Interroll Holding AG (INRN) Earnings Call Transcript & Summary

[ Dear, ladies and gentlemen, welcome to the presentation of Interroll Holding AG regarding the half year results 2020. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Heinz Hössli, Chief Financial Officer of Interroll Group, who will lead you through this conference. Please go ahead, sir. ]

Good morning, ladies and gentlemen. My name is Heinz Hössli; and with me is Martin Regnet, our Global Public Relation Manager. We cordially welcome you to our half year results presentation, and we are glad that we have so many participants. Today's agenda. I will start with a brief introduction of myself, and then I will hand over to Mr. Regnet for an over -- group overview, before I will go back with the financial highlights. And at the end, we will have a Q&A session. For organizational purposes, I repeat, we ask you to send your questions with the chat tool throughout the presentation. During the Q&A session at the end, we will read them out loud and answer them. Please note that we will combine questions from various sources if they turn out to be very similar. We will try our best to answer your questions within the given time. Shortly to my person. I'm 51 years old, married, and we have 2 teenage kids. My professional background, I'm a Swiss certified public accountant. [ Sorry for this technical interruption. We had just a technical problem. So I repeat again my introduction. ] 51 years old, married, and we have 2 teenage sons. My professional background, I'm a Swiss certified public accountant. I'm holding a degree from Duke's Fuqua School of Business in North Carolina as an Executive MBA. The last 20 years, I worked in various functions for Bühler with its headquarters in Uzwil, Switzerland. Whereas the late -- the last 8 years before joining Interroll in April 2020, I've been the CFO of Advanced Materials, which realized in 2019 about CHF 650 million. From 2002 to 2009, I have had various CFO positions in subsidiaries, whereas I stayed in Mexico and the U.S. Now I would like to hand over to Mr. Regnet for the group overview.

Thank you very much, Mr. Hössli. Ladies and gentlemen, I would like to give you an overview about the Interroll Group. In 2019, the Interroll group, as many of you might know, had net sales of 50 -- CHF 559.7 million. We are at 2,400 employees worldwide. We run 34 companies and have 16 main factories worldwide. Our headquarter continues to be in Switzerland, in Ticino and Sant'Antonino to be precise. And when it comes to the regional distribution of our net sales, EMEA is still our major region with 57%, Americas with 27% and Asia Pacific with 16%. That was the 2019 figures. It's clear that we, in the long run, want to take advantage of the disproportional growth in the regions Asia Pacific and Americas, and this is our target. Let me introduce you the internal material -- the internal logistics solutions within the material handling market, and I will give you a short explanation on the market size. We consider the material handling equipment manufacturing market worldwide at a value of more than CHF 150 billion and with a growth rate, and that is Swiss francs, of course, and with a growth rate of 4% to 7% worldwide. We think this is a long-term average value. We can also consider that there might be a crisis rebound scenario where the market turns up or, as we have in this year, a market that is a little bit more weak than this long-term average. But this is still the growth rate which we continue to see for the medium term. Also, we have the relevant markets. We have quite a number. As you can see, the internal logistics, there is -- that's a market which is about CHF 5 billion to CHF 7 billion worldwide. And depending on the product group, Interroll considers to have a market share of 8% to 11% worldwide. In the first half of 2020, Interroll estimates that we gained market shares. One of the big reasons to us was the delivery performance. Also, our decentralized setup helped us quite a lot, and we were not that affected by cross-border deliveries. And our innovations, which we introduced in the market over the last period, was very successful. We have 4 key product groups at Interroll, and those are the Rollers, those are the Drives, the Conveyors & Sorters as well as the Pallet Handling. And as you can see that we have quite a diversified share of this. The Rollers have 19.7% of our product groups. The Drives have 30.8% of the product groups. Conveyors & Sorters we're growing tremendously over the last years, we have here 39.9% from the 2019 figures. And it's the MCP, which is quite a successful solution in the market, and it's also the sorters that is a very successful solution in the market. And more in the sorters will be introduced later. But we also have the product group of Pallet Handling with 9.9%. This particular product group has been affected more than the others in the first half of 2020, and this is due to the crisis and postponement of projects. Interroll has a crystal-clear end-user strategy. We want to provide solutions to their problems. Excuse me. -- Interroll has a clear end-user strategy. We want to provide solutions for their problems. We want to have the customer payment focus. We consider ourselves as a trendsetter within our industry, and we have a leading technology platform that we run in the market. And this means we interact with the end user quite a lot, although they are not our direct customers. We use marketing and communications such as customer references and sales activities with our industry management, where we really engage in a dialogue with the customer about what is their pain, what is the process we can solve for them in order to make them specify Interroll when they go to the systems integrators. And regarding the integrators, we cooperate with global and with local players. Interroll's innovations, as mentioned before, and the delivery performance play a key role and this also helped to boost their growth. And also within this crisis period, we had quite a good delivery performance, which was very important also to our partners, and this helped quite a lot. We also run a partner network called Rolling on Interroll, where we focus on the local players and help them to make advantage of growth opportunities. Some systems integrators already outsourced their production to us. Typically, as you can imagine, would be, for example, rollers that -- or conveyors that would be outsourced to us from selected systems integrators. And this is also our objective that we convince them that we have to better offer, that they can focus on their core competence, leave the production of the equipment to us. And this is what we are pursuing also over the next years. And a good example is actually the recent sorter order in the U.S., where we have the privilege to work with even 5 systems integrators on various aspects of the project. Our growth strategy, Interroll retains a high pace regarding innovations. The agenda, we want to remain the agenda setter in the market and to remain the leading technology platform. We have a very strong global presence, and that's much more advanced than some of our competitors. We also use SAP and our Interroll production system to have capacity balancing and to make sure that we can produce very close to the target markets and to the customers. And we also upgrade our production network with new plants. We have, for example, Mosbach in Germany. We just brought into operation a second plant in Atlanta. And we already announced that we're going to have a new plant in Suzhou in '22. And all of this investment amount to CHF 150 million. We have to underline here that despite the corona crisis, we did not change any of the strategic investment plans that we had. We stick to it. We believe into our medium- and long-term growth on that end. Regarding the service, we see more opportunities because we do have a higher share in the installed base. Our sorters and conveyors are in the market now for a longer time. As you might remember, we had some large-scale orders on MCP with more than 12 kilometers in the last 2 years in Korea, for example. And the number of projects, the length of conveyor lanes in the market is rising, so Interroll has a bigger installed base. We have more than 400 sorters now worldwide, and this helps us also to acquire more and more service business. Also, new business models are under development. Within the service and the organization, is expanding currently. It remains an important pillar of growth at Interroll. Now I would like to introduce you some of our most recent technological innovations. Interroll offers a comprehensive set of modular pallet handling solutions, the MPP. The MPP is an end-to-end solution. We consider it as the most innovative concept on pallet handling in the market. It covers the most important global pallet standards, which makes about 70% of the global pallet market by volume. And the beverage industry is a very good example where the MPP can be applied. It can be combined with new systems, which is the stacker crane and the transfer car. And this is -- this can be used in automated warehouses to have an end-to-end solution that combines the pallet conveying with the storage processes. And this gives us an edge in promoting this. We are leading in terms of modularity, flexibility, high precision, low energy usage and space saving with this new solution. We also have this in our so-called layouter tool. That means for the customers and end users, this is only a minimum engineering time needed, and the installation is also more fast than with other systems in the market. The Interroll sorter is also a very successful solution in the market. We upgraded. The sorter that we have now is the High-Performance Crossbelt Sorter. That's a highly reliable solution in the market. This enables customers to a throughput of about 20,000 items per hour. The weight can be much more diversified. It can handle weights of up to 50 kilo. It has about 50% more area when we are talking about the surface. And it's easy to maintain with a rubber belt and no lubrication. And with this new market, we consider that we entered a new segment that is very, very interesting in the market. And let me show you here, we have 3 segments, as you can see. In the middle segment, this is our standard sorter, which we have in the market already since a number of years. And now we entered the high-performance segment where we go more strongly into the so-called CEP market, the courier-express-parcel market, as well as the distribution in general; whereas our standard product is available for e-commerce, for fashion and distribution, and continues to be available for applications that require this kind of specification. We can already announce here that we are really going to cover the whole sorter range. We are already in the plan for new sorter solutions in the first quarter of '21, where we also enter the basic segment for sorting applications. And here, we target, for example, the fashion and the textile industry as well as the distribution industry. And you will hear more from us in this regard next year. Last but not least, I would like to show you our new organizational structure. Our group management changed slightly. We have a new CFO. Mr. Hössli just introduced himself. This, aside that we have a new colleague in the sales, Mr. Maurizio Catino, who joined the group management at the beginning of July. As you might also be aware of, Mr. Zumbühl is ending his tenure by next April in the next year. And he will be proposed as active Chairman of Interroll at the next Annual General Meeting. And we published the details on this in our ad hoc. And the move is to -- is designed to continue to have long-term perspective on the strategic projects that Interroll has kicked off in the last years. That's it from my side. I thank you very much. And I would like to hand over to Heinz Hössli.

Thank you, Martin. I continue now with the highlights of the first half year 2020. The global pandemic of COVID-19 also affected Interroll's business. Our order intake, as you can see on the screen, declined by 11.9%. And all regions showed a decline. However, the local -- or in the local currency, the decline is only 6.1%. So currency effects played a large role in the first 6 months. Sales declined by 10.6% despite the growth in Asia Pacific, but the decline in local currency was also big. And overall, in local currency, the decline was only 4.8%. So also here, very strong currency impact. Interroll was able to gain market share due to our innovative solutions and the top delivery performance during this difficult time. The EBIT increased by 3.5% to CHF 32.3 million compared to CHF 31.2 million a year ago. This is basically thanks to a favorable mix of the realized sales, the high cost discipline and the share of flexible costs we have in our company. The operating cash flow increased by 12.5% to 45.6% -- to CHF 45.6 million, which is also a considerable improvement against last year. On the margin, you see that this is now 19.6% from sales, whereas it was 15.6% last year. The order intake shows a diverse picture, as already mentioned by Mr. Regnet. Our product business Rollers and Drives did well. And the project business in Conveyors & Sorters and especially in Pallet Handling suffered postponements of important projects. Positive is that the projects are only postponed, that we have no cancellations. The book-to-bill ratio, with 1.13 compared to 1.15 from last year, is well above 1, and this is also positive. If we go to sales, also, the sales show the same diverse picture as in the order intake. Also, the sales of the products business Rollers and Drives did well. But even better did the project business Conveyors & Sorters, which in local currency was even growing. The Pallet Handling is also in sales clearly affected, partly due to lack of major projects in the second half of 2019, but also due to the postponement of important projects during the COVID crisis. During the COVID crisis, we benefited from the considerable investments we did over the last 10 years in our global IT network and the infrastructure as we could strengthen customer loyalty by maintaining close contact. We immediately created new communication channels, new formats and even a virtual trade fair where we have been the first one after we canceled LogiMAT in Germany, which has been well received by our customers. Looking at the sales development by region, it reflects somehow the regional impact of COVID-19. Asia Pacific went first into lockdown mode, followed by EMEA and then Americas. Asia Pacific, especially China, is in growth mode again, which is very positive. Sales in Americas declined the most, partly also due to postponements of major projects. Asia Pacific could increase the share from 10% to 13% on the cost of Americas, whereas EMEA stays stable at 60%. Our long-term target that EMEA should be 50% and 50% coming from Americas and Asia Pacific remains in place. Reaching previous year's EBITDA of CHF 43.5 million with reduced sales was only possible thanks to a favorable margin from the product mix and high cost and investment discipline. The EBITDA in percent of sales increased from 16.7% to 18.7%. The EBIT could even be increased by 3.5% to CHF 32.3 million as the amortization was lower than a year ago. As already pointed out before, our considerable investment over the last 10 years in the global IT network and infrastructure, together with the measures initialized during the COVID-19 crisis, allowed us to improve our EBIT by 3.5% to CHF 32.3 million and the EBIT in percent of sales from 11.9% to 13.8%. Between EBIT and result, we had a negative financing result from foreign currency loss and a lower tax rate. The result of CHF 23.8 million is a plus of 3.1%. And in percent of sales, the result is 10.2% versus 8.8% a year ago. This result in the first half year of 2020 in times of crisis is very solid, but variation in the second half year due to the changing product mix is likely when the sales of project business in Conveyors & Sorters and Pallet Handling will generally -- with generally lower margins rebound in the second half of 2020. The operating cash flow continued to improve in absolute terms, but also in percent of sales. The operating cash flow increased by 12.5% to CHF 45.6 million. Main driver is the lower net working capital, especially lower inventories and work in progress and trade receivables. Due to the short delivery times of Interroll, we could also invoice very fast on top. We were executed a stringent trade receivable management during the crisis, underlying our principle of cash is king even more so in crisis times. The operating cash flow likely will not be sustained at this high level, as with the business rebound. Also, the net working capital will increase, but the focus on cash will remain very high. Also, in a position of strength and following the management's long-term view, all strategic investments into capacity expansions are going forward as planned. In the first 6 months of 2020, our investments were CHF 26 million compared to the CHF 11 million a year ago. Looking at the return on equity and the RONA chart, the slide shows very positive long-term development of return on net assets and return on equity. There is a half-year effect from seasonality visible in the first half year 2020, which is not unusual and was similar in previous years. The chart reveals a strategic long-term perspective. With 2009 and 2020, we have 2 crises on both ends. Since the last major crisis in 2008-2009, Interroll has driven forward its globalization and expansion into new markets as well as expansion in its technology platform and massively strengthened its position with a balanced mix of measures. We boosted productivity while always keeping an eye on cost. We have done our homework during the good times and aligned ourselves even more closely with our customers and their needs through our business model with the end-user approach. We benefited from the considerable investments in the last 10 years in our global IT network and infrastructure and strong customer loyalty by maintaining contact with them. Last but not least, the return on net asset increased on the last couple of years over-proportionally to the return on equity. Interroll is cautiously optimistic on accelerating business dynamics in the second half year 2020 compared to the first 6 months. However, the situation is still unsure and the second wave of COVID-19 is anytime possible. Our assumption is based on the further gradual ease-up as seen in the months of May, June and July. However, Interroll's capacity, delivery performance and innovations provide significant potential for both a prolonged crisis as well as a rebound scenario. In the long term, Interroll sees significant potential based on its strong market position, its innovative products and the fast-growing end markets like e-commerce, CEP, food and beverage, distribution and the industry. With this, we come an end for the presentation. The half year report 2020 can be downloaded from our web page, and the printed version will soon be available. Thank you very much for your attention. And now we come to the Q&A session.

First question from Mr. Schirmacher, Baader-Helvea. [Foreign Language] in high performance, middle and basic segment [Foreign Language]. In English, are there differences in the gross margin in high performance, middle and basic segment? If yes, how? This really depends not really on the product, but on the customers. We have now entered this high-performance segment, and it's very early to tell. But clearly, we have the same expectations on margin as also in the other segments we serve. Next question from Tobias Fahrenholz, MainFirst. We have raw material cost dropped so significantly. What is coming from your indicated product mix benefits, example, how much from lower purchasing costs? There is a mix of both. We clearly have seen that also raw material have dropped. We have benefited from this. Also, currency plays in this. We have lost on the top line in currency, but we benefited also on the purchasing side. But then, as mentioned also during the presentation, we benefited a lot from the mix of products sold. And this high margin is the result of both as well as from the cost savings. Then the next question from [ Hugo, William ]. Just a last question. You stated you benefited from favorable margin from product mix. Can you tell us the difference in margin between your 4 types of products? Yes, this has already been mentioned. Rollers and Drives have, by tendency, a higher margin than the project business Conveyors & Sorters and Pallet Handling. This has also to do that with the project, we have more what we buy in. On the Rollers and Drives, it's mainly our production. We produce the product and we have the full value chain. On the project business, depending on the project, we buy sometimes quite a bit in from third parties, which then not -- is not generating in percent the same margin. Another question from Mr. Schirmacher, Baader-Helvea. What tax rate could we expect in 2020 and 2021? We see that the tax rate should remain stable despite the tax reform in Switzerland at least for the first 4 years, which in Ticino has a transition phase. Next question from Mr. Vogel, UBS. Can you remind of your revenue share stemming from services in first half '20? I don't understand the question correctly, but most likely, you would -- the question is how much is service in the first half year of 2020, and the share is roughly the same as in the past. It's a share of roughly 10%. Next question from Mr. Schirmacher. Based on the installed base, on the improvement, how much turnover has been done with service? This question is basically the same as the one before. So we are on roughly 10%. Another question from Mr. Vogel, UBS. How much did MPP pallet conveyor system contribute to Pallet & Carton Flow? This really is a figure which is not material. If we compare it to last year, it's a very low number. So not material, and this is also the reason why we have not disclosed it in the report. Next question from Mr. Schirmacher, Baader-Helvea. The U.S. has developed weak. The situation seems to be unchanged or even worse. What is the outlook for the second half year? This is, indeed, as you mentioned, the U.S. has been the worst region in the first 6 months, but we have a very strong pipeline on bigger projects. And we also got one big project, what we announced on July 3. So we are quite optimistic that the U.S. is now really not changed a lot during the COVID. Or if they are going in a general lockdown, as some media discussed this morning, then we see that we should have a stronger second half year 2020 in the U.S. Next question from Mr. Vogel, UBS. Can you please outline your exposure to the automotive industry on a group level? Automotive is one of our segments we serve. And as you are well aware, automotive is in a deep crisis. Our share in automotive is about 10% to 15%. It changes from year-to-year. Next question from [ Reiner Weihofen ]. Was there short-time work? Were any job cuts? Yes, we use short-time work very -- in a very few locations. Also, for short time, exactly on 3 locations. And were there any job cuts? No, we did not lay off any employees. What we did is we used flexibility. We have some employees which we contract as a strategic maneuvering mass, and we reduced some of these contracted people, but there were clearly no layoffs. Next question from Nicandro Barile, Helvetic Trust. Labor cost, material cost, inflationary tendency? It's not what we see at the moment. We don't see big inflation. The next question, [ Mark Possa ]. Could you please describe the nature of postponements in some bigger orders? When will they be restarted? What do you do in between? Are there any changes to the projects? Very good question. This will be the crystal ball. As already pointed out, we are glad that we did not receive any cancellations. So these bigger projects, they are postponed. And we expect, as mentioned, we're cautiously optimistic that some of these bigger projects will materialize in the second half year 2020. Next question, Mr. Rotzer from Crédit Suisse. How we have to understand the success in e-commerce, order size or displaced timing? E-commerce is a part of our business, but it's a part between 25% to 30% maximum. So we are not fully in e-commerce, and we depend also on other markets. But clearly, e-commerce has boomed during COVID-19, and this is also somehow reflected in our sales. Another question from Mr. Rotzer. How was development by end markets, CEP, airport and industrial? Airport, as you can imagine, the development has been quite weak. On CEP and industrial, we are satisfied with the development. It was a little bit lower as the overall situation, but it was -- it's okay, but airport and automotive was clearly the 2 segments which are lower.

If I may add, food and beverage was in a resilient mode. Also, during the corona crisis, there was a big emphasis on keeping the food industry running stable. So this was also positive in terms of projects for us.

Next question by Mr. Fahrenholz from MainFirst. Could you speak a bit about your potentially more tricky airport business? How did it develop during Q1, Q2? And what would you see for second half year? Partly, this question has already been answered. The first 6 months have been rather weak. The outlook actually is not as weak as we expected a few months ago because if you look at the airport industry, many people say this will take about 5 years to recover. But there is some potential that we will see some orders in the second half year, not on the level of previous years, but at least that there is a continuation also in this segment on a much lower level. Another question by Mr. Fahrenholz, MainFirst. Why have raw material costs dropped so significantly? What is coming for your indicated product mix benefits? I think I touched this many times. Yes, we benefited clearly also in purchasing from the currency effects because we also buy in foreign currencies, not in Swiss franc. We benefited also from cheaper raw materials, and this is reflected in the figures. And this is clearly not sustainable, other than I have to mention this, this is not a sustainable development. Another question from Mr. Schirmacher, Baader-Helvea. Can we expect invoicing of these big orders in the U.S. in the second half year 2020? Partially yes, but not all of it. Next question from Mr. Schirmacher. Pallet Handling, weak. We mentioned the bigger project. Is COVID-19 specific or does it have different reasons? I mentioned it during my presentation. Also, the order intake in the second half year 2019 was weak in Pallet Handling so that we had not a big backlog. And in addition, the order entering the first 6 months has been weak too. What we see? We see now some projects on the horizon, which could improve the situation in Pallet Handling. But it is not only COVID, it's clearly also due to a lack in order intake of major projects second half year 2019. The next question, Mr. [ Possa ]. Installed base, how many client installations are web-based already or connected to the web? [ And hence ], to what degree can you add on preventive maintenance if -- with valuable solutions in the future?

I guess it means how much is smart logistics, the share of smart logistics. That's how I understand the question. Well, we don't have a clear official figure on this, but I can tell you, for example, in the conveyor -- in the field of conveyors, we have quite a number of EC5000 installations already, and these are using a bus. There's a version which uses bus, so that means it's a smart version. And we see an increase of this type of installations. We just had recently a case called Karaca in Turkey. There are some details mentioned where there's made use of the smart functionalities that the EC5000 has. Again, we don't have a very clear figure on this at the moment. We didn't evaluate this. But what's clear is that there's a rising share of this kind of applications. And this is also the direction in which Interroll wants to go increasingly to be an agenda setter when it comes to smart logistics equipment.

Thank you, Martin. Next question from Mr. Fahrenholz. M&A, is this topic within your focus at the moment? And what kind of deal size should we roughly expect here? M&A is a topic, but only opportunistic. And we have clear criteria. It has to be a strategic fit and it has to be also a technology fit, which makes it not so easy. And this is also why in the past, there have been -- in the recent past, there have been no acquisitions besides the one in Iceland last year. So we have high internal criteria. And then also the price has to be right, which, in the past, at least, has been on the very high end as well. So in other words, yes, we look at targets, but only on an opportunistic basis. Another question from Mr. Schirmacher. 11% sales profitability, what has been the driver? Can a similar seasonality on the EBIT margin be expected like in '20 -- in the past years, can it be expected also in 2020? As mentioned during the presentation, we expect that -- this is not a general trend what has happened last year. And this year, in the second half year 2020, we expect lower margins due to the mix of the sales realized in the second half year. We will have more turnover from the project business, and we will have a lower margin in tendency on this. Another question from Mr. Vogel, UBS. Regarding IFRS 16, is there anything that would make first half year 2020 different from first half year '19? No, there is no material difference coming from IFRS 16. Another question from [ Mr. Possa ]. Could you describe the competitive landscape? Your 8% to 11% market share is rising. Who are you winning from? What are the current market forces changes? I think the main driver is that Interroll is a very reliable company, globally known, well known. And during this crisis, we always could perform. We could deliver most of the time on time. We are not depending on one supply chain. We have independent supply chains in the regions, which helped out during the crisis. For example, when we had to close here in Switzerland for a week our factory, we could supply the parts from other regions, and we were always in the position to serve our customers during this crisis.

If I may add, there's also the delivery performance of Interroll which has been exceptional and outstanding during this crisis. In particular, there were quite a number of projects in the market that came in on short notice from competitors who couldn't handle these projects. And so this also showed that Interroll has the right setup in terms of production and also has the right setup in terms of capacity to handle larger and more complex projects as well. And this is what Interroll is also working on to expand this capacity over the next years.

Next question from Mr. Rotzer, Crédit Suisse. Half -- second half year 2020, lower margin compared to what, to second half year '19 or to first half year '20? Thank you, Mr. Rotzer. It's a good question. We clearly mentioned we compare it to the first half year '20, and we expect lower margin compared to the first half year '20. Next question, Mr. Fahrenholz, MainFirst. As you mentioned the benefit of purchasing in foreign currencies, do you have a rough indication of how much of your current sales and overall costs are currently coming from Swiss franc, euro, USD? Where is the biggest mismatch? I don't have this detail. Another question from Mr. Fahrenholz. Why have raw material costs dropped so significantly? This one we have already answered. [ Hugo ] from [ William ]. Congrats for your impressive set of results ahead of consensus. How did you manage to deliver an increase in margins while facing a drop in sales? And second, what is your current book-to-bill? Third, do you think that an acceleration in growth in booking can be expected for second half year 2020? The first question, I mentioned many times now, the increased margin is a result of these various factors. Volume down, but the mix was favorable to us when we had cost savings. And the second question, what is your current book-to-bill? It's 1.13. It was also in the presentation. Last year, at the same time, it was 1.15. So this remains well above 1, which is positive. And then the third question, do you think that an acceleration in growth in booking can be expected for second half year 2020? This was also mentioned. We are cautiously optimistic, but obviously, we don't know what will happen in the future with COVID-19, but we see some positive signs in the market. Next question, Mr. Marti from Corisol Holding. What sales level can you reach with new footprint, including new factories in Germany and China? We don't have exact figures because this also depends on the projects and then the products sold in the market. But we expect more or less with these investments we have done in the U.S., in Thailand and we will do now in Germany and China, that we roughly can double capacity. Next question from Mr. Schirmacher. How has June and July developed in order intake comparing to the last year? I can talk about the June month. Month of June, order intake has been roughly on the same level as last year. And July, we still don't know. Another question from Mr. Vogel, UBS. Your material cost decreased by 31% year-on-year in first half '20 and reached 38.7% of sales versus 50% in first half year '19. What drove this? And should we get used to such a volatility going forward? The volatility -- some portion of volatility will always remain. As this comes with the project business, there is a clear -- there is ups and downs. But the first half year '20 has been extraordinary, and I think that is not a sustainable level. I mentioned this also during the slide presentation. This margin will not be sustainable, and this will go down.

Okay. So currently, there's no more question in the pipeline. If -- we are just waiting for you to post a new question. As you might have observed, we combined some of the questions which were identical. So if your personal question was not mentioned, one of your analyst colleagues already asked them.

Good. If there are no questions, then we finish here. I would like to thank you, and I apologize again for the technical interruptions we had at the beginning. And I also have seen that the slide sometimes had a delay in the transmission. Also, apology for this. There is another question from Mr. Schirmacher now coming in. Can you repeat the answer regarding capacities expansion and potential sales resulting from that? Yes, I'll gladly repeat this. With the expansion projects in Atlanta, which has finished this year, in Thailand, which has finished before, and the new ones in China and in Germany, we roughly expect that we have a -- we can double today's capacity. Thank you very much.

Also, thank you very much from my side, and have a good day. We are still available for your individual answers via e-mail and phone after the webcast. Thank you very much.

Thank you very much also from my side. Have a nice day.

[ Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect. ]