Interroll Holding AG (INRN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. With me is Martin Regnet, our Head of Communications and Investor Relations. We cordially welcome you to our half year results presentation, and we are glad that we have so many participants. I hand now over to Martin Regnet for the introduction.

Thank you very much, Heinz. I would like to give you a brief overview on what the group is, how the group is developing in the first half year. First of all, I would like to start with giving you an overview on the internal logistics solutions market as well as the material handling equipment manufacturing market, we have a very promising development here with an estimated CAGR of 4% to 7% for the next 3 years ahead. This is our estimation. We estimate the material handling equipment market overall as at CHF 200 billion roughly. And for the internal logistics solutions, which are part of this huge market, we estimate a revenue market volume of CHF 6 billion to CHF 8 billion worldwide. We estimate across all our product groups that we are in the range of 8% to 11% of market share worldwide. Interroll has developed in the last 18 months. We have a little bit more employees than in the previous year with 2,600, 35 companies. Meanwhile, our latest addition is the Center of Excellence in Linz, where we have our activities on software and electronics bundles and we have 16 plants worldwide. We are still headquartered in Switzerland and continue to have around 28,000 customers. When we talk about customers, we talk about system integrators 90% and 10% are OEMs. And those are our partners in the delivery to the end users. Now when we go into the growth markets, we had some interesting developments in the first half of the year. We saw, for example, that food and beverage is quite a sophisticated and robust market, which has more decentralized supply chains, more regional integration. So it's a very robust market that has been affected by development in the supply chain a little bit less than other markets. Nonetheless, we also see that the Ukraine crisis here has a bit of an effect in this industry, nonetheless, the demand for material handling solutions is developing well in this industry. And I introduced later our latest technologies that we introduced specifically for this industry. So our outlook is positive on food and beverage. When we talk about airports, we see this is a bit of slow recovery after the pandemic had some effects on this industry. Nonetheless, our Modular Conveyor platform, in particular, our bell curves continue to be in demand in airport projects when we talk about baggage handling, baggage scanning into is well-positioned. The warehousing and distribution as well as the e-commerce is now a bit of the industry that has some impact on our first half year figures. We saw that a heterogeneous development. Here, we started larger e-commerce project did not materialize in the same way as in the period -- as in the same period of the last year. Nonetheless, we also see positive momentum for third-party logistics projects and they are getting stronger. We also see that the retail sector, I'll come to that later, is kind of also catching up in some areas after the COVID slow down a little bit. So we have a positive continued outlook on this particular field, but we see that the order intake in that particular area was weaker in the first half year of '22. The pipeline, however, remains good. We didn't have any substantial cancellation so far. And we see that the pipeline has a good development. So what we see and Heinz will elaborate on that a little bit further, is that we have postponements on the end user side, on the customer side for a number of reasons, but not a substantial cancellation so far. When we go to the time automotive industry, it's still robust. The automotive industry overall is a bit in a slower mode. However, mainly we are active in the tire industry here, and this continues to be an interesting field. And when we look at courier express and parcels here, we see a continued positive [ movement ]. And we also see that for the future outlook. So we have positive estimations in that particular industry. Supermarket solutions remained robust in the first half of the year. And as mentioned before, the retail sector proved to be very robust. And with interesting new developments when we talk, for example, about micro hubs, when we talk about new structures in the supply chain, in the store concept that those retailers have so that provides also additional and new opportunities. Industrial manufacturing is doing well, it's stable, it's robust. Nonetheless, we also have to say at this point that our new solutions, such as the SPM and the MPP are in a somewhat slower mode than we initially anticipated. The market entry that doesn't really worry us because we are very convinced about the product. And we saw that material handling in the past took a while usually when we came up with new innovations. So we still have a positive outlook long term on this one. Nonetheless, we also see that we need to be patient here and there and look at the long-term development. When we talk about our platform strategy, we continue to pursue that modular, scalable, flexible solutions. We have our 4 product groups, sorters, drives and controls conveyors and sorters as well as pallet handling and our ultimate target is to create maximum customer value by offering faster installation maintenance, shorter delivery times and highest product quality. Most of that, we fulfilled also in 2022 in the first half year. However, we are still not at the full delivery times that we saw pre-pandemic in our performance. So we are doing much better partially than in the year 2021, which was difficult with a lot of supply chain impact. We're definitely doing better. However, we also need to see how the Ukraine conflict and how the Chinese lockdowns are continuing to impact global supply chains. We track that with a task force. We have a very capable task force that is monitoring issues and initiate quick reactions to mitigate any supply chain risks. And so far, this is having a positive effect nonetheless, we remain cautious for the remainder of the year. When we talk about the highlights, what we had in H1 2022, we saw that our innovation pipeline was, we really introduced, was good. We introduced quite a number of new solutions in the last 12 to 18 months. We have our Smart Pellet Mover in the market. We have our sorter platform completed, which is very important when we talk about customers of different industries when we talk about offering different performance levels in the sortation process. And our food conveyor platform was completed. I will show you more details soon. And we extended our control family that means we are capable of offering our own sorter control solutions, whereas in previous years, we had to acquire that from third parties. Our new Center of Excellence in Linz will play a key role in the software and electronics development, it already is, and we are very confident to upgrade our controls and that this will bring also new opportunities for us. We plan some extensions in Germany in 2023. We are currently expanding the Baal site to -- in order to upgrade our Center of Excellence for food, where we have the new food conveyor platform. This is currently ongoing according to schedule and we are very much looking forward to that. The planned initialization is ongoing. This is something we generally do in the good times and the bad times. We always look for productivity opportunities and here, we also identified further opportunities and are currently in the rollout of using this advantages. We also use more automation in our plants, be it cobots, be it AGVs, there's more automated solutions within our production. Americas. Here, the e-commerce is temporarily slower. I mentioned that in the beginning. So this is a bit of a different trend than we saw in the 2021 financial year. Nonetheless, as said, our pipeline is good. It is more about installation, about confirmation about finding the right time to really roll out the projects rather than canceling projects. We upgraded our local assembly in Brazil and see some good productivity progress here as well. And in Mexico, we have a new sales team in place with a lot of expertise in the automotive industry, in the machine building industry, in particular. So we are also confident to see some development over there. Asia Pacific, the Chinese factory is complete now. We are currently in the full ramp-up phase. So this is completed successfully and on track more or less despite some pandemic effects, we could do a very good project management, and this is going very well. We will hear more about that in Q3. And we have the focus markets Vietnam and Philippines, which continue to provide opportunities as well as Australia and New Zealand. When we talk about the service business, we had a new service organization that we rolled out last year already, and we see good positive results from that, and there is a number of attractive retrofit opportunities that we see our service can play a vital role. So this is also a positive development in general, we think retrofit opportunities will increase over the next year. So our service is preparing for that. When we talk about the food conveyor platform, we have three elements of that. We see that we have a poultry processing focus with the ultra hygienic transfer. And this is a particularly interesting solution because with that, we can improve shelf life, we can decrease the bacterial contamination due to its design, it's much more suitable to the wash down process, in food processing that you see typically, in meat processing, for example. So this also brings opportunities for the manufacturer to have a lower bacterial contamination, which in turn will lead to an improved shelf life along the rest of the supply chain. And we think this is besides just the economic factor, this is also a vital contribution to an industry, to societies that are somewhat endangered by food safety, but also by food supply. So we think this is a positive contribution to avoid food waste in the future. And we think this will also be an increased focus of regulators in the future. The special hygienic conveyor is something that is being used for packed food so we have a bit of a broader range of usage. We can imagine this in distribution centers, we can imagine this as a goods receiving area in supermarket areas, for example, so this is an interesting product that is also capable to be hygienic at the highest standard. And this also brings additional opportunities for the food distribution. In the future, we already work on the ultra hygienic conveyor. So this is a conveyor that we can use for nonpack foods. And we see this also very suitable for the wash down process, and we will inform you about this in more detail in 2023. But as you can see, this is a very thorough platform that we are developing. And this also means that our footprint in the food industry is planned to be increased over the next year. We think it's a promising industry for material handling and Interroll continues to be in a leading role here. The global lifetime service net debt currently, we already achieved spare parts and refurbishment spare parts logistics and distribution where we made significant steps. Meanwhile, we enlarged our service team to more than 100 Interroll employees, but we also use external partners, partially from our volume on Interroll partner network. So this is also increasing in terms of exposure. We have -- currently about 10% of our turnover is attributed to service in the longer-term future. We are striving to generate up to 20% of our turnover with global lifetime service. In future, we also see opportunities to be -- to have a scale up in installation activities, service level agreements as well as preventive maintenance here, we -- to be very precise, we always need to be very sensible in how we deal with this -- with our system integrators. They're our main stakeholder, they are our main customer. So we offer this in a way to really convince them. This is a value add for their own activities and in short is not in direct competition with its own customers for the end user. That being said, is something that we are really doing very carefully. We also see opportunities in consulting, training and retrofit. Our Academy already started to roll out an increased number of customer trainings. This is going well. And retrofit, as mentioned before, is one of our main focuses what we can really increase in future using our global lifetime service organization. Corporate responsibility and also the reporting on it is in the focus over the next months. We plan to have a full report on the financial year 2022, ready by 20 -- by March 2023. We are focusing on using the GRI standards global reporting initiative as a standard that we are going to use so you can expect more transparency and increased details on our activities, on our sustainability performance. And certainly, the first report will also be a baseline for us. And from there, we can manage to improve over time in the coming years. At this point, I would like to hand over to Heinz Hossli, again, who will introduce you the financial highlights.

Thank you, Martin. I will continue with the financial highlights. We had a good start into the financial year 2022, and we assume the further recovery trends in the markets and in an increasingly improved availability of components. However, with the conflict in Ukraine and the various COVID-19 lockdowns in China, the situation in the supply chain has deteriorated once again. We also noted significantly more project postponement by customers and end users in the second quarter of 2022. This is due to their compromised supply chains, postponements in installation and short-term adjustments in their investment activities. The order intake fell significantly by 27.8% compared to the extraordinary first half year 2021. The decrease in local currency is 24.8%, all regions show a decrease in order intake. On the other hand, sales increased by 14.3% and in local currency, even 18.5%. The picture in the region is diverse, while EMEA and Americas show an increase in sales. Asia Pacific suffered a decrease. The EBIT decreased by 9.2% to CHF 40.8 million compared to CHF 45.0 million a year ago. This result mainly from the time lag to get material price increases into the market hence the backlog sold at old price levels. The operating cash flow is CHF 1.2 million compared to CHF 25.3 million a year ago as the inventory level further increased. On this slide, you see the details on the order intake. It shows a significant decrease to CHF 304.4 million compared to the absolute record prior year period. Our product group's roles declined by 23.9% and drives by 11.8%. The biggest decrease is in the product group conveyors and sorters due to the absence of major projects compared with the prior year period. To a lower extent, this is also the case in the product group pellet handling where the order intake decreased by 22.4%. The book-to-bill ratio is 0.98 compared to 1.55 a year ago. Despite the book-to-bill rate below 1, we still have a big order backlog from last year. The highlight of the first half year are the sales. All product groups have been growing. Sales of the products business, such as the product group rollers and the product group drives did well, even better with the project business pallet handling. Conveyors and sorters have the lowest growth rate, but the highest order backlog at those projects have much longer lead times. Looking at the sales development by region, it shows a diverse picture. Americas with a growth of 36.4%, again outperformed. EMEA also shows a solid growth of 12.3%, but the sales in Asia Pacific declined by 23.0%. Asia Pacific struggled already in the second half of 2021 with project orders, and we did not improve in the first half of 2022. In addition, the various lockdowns in China further negatively impacted the sales in the region. As a result of the sales development, the shares of the three regions changed considerably compared to last year. EMEA lost 2 percentage points and now represents 58%, followed by Americas with 33%, gaining 6 percentage points and Asia Pacific with 9%, losing 4 percentage points. The long-term target ratio of Interroll remains unchanged with 50% of sales from EMEA and 50% from Americas and Asia Pacific. Now we come to the EBIT. You can see the EBIT decreased by 9.2% to CHF 40.8 million. This is mainly due to material price increases and supply chain issues. On the positive side is the high cost discipline we still have in place. In percent or in margin, we decreased from 20.7% to 16.9%. And the -- on the EBITDA level. And on the EBIT, we decreased the margin from 16.5% to 13.1%. The depreciation and amortization is almost the same level like a year ago. Coming to the results. The result decreased by 0.9 percentage points -- 9%, sorry, to CHF 33.1 million. We had a positive impact from foreign currency exchange. We had a gain there, and we benefited from a lower tax rate. This results to a margin from 10.6% compared to last year's record level of 12.2%. Now coming to the operating cash flow. The operating cash flow decreased significantly to CHF 1.2 million, mainly due to much higher inventories. The growth in inventories relates to higher stock levels as well as much higher working process. As the normalization of the supply chains did not happen and safety stock is required to keep delivery readiness on an acceptable level for our customers. Nevertheless, reacting to the supply chain disruptions in a short-term move and as soon as this comes into a new equilibrium with sustainable supply chains we returned to the lean inventories principle we had in place before COVID. Our principle of cash is king still remains valid. Also out of a position of strength and following the management's long-term view, all strategic investments into capacity expansion are going forward as planned. Nevertheless, the investment of CHF 12.4 million in the first 6 months of '22 are considerably below the previous year investments of CHF 32.0 million. This led to a negative free cash flow of minus CHF EUR 7.2 million compared to last year, still a decrease. On this slide, you can see the long-term development of return on equity and return on net assets. There is always a half year effect from seasonality visible in the first half year. In addition to that effect, the steep increase in inventories dragged down the RONA and the lower profitability impacted the return on equity negatively. The chart reveals a strategic long-term perspective since the last major crisis in 2008, 2009, Interroll has driven forward its globalization of the expansion into new markets as well as the expansion of its technology platform and massively strengthened its market position with a balanced mix of measures. We boost the productivity while always keeping an eye on cost. We have done our homework during the good times underlined ourselves even more closely with our customers and their needs through the business model with the end-user approach. As soon as these supply chain issues will normalize, we also expect again an increase in these two KPIs. Due to the time horizon that is difficult to assess with regard to normalization of the situation, Interroll currently refrains from providing an outlook for the financial year 2022. Based on its strong market position, its innovative products, available capacities for growth in the fast-growing end markets served. We see a lot of long-term potential. With this, I conclude my presentation. I would like to point out that we are -- for the second time, we have published now the full digital half year report on our web page, and we encourage you to have a look on it, and we are always open for feedback how we can improve further. Now we come to the Q&A. And for the first time for half year results, we do now a live Q&A. So we are now open for questions. And as mentioned already in the introduction, you could do this on the platform.

The first question comes from the line of Walter Bamert with ZKB.

Could you help me, please, if the order backlog is that at the level of about half year sales? And does it improve with regard to old prices being in there?

To the first part, the backlog, what we have is still quite high, as you can see with the book-to-bill of 0.98 that we could not work it off as planned. And as we anticipated because of the new occurred supply chain disruptions, we could not work it off. So the sales would have been expected still higher. As a result, we have the backlog for the second half of the year. And we see now an improving situation in supply chain slowly, but we see now again that it's slightly improving. There are still components which are very difficult to source or have very long lead times. But in general, we see on our product business that we could reduce our lead times to our customers because we have now a better availability of the materials and also the stock level helps that we can now produce, and this is the first step that we go into a normalization. On the project business, this will take probably a little bit longer.

When it comes to the slowdown in order received, especially in conveyors and sorters. Is there still the change that you will get orders now in August and September for delivery in the current year? Or you think that opportunity is gone? Or is it just a postponement by a month or two because it's not debt clear cut for your clients and their clients, how to behave in the current market environment?

That's -- it's difficult to answer the question. If it's about big sorters, clearly, the window is closed for realizing an order intake once the sales still in this year. For smaller sorters, the window is still open. It's open still for some time. So there are opportunities. Important is really to see, and this is why we refrained from an outlook. We need to see how this develops. Now this -- in the second quarter, we have seen many postponements also in EMEA, which has been doing okay. In the first couple of months, we had even a very good start, and we have to see how this develops. And this is why we cannot say where we are shooting for and we refrain from an outlook.

I know it's difficult for you to assess what's really the reason behind those postponements due to the indirect business model, but what do you hear from your clients?

There are a number of project postponements due to the supply chain. So if you have larger construction projects, for example, if you build a new distribution center and suddenly, the supply chain of construction materials, is impacted. So this has an effect on the overall execution of the project. So this is one reason, but we also see that a number of end users are changing their macroeconomic outlook temporarily, also due to high inflation due to cost increases, they might be in a, let's say, tactical holdout position where they say, okay, let's wait until prices go down a little bit before we progress with the project in order to keep the costs in a better control. The indicator, we are really looking at is are there cancellations are end users or system integrators stop talking about certain projects. And this -- we don't see it as the case. So those are technically still in our pipeline and that's why we think this might be temporary, but we cannot say for sure. So we cannot give a very detailed outlook or estimation. But if you want to use the project pipeline as an indicator and the level of cancellations as an indicator, it gives a picture that is not pessimistic.

The next question comes from the line of Sebastian Growe with Exane BNP Paribas.

I would like to start on a quick follow-up on the mentioned postponements and delays. Can you give us a rough idea what the impact has been on orders and revenues? Is there any possibility to -- provide a number? And what I would also be interested in is clearly the sequential development. If you could that give us a bit more color around our quarter 1 compared to quarter 2 has trended in terms of demand. And eventually, if that's possible also to give us an indication on July, maybe we can start there?

Thank you for your question. I would start with the separation in Q1, Q2. I think we mentioned this in Q1, the demand side was still strong. We had a good start into and the postponement of projects and also in the product business, a little bit a slowdown, which might be that some of the big customers also now reduced their inventories again. This came in the second quarter. And it's difficult in July. We cannot say anything yet. We don't even have the figures yet, but we see that the pipeline, as Martin said, the pipeline is strong. If you look at the pipeline, we would expect a good second half year on order intake but the experience from the second quarter where we have projects, bigger projects, which we said will be order intake in May than it was June. Now it's September and we have various of these customers, which just move and they are not ready to make the final decision and to issue the PO. So this is why it is difficult at the moment to judge. But the pipeline is good. We have many projects which are under discussion. And what is positive is even though some projects moved in the time line, which we have on order intake, but basically, we had not suffered any cancellations from the orders we have on hand.

That's helpful. And on the question related to the impact on the orders and revenue levels due to the performance. Can you give us a number?

It's difficult to give you a number because it depends really on the second half year. And in the product business, we go basically from month to month. We have a backlog, but it's not long. Also delivery times have not come down. So we need to see how the order intake is and we have to go from month by month. On the project level, this I can tell you, what we have lost a big part is also gone. No, we have still a very high backlog. But it's clear now that last year was a record year. This was a total record year. And the book-to-bill ratio of last year of 1.55 was unhealthy by definition. We had much too high order intake to what we can produce, and we now still have orders from the first half year in the pipeline to execute. But this order backlog will be to the greatest extent work we worked off this year in the second half year.

Okay. And if I may move on to pricing. You [ decide ] prices in the second half of '21 also for the first half of '22. Are you planning any further price hike? And I'm asking the question in the wake of wage inflation, especially in Germany, is a substantial part of the also production footprint? And related to that, I would also be interested your thoughts around the potential gas rationing and how that might impact the operations in Germany?

Regarding the prices, we follow this monthly. We have also established our own index where we see what kind of materials and commodities buy in. We track these changes we track also the outlook where we see this goes deal has now changed. It's now going back. All the components are still going up in the price. But what we see now from the last 2 months is that we have stabilized the price level, and we do not plan any further price increase if this stays as it is now. What you mentioned with the inflation, this will be then for next year, which the salaries will clearly go up in basically all regions driven by the inflation. And this will then be considered for a price increase 2023. So what we do regularly in January. If something unexpected happens and the price would go up again, then we would also do another price increase, but only then. And really the good news we see now a plateau. We see that over the -- our basket, it is stable.

Okay. It's good to -- reassuring indeed. And then finally, on the EBIT. I noticed that you had a quite significant increase in the change from work in progress on capital R&D on the P&L. Can you give us a sense of to what extent really this was driven by higher capitalization of R&D?

Can you repeat the question that I -- acoustically I did not get it.

In the P&L, you had in this line item, which is called increased decrease in work in progress and finished products and also on work only goods capitalized. So that is obviously also an element of R&D capitalization included. And the question simply is to what extent does it increase because the number went up from about CHF 11 million in the first half of '21 to more than CHF 20 million in the first half of '22. To what extent this was driven by higher R&D capitalization?

Yes. Higher R&D or capitalization of goods is basically 0. This is not even material amount. It goes into the rounding. So the entire increase is really coming from inventories and about half is from the increase in work in process and the other half is about the increase on the stock level. It's pretty much 50-50.

Okay. And then finally, if I may, just very briefly, similar to the question I asked around the split between quarter 1 and quarter 2 on the order trend for the EBIT. Obviously, at this point, with the deterioration in supply chains in the second quarter would it be possible to get an idea at least how the EBIT margin might have looked in quarter 1 compared to the second quarter?

It's difficult to answer. Normally, the second quarter always had the lower margin in percent. So the margin is lower on EBIT because we have more output. We have more turnover coming from the project business, which is very seasonality. This year, we see this a little bit different because we still have a backlog where we sold with old prices. We work this off. We also have a backlog with new prices. This will have increase in margin in the second half year. But at the same time, we still have a lot of projects with old prices. So it's a mix.

Yes. My question was more referring to the first half of 2022. The reported numbers, I just want to get a better understanding significantly the impact from the deterioration in supply chains might have been on the EBIT margin. So I'm exclusively asking for the quarter 1 '22 compared to the quarter 2 '22 margin, if that is possible?

It's -- I cannot answer this like this. It's very difficult because it always depends on the mix. What we have seen last year was by far the best first 6 months where we still benefited from low material prices we purchased very early in the COVID crisis, this first 6 months, we clearly suffering on the margin side from materials we have to buy on a very high level. You can see this also in the P&L, how much we lose only on material. Now we have a material is 42.1% last year and now in the first 6 months of '22, the material is 49.0%. So it is considerable amount, which we lost on materials.

Thank you very much, Mr. Growe, I would like to invite also some other participants to ask questions.

The next question comes from the line of Stefanie Scholtysik from Mirabaud.

Yes, hello. Can I come back to this cancellations and also postponement? Does this -- just for clarification, this cancellation does not affect any -- and also the postponements does not affect any of your firm orders that right? Is this just more on discussions you have with your clients? And then maybe can you share with us how much you increased prices? And how much of your order backlog in terms of percentage is still with old prices and how much is already new prices? And then on the material cost, the percentage of sales, the 49%, should we assume the same for the second time? So that's it for the moment.

Thank you very much. First, to the orders. Now when we say about the cancellations, then it's clearly referring to what we have on our book. So we have no -- basically no cancellations from firm POs we got in the past. When we talk about postponement, then this is valid for both. Now we have postponements where we cannot deliver our scope because our customer, the integrator is not ready because the end-user is not ready, as Martin elaborated. There we have some postponements from projects where we cannot deliver our scope on time. And then we have projects which are postponed in order intake. So we have negotiations with the customers. We basically have done final negotiation. We wait for a PO and the customer is just postponing issuing the PO month by month. So this is -- hopefully, this answers your first question. The second question is basically impossible to answer. Our order backlog with a big mix. And as you know, we did many price increases in the last 12 months. And we cannot assess each order which price has been done. What we can say is that on the products on rollers and drives, we now see an improvement that we have worked off a big part of the backlog and that we could reduce our delivery time to our customers now. And there, we will soon be on new pricing levels. And when I say on new pricing level, this is the last price increase from this year is then included and will materialize. On the projects, this will take time until we have worked them off. And to your last question, this is related. No, when you say is the 49% now the new standard, clearly not. This is not the standard. But we have to see that -- on the project business, we also have more labor involved a little bit less material. On the product business, we have more material and less labor. And this changes this mix now. So what I can tell you is my assumption is that this will come back down because we benefit from the mix in the second half year. And we also benefit that we get product business with new prices in.

Okay. Great. Maybe one additional, if I may, on the product, you were talking about retrofits. I mean, how much of your orders is coming from retrofits? And could you also give us an outlook, maybe a short one on this segment?

Well, in general, I would estimate retrofit new project ratio in the range of 40% to 50% at the retrofit area, I guess, Heinz would confirm that figure or that range. And we see that we have new drivers that are coming in that cause retrofits. Of course, performance is a topic, but we increasingly have carried out projects already, but also had requests for more energy efficiency. For example, in France, we had recently a customer called [indiscernible]. There are manufacturing injury. And for this, they upgraded their conveyor lines with an energy-efficient solution from Interroll, which saves them about 48% to 50% of energy in the daily operation for their conveyor lines. And that can make a substantial difference over the course of the year when we talk about the electricity bill. But it's not only the electricity bill, it's also the attitude. It has something to do that a number of customers, for example, in a business that is sensitive to customers' expectations on their sustainability. So we see an increased interest on energy-efficient solutions, and that would be a very interesting retrofit scenario on which we are focusing on to maximize these opportunities in the future.