. It's a well-defined set of playbook.

Part of what gave us the confidence we want to do that.

Our next question comes from the line of Nigel Coe with Wolfe Research.

So Greg, I just wanted to clarify your comment. Did you say strong non-investment grade rating?

That's exactly right.

Okay. So like a BB+ kind of range, okay. Got it. Okay. Great. Any kind of estimation or kind of ballpark on public company costs, onetime costs, breakage fees, et cetera? Anything there would be helpful.

Yes. So it's a bit soon for that at the moment, Nigel. So we're not going to get specific around those things. But what I would tell you is we don't expect this to be outsized for a spin of this size. This company has actually its own ERP and things of those nature. So -- and so I wouldn't expect this to be outsized in -- as it relates to any spins of its revenue profile.

Okay. Great. And then, Vimal, it seems like the 10% you put out there, I think you mentioned that the majority of that or maybe more than 5% would have been some of these businesses within advanced materials. So would it be fair to say that we obviously taking account of the spin that perhaps the scope of the noncore is now like 15% or so. Would that be fair?

I didn't get the second part of the question, Nigel. Can you please repeat that?

Well, has the 10% become more like 15%, including the spin?

Yes. I mean, definitely, as I explained to an earlier question, the initial estimate I had of about 10%, that included parts of AM business. And as we did work, we felt the broader business as a more value creation. So there are still parts of the portfolio we are working on. Yes. So technically speaking, the answer has become slightly bigger than 10%.