Jenoptik AG (JEN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Jenoptik conference call regarding the financial results of 2019. [Operator Instructions]. Let me now turn the floor over to your host, Dr. Stefan Traeger.

Good afternoon, ladies and gentlemen, a very good afternoon to all of you out there. With me together at the conference is Hans-Dieter Schumacher, CFO, and happy to present 2019 to you and happy to receive probably a lot of questions that you all have. The outbreak of the SARS-CoV-2 virus around the globe has an effect to all of our lives, obviously socially, but also to the companies around the globe, obviously, to us as well as a company, to see an uptick. And we believe that the highest interest you guys have at the moment out there is probably beginning to ask many questions around the COVID-19 crisis, how we're prepared, how it is affected to us and so and so forth. And so we will go through the numbers of 2019 fairly quickly to leave ample time for Q&A afterwards. We will also try to explain our position and our thoughts around the current status of the company at the beginning. And we'll pick it up at the end of the presentation as more of a forward-looking view as much as that's possible in these days. Obviously, it's very hard, it's not even impossible to reliably assess the extent that the spread of virus will have on the economy, our own business in this current fiscal year. Therefore, we've announced yesterday that we put the -- our forward-looking statement or forecast and our guidance under review and under condition. It was also announced yesterday, that we put under condition and under review the timing of the Annual -- General Annual Meeting as well as the payment of a dividend. So it's currently, up until this point, have proposed to pay a dividend of EUR 0.35 per share, and again, we put this under review depending on how the situation is going to unfold in the next few weeks and months. We will give you some more indications around our individual businesses and how they -- how we believe they are going to be affected by the crisis throughout the course of -- toward the end of the presentation -- at the end of the presentation. Let me just, from a really big picture perspective, to tell you the following, from our point of view, Jenoptik is actually pretty well prepared. We have put in place a task force in the company really weeks back already, and we've taken a lot of measures to prepare the company. At this moment in time, all our factories, but one in the U.S., are productive. So all factories around the globe are running. The only exception we have is our factory in Detroit, Michigan, but all our other factories are open and are producing, including our office in China that's back online, and a factory in Europe and the other factories that we have in the Americas. We're monitoring our supply chain very carefully. We do have very good visibility at this point. But of course, that's much -- or is becoming more and more of a challenge. But at this very moment, we are still okay when it comes to supply chain. We see some shortages for materials, obviously coming out of stimulation in Philippine factories and the Asian factories. We see some minor shortages of -- in a smaller supplier within Europe. But overall, we can, at this moment in time, at least, report that all our factories are still running and able to produce and supply our customers. From a demand perspective, again, we will address that when we go into the individual businesses. But big picture, again, we believe that our VINCORION and Light & Safety divisions, the 2 divisions that are directly dependent on public money, shall be affected to a lesser extent. We believe that public money will continue to flow. There is, of course, a short-term impact because the folks are not in the office and the government had other things to do at the moment rather than issuing invoices for new infrastructure. But overall, we believe that the huge amount of stimulus packages that are put in place and that it will, should actually support those 2 businesses and that they represent a larger quarter of our business. The other 2 divisions are somewhat different. In Light & Optics, we see, in particular, in our semiconductor segment, still order intake and still questions of our customers whether we could supply and to what extent that is changing going forward is very hard to see, but at the very moment, it seems as if the semiconductor industry, things are relatively strong, let's say, stable. So at this moment Light & Optics is okay but Light & Production, the automotive industry is affected. The automotive industry, basically [indiscernible] global shutdown here in Europe and in the U.S. All factories are almost closed and so, therefore, the automotive industry is already affected quite a lot, and we foresee that to carry on in the next few weeks. With all that said, we have said that we believe that the first quarter, and in particular, the first half will be affected by the outbreak. To what extent, it's hard to see, and I will share our view on the second half at the end of the presentation. Nevertheless, let's switch to 2019. As much as we all are focusing our efforts and all our bandwidth on managing through the crisis and, hopefully, emerging even stronger on the other side. There was in 2019, though it looks a few ages ago, but there was 2019, and we'll go through the numbers of 2019 in a fairly brief manner. Let me just point out a couple of few very important things that's worthwhile to notice. 2019 for us, overall, has been an okay year. Certainly, we would have liked to get more growth, but the sheer fact that we did post growth in 2019 and actually putting a remarkable margin expansion, to us, is a good result. We have continued to invest in expansion and modernization of our locations on our sites. We have received several larger orders, in particular during Q4, where we saw actually good momentum in orders and in sales. And probably most importantly, we have started our new corporate structure in 2019. We built that in the year 2018, and we started to run it at the beginning of the year. And for us, that has been quite a test. Since the beginning of this year, we have now our corporate structure in place, and I am proud again to report that we didn't have any lot of major hiccups, and this reorganization everything went pretty smoothly. And that allows us now the next step in 2020 to actually work on streamlining our processes and also streamlining our -- quite frankly, our admin efforts to manage the former complexity in the company. The complexity has been reduced in a small time to actually streamline the processes and leverage that and get more efficiencies out of our administrative functions. Quick word on the VINCORION. Obviously, we have communicated in the middle of last year 2019 that we intended to sell VINCORION. And at the beginning of this year, we had to communicate that in January, we had to come to the conclusion that at this point in time, we didn't have an offer on hand that reflected our view of the value of the business. When we go to the development of VINCORION in 2019, you'll probably understand that even better within the numbers of VINCORION in 2019 has been strong. And the order intake had been strong and the backlog is very strong, actually. So we expect a very good 2020 for VINCORION and that's all. I mean there's a disclaimer, with the effect of the crisis, we have to find out still, we have to see it still. But overall, that growth of that organization we say, okay, we will stop the process. It doesn't mean that we, in any way, shape or form, deviate from our strategy. Our strategy is still in place and we are very convinced that our strategy of trying and actually acting to transform Jenoptik into a more focused -- technology company focused around our core competencies, in optics and photonics is still in place. We have the absolute intent to pursue that strategy. So we, at this moment, operate VINCORION, a bit like almost like an independent investment. Of course, it's part of the group and we consolidate VINCORION. But in terms of how we manage it, we have no intention to reintegrate all the back-office processes and the like, which we have disintegrated. So we have no incentive to reintegrate that now back into the book and has been asked a number of times in the past what does that mean? Does it mean it's still for sale? Or does that mean you expect some offers? Well, if we put it that way, if somebody purchase us with an offer that is attractive to us, we would certainly consider that and it's our duty to do that anyway, but we would certainly look into that. But in other words, if somebody calls, we'll pick up the telephone. To what extent that materializes in 2020 given the current circumstances of the capital markets remains to be seen. I think pre-crisis, we would probably have said, well, maybe it works this year or maybe possible. We don't know. But now, I think it's not as likely given the status of the capital markets. But again, if there is somebody out there that's interested in a business that has very good, stable cash flows, and it's a very healthy business, but -- somebody can work with it much well and we can, then when we are prepared to talk. Okay. So that's that. Let me go to Page 5 in the presentation. Page 5 for our presentation actually shows the sales momentum, revenue development in 2019. And you see that in 2019, we've managed to grow Jenoptik, again, by 2.5%. Again, we originally anticipated a bit more, but like -- we did want to have a bit more, but I think, given the economic circumstances, in particular, in the car industry, I think the result that we have seen in 2019 is a decent one. The fourth quarter '19 has been very strong for us. It showed growth versus the fourth quarter of '18 of 7.5%, 7.6% to be precise, so fourth quarter being very, very strong and a good momentum in the fourth quarter. Growth has been driven, obviously, by a good business in semiconductor equipment industry. That's always something to mention. It's a very important business for us and given that there has been quite a semicon -- in fact, a bit of a crisis out there in '19, it's important for us that, in all our segments, still see good demand in the semiconductor equipment industry. And we also have seen very good demand in Automation & Integration that refers to Prodomax. And as you know, we have just recently announced the acquisition of INTEROB. It's a bolt-on to Prodomax. So what we started was Five Lakes and Prodomax in America. We intend to now roll out into Europe. Page 6, you can see the regional distribution of our sales growth, particularly strong in America. That is due to the acquisition effects. Europe, almost flat. We see decline, in particular in Germany. That's attributable also to the decline of the car industry in Germany and the effects on our Light & Production business. We see a decline in Asia, that is, in particular, in China. You might remember that we, as many other companies have reported, we had headwinds in China already in 2019 pre-corona crisis, and that led to a decline in sales in Asia overall. As I say, total growth for the year, 2.5% sales. That's a typically a decent sales growth for what has been a relatively challenging year out there in the marketplace. With that said, let me skip actually, in the interest of time, to Page 7, and let's go to Page 8 right away, and I'll turn the mic over to my colleague, Hans-Dieter, who is going to explain our margin development. We're proud of the fact that in '19, we could, again, leverage our margins and expand our margins to now almost -- not quite, but almost 16% EBITDA, and you may remember that we originally targeted for 16% EBITDA in our strategy for 2022. So we're not quite there yet, but I think we're fairly close already. So with that, Hans-Dieter, over to you and who will deliver the detailed development of profit and on our P&L segments.

Yes. Thank you, Stefan. A very warm welcome from my side to all of you as well. Let's go directly to Page 8, please. Here, you see what Stefan had already mentioned. Our EBITDA was -- the development of our EBITDA was even stronger than the sales. We increased it by 5% compared to 2018 to EUR 134 million. It was already supported by the contributions of our acquired businesses. We had, obviously, positive effects from the first-time application of IFRS 16, an amount of around EUR 10 million, by the way. And this is also directly the relationship to the EBIT, where we don't have such IFRS 16 impact, only a little bit. So this is the reason why the EBIT margin is a little bit coming down as expected compared to prior year. But with 15.7% EBITDA margin, we have been very close to the 16%, as Stefan already mentioned. Then let me switch over directly to the next page, next slide, Page #9, Slide #9, where you see our P&L of the group. And let me focus directly on the earnings after taxes or the earnings per share. Here you see, as already communicated throughout the year, poor development. Let me say it in this word in the earnings per share compared to prior year, having suffered now on the tax side. What happened? In the year '19, we had no carryforward losses for corporate tax purposes anymore. We activated the deferred tax assets in 2018 for the very last time, the last portion. During this year, we have, for the first time, the impact that we use these assets. And this is why our deferred tax liabilities increased compared to prior year, and therefore, we have a higher tax rate. The operational, let's say, cash effective tax rate is nearly on the same level like last year. It's 13.3% compared to 12%. In values, it's EUR 11.3 million taxes we paid compared to EUR 10.9 million. This is a real tax payments. And the rest, as I already tried to explain, is coming from the deferred tax aspect. In the future, Jenoptik will become more and more normal German headquartered company, so to speak, as I already have explained to you, and we expect always a tax rate between, let me say, 15% and 20% in the years to come at least. This is -- this aspect and then let me come directly to Page #10. Here, you will see the most important key performance indicators of our group, looking a little bit more in the future. You see our order intake and our order backlog. In last -- end of the last year, we reached EUR 812.6 million order intake. This is 7% less than at the year -- at the end of the year 2018. But don't forget, in the last days of December 2018, we booked an order intake. We expected it to be booked in the first quarter '19 in Light & Optics. It was a big order, a major order. If you would equalize this, we would show you a little bit of an increase compared to prior year. And Stefan already mentioned, we had a very strong Q4 last year with EUR 237.7 million, which was clearly above the Q4 2018. We -- but nevertheless, also already explained by Stefan, the automotive sector. We saw certain reluctance to invest in the H2 2019 already, which impacted negatively our order intake of the group. On the order backlog side, you see EUR 466.1 million, which is 10.6% below prior year. Still a solid base for growth in 2020 from our perspective. Approximately 68% of this order backlog, we plan to convert into revenue in this year. So this is a starting point for 2020. Next page, please. Here you see our free cash flow development. We have had the discussions last time at the Q3 reporting. When we reported to you the Q3 figures, we had reached EUR 7 million after 9 months. I promised you we would come close to EUR 80 million. We ended up at EUR 77 million, meaning we collected EUR 70 million free cash flow in the Q4 '19. We are quite happy with this. You all know, or you remember that we had some aspects, which were not so good for cash flow in the last year, for example, the export license in our VINCORION business. We could not get throughout nearly the whole year. So we had to carry forward, so to speak, the working capital aspect on this big order, which we finally got the allowance that we shifted. And then we had, in the beginning of the year '19, the push out in the semi area. So this all influenced a little bit negative in our free cash flow throughout the year. But we are coming back, and we are quite happy with EUR 77 million. And by the way, with these figures at the year-end, we have been, again, net debt-free, showing you plus EUR 9 million, I think, even including the IFRS 16 negative impact at the balance sheet of EUR 55 million. So it was not so bad concerning the cash flow and even taking into account it's free cash flow, meaning operating minus cash flow from investing activities, and we invested much more than in the year before. So taking this all in account, we are quite sufficient with EUR 77.2 million free cash flow. This -- having said this, I'd like to hand over again to Stefan, who is happy to share with you our divisional development and we'll come later on to the outlook for 2020. Stefan?

Hans-Dieter, many thanks. Let's start with Light & Optics right away. If you would follow me on Page #13 of our presentation. As you can see, in terms of sales, Light & Optics, our OEM business, grew in 2019 by almost 4% to now EUR 350 million. The business had good tailwind still, as I said earlier, from the semiconductor equipment industry, which is obviously very, very important for us. We did see a decline in the area of industrial solutions. Now in the discussions with some folks in the past few months, there have been some slight confusion around the industrial solutions divisions business, let me explain that a bit more. Industrial solutions, for us, and Light & Optics, is a business segment of a business unit, which produces optical modules and components for industrial accounts. So please don't confuse that as our industry or our Light & Production business or with our industrial metrology business, right? Industrial solutions in Light & Optics really is a components business for industrial applications. And that business, which is -- let's say, it's mid-double-digit, around EUR 50 million in size roughly, that business had suffered in 2019 already. Nevertheless, overall, the division did grow as well, as I said earlier, by almost 4%. EBITDA margin has been stable at a very, very high level of 19.8%; [ our margin ], 20%; prior year, the 21.8%. So it's really very high, but we believe that 20% or roughly 20% EBITDA margin for this business in total is still a pretty good result actually. You do see, on the right-hand side of the chart, a significant order decline. Let me point out, again, that we have recognized or booked an order -- not recognized, but booked a large order for a semiconductor equipment product in Q4 2018. And again, just as an explanation, I think we've discussed that with many of you throughout the year already. Typically, we get what's called frame contracts, and we book the orders then the call ups come for the individual product delivery. This particular product -- or this particular -- sorry, not the contracts for this particular product in question here has been such that, under our rules, we had to book this all in one go in the end of 2018. So if you want, December 2018 has been much higher, and we're now missing as far as the year, and it's -- and that will be with us also into the next year. But we have the orders. It's just in the backlog, right? So that's something we explained -- an explanation why order intake is down by 18%. Overall, of course, as I say, semiconductor business is stable, but the industry solutions business declined and the biophotonics business there, we believe, has a good potential going forward, but also has not an easy 2019. All in all though, in Light & Optics, we are fairly happy. Let's go into Light & Production, which is on Page 14, and if you just look at the numbers, you could -- well, that's great, actually. We grew revenues by 8.6% to almost EUR 230 million. We expanded margins, again, by 4.7%. Order intake has been stable. So why do we say that this is a challenge? Well, let's remember that in Light & Production, we have the acquired businesses, Prodomax and also the OTTO Vision business here in Germany, which is a small business, actually, but the main business is Prodomax. The acquired businesses contributed EUR 37 million to the sales in 2018 and EUR 66.4 million to the sales in 2019. So the difference between those 2 numbers, obviously, is the additional annualization effect that we got in the sales of Light & Production. Still, that does mean that Light & Production has had a challenging year in terms of growth. They didn't grow organically, but the acquired business contributed to most of the growth. But we're still okay-ish. It was not a complete meltdown like in many other semicon -- sorry like in many other automotive businesses. So Light & Production with 8.6% growth driven by the acquired companies. EBITDA expanded to EUR 25.8 million or 11.3% in margin. That's a slight decline, but overall, I think that's a good development for this business. Light & Production, as I said earlier, is one where we are most concerned when it comes to the effect of the crisis, simply because Light & Production is exposed really to the automotive industry, and we have to see how the effect -- how the automotive industry really affect our Light & Production business in 2020. That, at the moment, is the point that's really, really hard to assess. We really just don't know at this point. With that said, let me go to Light & Safety. And in Light & Safety business, they're opposite ways, it's correct. If you look in at the pages, you see a decline in revenue, you see a decline in order intake, but the early good thing is that an increase in EBITDA. Nevertheless, we are very happy with the development of Light & Safety. And we would like to remind you that Light & Safety has a special Toll Collect effect in 2018 when we got a lot of tailwind from this specific project, a bit of Toll Collect in Germany. So the comparator for Light & Safety is completely skewed, if you want. Light & Safety, the guys there managed to almost compensate actually the EUR 26 million than, I would say, versus '18 from the Toll Collect project. If you would dial back out the Toll Collect contribution in 2018, you would see double-digit growth in Light & Safety. Order intake is -- shows a bit of a decline, 9% for Light & Safety. Here again, we had some very big orders actually booked at the end of '18 for the Middle East, for a large construction site and infrastructure development, which we will turn into sales [indiscernible] '20 year. That is a fairly normal development in this business. It's a very lumpy business. The business, that's project-driven and therefore, it can see swings in order intake up and down. But overall, as I say, we're actually fairly happy with how the business developed in particular also from a margin expansion perspective. Of course, this business has helped by the IFRS 16 effect, less of our infrastructure -- some of the infrastructure, we actually keep on the balance sheet. And we get recurring revenue from the service -- from service and operational contracts there. But nevertheless, again, we are very happy with how the business has been developing throughout '19. And we did get orders, again, for infrastructure in America, in particular, in the state of New York and we have been able to communicate that a few weeks back. Let me go to VINCORION on Page 16. VINCORION has shown a significant growth in order intake. VINCORION order intake totaled almost EUR 180 million in 2020. That's a very, very strong result for us. And it does show that the future for this business, 2020 and beyond, should be really good. And again, that's why we said at this moment in time why would we sell a very -- actually good and decent and strong asset undervalued. Again, I would like to point out that we believe that, strategically, there are just no synergies between VINCORION and the rest of the group. But again, it's a good asset, and there is no reason for us, and I think we also owe it to our shareholders that we not sort of sell it for completely or below what our expectation of valuation would be. So you see almost 15% order intake growth in 2019, you see revenue is stable. Or how does that work together? How does that square? Well, the VINCORION, is, again, in the project business and order intake turns into revenue in years to come. So we do foresee a very good sales development for VINCORION in 2020 and beyond. And in EBITDA, you see that VINCORION managed to expand the EBIT margin considerably to now almost 15%, which is really a record for this business. It's a business that, typically, or in the past has at much lower margins. And we're very proud of the colleagues at VINCORION for them being able to manage such margin expansion. And again, good business, good development in 2019. And given the nature of this business, it will actually also help us through the crisis because it does produce stable cash flows. Yes, we have seen that over the years. So to us at VINCORION, at the moment, is actually a good thing because again, short term, it helps us to navigate Jenoptik through crisis and, nevertheless, we believe that, strategically, we want to focus our business more on our core competencies around optics and photonics. With that, let's -- I'll actually go to the outlook and to what we believe the development in 2020 could be. Our original target, up until really what seems like in ages, ages back, but it's actually just a few days ago, our original target had been to grow the business in the low single-digit percentage range. Let me again point out that we have to deconsolidate HILLOS. And for those of you who are not that familiar with it, HILLOS is a 50-50 joint venture or it used to be joint operations between Jenoptik and Hilti. And as a joint operation, we would have shown, or did show in the past 50% of its revenue and profit in our P&L. HILLOS has now been converted into a joint venture so that HILLOS is able to also produce for other third party companies, not only for the owners of HILLOS. As the joint venture goes, we cannot consolidate it anymore to our P&L, but it ends up in our financial results. So we do consolidate it, obviously, further down below the EBITDA margin. But you don't see it in our sales and profit -- and operating profit numbers. And HILLOS is -- we used to have around EUR 20 million or so for HILLOS in our P&L. So we lose that. Nevertheless, we're originally targeting for a single-digit percentage range of growth up until a few weeks back. At this moment, the COVID-19 outbreak really makes it so difficult to forecast that we have put this forecast under review. We have to see how the next weeks and months develop. And I think you all would understand that. I think that we have seen that around the globe, and although I detailed how we believe it could develop in a few second images. Let me just -- could we touch on our margin again. In 2019, as I said, we had already 15.7% EBITDA margin. In -- 2 years ago, we promised that we want to expand our margins from what used to be 14.2% at the time to 6 -- around 16% in 2022. And until a few days ago, we were pretty certain that we can achieve that 2 years earlier already in 2020. Now here, same then caveat applies. The COVID-19 outbreak makes it very difficult to forecast, therefore, we also have to put this under review and under the condition that we have to see how the year develop. So therefore, our entire forecast is subject to review. Let me just say a few words to our view of developments, or how it could develop in the next weeks and months. I think there are 3 possible scenarios. And somehow I'd like to call them U-V-W. In the V-shaped recession in the scenario one, where we would basically get a V-shaped recession, hard downturn but then also a very quick rebound in a few weeks or in summertime. At Jenoptik, we wouldn't have that much of a problem. We would have -- obviously, have a very hard -- harder, if I would say, H1. But as business returns back to normal, we should actually see H2 in this V-shaped scenario because, as I said earlier, we are not a consumable business, we're in a capital goods business. And while consumable businesses suffer, you may refer, if you don't have your beer now in your restaurants, chances are, you will never drink that 1 beer that you didn't have today. Some of you might, but it's overall, I think. Consumable businesses are much, much harder hit than capital goods -- capital equipment business. So stuff that we can't deliver in the first half under the V-shape scenario, we would expect to catch up in the second half because, at that point, under the V-shape scenario, as I said, the stuff will then be delivered, and we're still producing currently as I said, when all our factories are done. The other scenario, that would be the best-case scenario because worst-case scenario from our point of view, would be a U-shape, basically, where we do see a recession now and that prolongs once it's finally bottomed for a long time, and we don't see any recovery before 2021. That would, obviously, put all our economies under severe stress, and I would go back on those stress as well -- or under very challenging conditions. I think the middle-of-the-road scenario for us is -- well, we got a bit of a W effect, where we see the recession now. And in summer time, maybe a bit of a rebound with contracting infection cases and reopening of factories the world. But there's a chance that we could see a -- again, a rise in cases of COVID-19 in autumn, and another clampdown and another shelter in place orders for the entire world. And that would make it sort of, again, challenging. We don't really know which one of these scenarios we will see. Obviously, we are not virologists. We are the optics people. So we have to see what really happens. We have a lot of trust in what the governments are doing, actually. And I have to say that many governments around the globe are putting severe and big stimulus packages in gear. And whether right here in Germany, in Europe, in the U.S. or in Asia, we see governments putting together big stimulus packages, which should help for a fairly quick recovery if the scientists can help to develop a cure or at least immunization against SARS-CoV-2. What does that mean for us? Well, we have managed very, very closely. We steer the company through the crisis as good as we possibly can. It's our highest priority at the moment to keep our operational processes going. And again, I point that out one more time, to keep our factories running. Up until now, that's possible and all of our factories are running. And we also want to be able to do strategic invests to grow our company and to invest into strategic moves at this current time. It could be actually an interesting time for activities, and we want to be able to invest into that. So those are our highest priorities at the moment. Obviously, next to the health and safety of our associates and families and the entire society. We had a strong balance sheet in Jenoptik. So I think we are well prepared. Of course, it all depends on how long it all takes, and how long the crisis will be with us. But at the very moment, we have a strong balance sheet. We are in daily contact, almost, with our customers, where it's possible, with our suppliers, with our banks. And so that makes us, for now, at least, hopeful that if the crisis doesn't prolong for too long, then we should be okay. Let me close with a statement that I have been using a lot of time lately with our associates and employees around the world. From my point of view, good companies will shelter now and manage through the crisis and come back on the other side. Exceptionally good companies and real excellent companies will steer the company through the storm and get stronger on the other side. And the Board, Hans-Dieter and I will make all that it takes to make sure that Jenoptik belong to the latter category of exceptional companies that, as I say, actively steer the ship through the choppy waters and emerge even stronger on the other side. With that, thank you for your attention, and we're happy to receive any questions you might have.

[Operator Instructions] The first question is from Richard Schramm of HSBC.

I would like for -- take a question concerning the financing of the project business you have, obviously, in Light & Safety and also in VINCORION. Do you have down payments on hand, which helps you through this process? Or are you able to still achieve milestones -- milestone payments from your customers in this respect so that your own liquidity might not be squeezed if you try to keep up operations and prepare for these contracts? That would be my first question. And second, besides the financial ratios you mentioned, what is left aside from your financing side in the current situation? Can you remind us on this one?

Yes. Thank you very much for your question. I'll take the first one, and, I think, Hans-Dieter will be better prepared to answer the second one. So from the project business point of view, other -- to this point, we don't have any sort of delays, if that's the question you have. So we can still achieve the milestones, given that the factories are open. And we think that at the very moment, we keep the business going. It could change given that we have now obviously, in Light & Production, these projects. We have large projects. And the factories there are closed to that much change. That's more fully for the Prodomax business. In VINCORION and Light & Safety, which you asked, in particular to -- with respect to the governmental account, obviously, again, if a governmental agency shut down for a while, then they don't process as far. But at this moment, we can't report or don't have to report any severe impact. And with respect to liquidity and the headwind that we have in our financing scenarios, I think Hans-Dieter was better prepared to handle that and also from the discussions that we had last with the -- lately with some banks and to [indiscernible].

Yes. Thank you, Stefan. And shortly before I switch to this question, I'd like to highlight for Mr. Schramm that we had in our balance sheet at the year-end 2019 EUR 43.9 million prepayments from our customers. So we still get prepayments in a certain amount, yes. And to the actual -- let me say, financing situation of Jenoptik, we still -- we are obviously in these days, very close together. All, our CEO, me and my team and our divisional heads, we are looking very, very intensively at the cash development. And I can say to you that we still have around EUR 150 million in our pocket compared to EUR 170 million at the year-end. And the main reason for the deviation is a payment of EUR 24 million for INTEROB, the first payment we made for the deal. So all in all, we are still in a good situation. We get the money from our customers. Our -- they're paying their duty -- due payments to us. So we have a cash inflow. Yes, we are looking to make our cash out -- cash outflow relatively smart. But -- for example, we have our syn loan, our EUR 230 million line with our banks. We did not draw the money. We did not put it under our account. So we have not used it. It's only used with an amount of EUR 30 million for guarantees. So we could draw EUR 200 million if it would be necessary, but it's not necessary at the moment. So we are, financial-wise, let me say, on a good fundament, but it's depending what Stefan already mentioned in the beginning of his speech. It's depending on how long and how deep this crisis will last on. But yes, that's future. We are looking where it -- as I mentioned, already very intensively at this development. But at the moment, we are not nervous. Let me say this word.

The next question is from Malte Schaumann of Warburg Research.

Question one is for your cost structure in the OpEx. So what is the ratio of OpEx to variable cost? So to what extent you can save on cost in case of a sales decline?

So Stefan, do you want to say first?

Yes. Let me get started here. So obviously, we're not averaging these figures precisely. I think what helps -- with my talk, if you look into our P&L, as you see in our P&L structure, and if you see our gross profit structure, it does indicate that we have actually a high -- relatively high amount of material costs in our gross profit. I mean where we don't have a gross profit of 50%. And so again, there is a relatively high material amount in our gross profit. And obviously, if the demand was contract significantly, that we would not pay that much -- sorry, purchase that much material anymore. At this very moment, though we have another problem. We have the problem of getting material rather than delaying the supply of the material. But I think that's a good first indicator. And then it very much differs around the world. If you come to our functional cost, then it's changed really around the world. And here in Germany, where we have -- yes, the majority of our admin and function people, also R&D is predominantly in Germany. And in Germany, we have good tools from the government to support. If indeed we're running out of work, then so here can go with what's called short-time labor, where the government actually subsidizes the missing income for people. That has been a tool that's been used in the '08 or '09 crisis actually, yes, very successfully within Germany, call it, what I believe why Germany emerged so strongly after the crisis of '08 or '09. And this tool has been rolled out already again here in Germany. And we have -- we did come through an agreement with our workers' council, actually in record time, within the day, on a new, of course, the content. It seems fine down in Germany. So a contract between the management and the workers' representation here in Germany for this tool of short-time work. We don't have to use it at this very moment. We have people going to use that bank hours when we don't have enough work. So we have lots of bank hours. So we're actually pretty flexible in our labor cost structure. And again, if you look into our cost and there is a pretty significant material costs, which are flexible.

Any idea of what the SG&A cost might be variable, 10%, 20%, something in that range?

I mean, again, SG&A is labor but obviously, what we have in terms of IT costs and things like that. So I just say, to give you a concrete number, I don't know exactly if we can put a bit more light or color around that. Obviously, we don't want to be -- give a precise number here, but maybe there's some other indications on your end on how to see that.

Yes. I'd like only to admit that, obviously, we are looking very careful on our spending side. So meaning what investments we really will release right now and start and what we will spend on projects we are running with companies who advise us. So there we are very careful, obviously, in the cash out saving mode, so to speak. But all in all, as Stefan already mentioned, the major bullet points are our material costs by far. Second one is personnel costs and where we are good, prepared, let us say, in these words. That still depends.

Okay, fair enough. And then on the automotive business, do you see them, taken all the segments, on metrology, laser systems and in automation goes, there are kind of one customer who, more willing to discuss on new projects than others? Or are all businesses are clearly impacted at the current point in time?

That's hard to say at the moment. We see clearly an impact in meteorology, where we hear again and again that our sales reps are not allowed to enter the premise of the companies. And as a matter of fact, just this week, there was a shutdown in Europe. They don't even go to the customer anymore. So demonstrating product is impossible at the moment and visiting customers is impossible at the moment. In the Prodomax, in the automation business, these are often longer-term negotiation. I mean, they didn't go out every day to knock on customers' doors. So at the moment, that business seem to be okay, but that might change. At the moment, the projects they get, basically, they started negotiating a year back. That's how long it takes the time to actually close a contact for our automation businesses. So that's -- I would say they are the least affected, and laser processing is somewhere in the middle. But that's yes, got feeling at a moment, really because the development is so dynamic, it's pretty hard to be a bit more precise on that.

Okay. Okay. Good. My last question is on the development of the gross margin. I think it was 2 or 3 years ago when -- I think, it was in 2017, when there was -- you shared your expectation that gross margin should increase every year and then finally, somewhere in the future towards the 40% level. But actually, we saw a decline, even though it's flat, but it's a decline in gross margin by more than 100 basis points since then. So basically what went wrong? Or what's the explanation behind that? And then what's -- should 2019 has been kind of a trough, 2020 might be difficult to foresee, but should then turn towards a more positive development in the future next year and the year after that, so what's your view on that?

There's a fairly simple explanation for that, actually. The development in our gross profit is pretty much depends on our mix -- product mix. And with the addition of 2 of the automation business, Prodomax, Five Lakes and now also INTEROB, these are businesses that have a very different P&L structure. They're businesses with very low gross profit but pretty high operating profit, actually. And it's just that the nature of these businesses because they have a lot of third-party items, which they purchase, mark up and then sell on to customers. So again, if you integrate basically, we build a whole street for our car company and you purchase robots and a lot of additional stuff, and then you mark -- you put a mark-up on it, but you don't sell it sort of with the full gross profit, that would hit on the bottom line profitability, they are pretty high. So that indeed is the explanation for the development of the gross profit. The change in business model with the addition of Prodomax.

Well, anything within your other businesses that should kind of pick up certain trend over the next 2 to 3 years?

I mean, the metrology business is under pressure from a price perspective. That's for sure. So metrology, industrial metrology is under price pressure, which has a negative impact on the gross profit. But again, since we are an OEM provider, of course, we will continue to work on our gross profit. But for us, I think, the potential for savings is higher in the admin side and actually in -- with growth in the overhead coverage. So again, there is the Prodomax effect. That goes down gross profit, and there is price pressure for metrology, and I think what we should see in terms of, at least, in the future is the more we get software businesses, the more we get full solutions businesses like we do, for example, the Light & Safety already, and we want to roll out that type of business and then utilize that business model much more in terms of recurring revenue models and full solutions, additional services, additional software sitting on top of our infrastructure, on top of our hardware components, that should enlarge our gross profit.

The next question is from Richard Schramm of HSBC.

Yes. Follow-up on Light & Production. I'm not sure if I understood you correctly, but you said that the bigger projects you have there, more or less on hold, especially in North America, if that's right, which would go in line with the closing down of the factories there. So I think that would also affect the equipment side as well. And second question, I have concerning the weakness in China last year. Was there a particular reason? Or was it more the general economic environment there as China was heading already to slower growth last year, and therefore, was a bit ahead of the development here in the rest of the world? And would you think that this is a chance that they also then might come out earlier out of this mess and might help here to compensate a bit for weakness in other markets?

Thanks for the question. I'm not quite sure if I have said that the bigger project is canceled in North America. If I said that, then I apologize, but I don't think I have sent the message. The fact that Prodomax has larger projects, the shutdown of the car manufacturing -- of the car plant really starts the year -- sorry, [indiscernible]. So we have not yet seen the effect there. What we have seen is a long-term structural effect in the car industry, which, of course, we're all aware of, and the car industry has changed structurally, that's for sure. But I don't think that we have seen a decline in purchase. As a matter of fact, we have seen for Prodomax, still -- or rather an increase in outsourcing activities. The projects become ever bigger. The growth in Prodomax is not driven by more projects. They can only take that much. They could have taken much more but they can only take as much. So the growth is not driven by more projects, but by bigger projects, yes. Volume per project gets ever higher, which is an expression that the car industry ever more automating their production processes. And again, the shutdown of the factories in the last few days, the complete shutdown did not have much of an impact on us or for them. And now we come to China, which is part of your second question. In China, we have seen an impact, in particular, the car industry, in January-February, and to some extent, so now the challenges -- our challenges in China are predominantly driven by the challenges in the automotive industry. Do we believe that China can help or has also come out of this crisis already? Yes I do from what I hear from our Chinese colleagues. Things are normalizing there, and let's hope that the Chinese industry comes out of the gate strongly. And I think there is a chance that, that materializes.

The next question is from Peter Rothenaicher of Baader Bank.

Yes. One question on Light & Safety. So you mentioned this business is seen as more resilient, but don't you think that in these times the focus of the governmental organization is less on red light and speed control and therefore, this kind of orders might be postponed and no orders given?

Well, I mean, nobody knows, but I would not foresee that. I think when the administration are up and running, I think they will spend quite a lot of money actually on infrastructure project to stimulate the economy. And thus, I would foresee that the Light & Safety should actually see tailwind and stimulation from those stimulus packages once they go again. Of course, I mean, I don't have a crystal ball. I don't really know. But I would not understand why a jurisdiction would reduce its efforts to save lives on the road and its investment into infrastructure, in particular, with the huge amount of stimulus money that's going to flow around there.

Have you seen in the first quarter so far the bigger orders already?

No. I think, I mean, we're talking over the situation that has developed in the last 10 days or more. I mean, in China, it's not yet over. But you think back 10 days, who would have thought that the entire United States of America is going to be in a lockdown and shelter in place 10 days ago. So no, we have not seen yet the effect.

Yes. Then on the development in the semiconductor equipment sector, could you give us some information about the performance in the first quarter? What are your customers saying there?

Well, customers in semiconductor are actually still asking us to supply. Some are even urging us to supply a bit earlier. And I think that is because they want to be as resilient as possible to a disruption to the supply chain. Well, that all can change every day. And again, that's more on the sales side I refer to, not necessarily on the order intake side. But on the sales side at least, our semicon manufacturing customers are questioning and reviewing our pandemic plan and our preparedness for what has already come and are asking us to supply as quickly as possible. They are pretty good with management of supply chain essentially. And that's exactly what typically is their question on.

Then I think you mentioned so far that you have not applied for short time work. But if I hear about your comment on the automotive-related business, particularly on metrology, isn't it necessary here to react very quickly now?

Well, we are prepared. We have put all the equipment in place. We can switch it on every hour basically. So whenever we need to, we can switch it on. And I didn't say we don't do it at the moment. Effectively, it's only in very limited places [indiscernible]. Let's not forget though that the short-term labor is something that helps companies to clear through and survive a downturn. It's not an instrument to structurally change businesses. And we have already, at the end of 2019, put in place some initiatives to do structural cost takeouts. And we are managing very careful at what point it makes sense to go on what's called short-term labor here in Germany. And by the way, under a short-term labor regime, labor is reimbursed. We will be reimbursed by the government for the compensation of our workers. But in return, we cannot lay off people. So again, we're balancing that pretty carefully. We have no intention to go on sort of mass layoffs here. Don't get me wrong. But we manage it very carefully because we can do that also to structurally improve our cost position in some of our businesses. And that's nothing to do with corona. Please don't get me wrong. And really, please, please, please, we do not want to create the impression that we're taking advantage of what is really a disaster situation. We have put some measures in place and projects running actively already, already in the beginning of the year. There was no discussion about corona in Germany.

And then again with regard to Prodomax. So as the OEMs are definitely having a strong focus on liquidity, don't you see here any major risks of order cancellations?

It's just hard to see or hard to really tell. Midterm, at least, I would think that if they want to survive, they need to automate their businesses. That's what we have said like a mantra throughout the whole of 2019. And automation is something that all the major car companies are using more and more and more. So I would think it's probably not the case that they're canceling orders on that. To what extent the liquidity issue comes into play is, for me, really hard to judge. And in terms of also, just to be honest, what extent stimulus packages around the globe brings liquidity back to car companies. So please understand, I really can't actually answer that question with any more precision than what I just tried to do with the color there that I could put around it, but anything else would be speculation on my end.

And my last question is on HILLOS. You mentioned that your negative sales impact in the current year would be around EUR 20 million. How big is then the impact on EBIT that is then being transferred in terms of the financial result?

Look, I mean, we don't disclose that. But let me just say, HILLOS is not the most profitable of our businesses. Okay.

[Operator Instructions] The next question is from Craig Abbott of Kepler Cheuvreux.

Can you hear me?

Yes.

Yes, we can.

I have 3 remaining questions, please, and they're all related to the Light & Optics division. The first one is, I just wanted -- a technical question still. I just wonder how much of that very large order that you received in Q4 2018 is still in the backlog to be worked off this year. Secondly, obviously, your health and life sciences actually today are still a relatively small percentage of the group. But might this then actually benefit in the crisis as you have more, see more testing systems in use? And then thirdly, on the supply chain, you mentioned that overall you're not yet concerned, although you see some potentially bottlenecks. And I remember the last couple of years, you had, anyhow, some shortages in this key input product for most of your optics production. And I forget the scientific name, but I just...

[indiscernible]

Yes, exactly. And this is a pretty, obviously pretty critical material. And I just wondered how your supply chain there looks.

On the content flow side, that's almost like the easiest question to answer. We still get supply. Thank god this is far away. It's in the same city. We get it from our neighbors. But of course, if their production is going to shut down or has to shut down because they get COVID-19 cases and then they'll have to go in isolation, that we don't know. But at the very moment, that's not the case. First question has been on our life sciences.

No, no.

Long term...

The order from Q4 2018, how much have you done so far?

Okay. First, just on the top of my head, it's -- the order was for around 2 years' worth of supply. So probably half of it still in the backlog, but I can't really give you a precise number simply because I don't know. I mean, but I think it was for around 2 years.

Yes. The current run rate is around 50%. We are in negotiation concerning some request of our customer, technical points, but it's around 50%.

Around 50%. And the last question around life science and biopharma, not short term because the optic or the testing kit that has broad molecular test, there is no sort of optical testing for SARS-CoV-2. Those are as far as I understand molecular and PCR test which are non-optical tests. We do have some, yes, tailwind, if you want, for our thermal imaging cameras. There is an initiative to see if we can build more thermal imagers to use in the monitoring of temperature of people before entering buildings. That's an initiative that's going on that we obviously support. We also are in close contact with the industry association authority of Germany to see if we can expand our production capacity to help in producing medical supply. But there is no short term possible or no short term larger stimulus in our Light & Optics business on that, probably going to see the thermal imagers.

Isn't that immaterial?

The thermal imager, so basically, I think already counted, but that's not really huge. It's just building the same.

Just one quick follow-up, please, on that regarding the comment you and Schumacher made on the big semi order. You mentioned that you're in negotiation with customer on technical reasons on that because there's been disagreement or because the customer simply has requested further additional upgrades or something.

No. We're not disclosing those discussions at the moment. Sorry.

The next question is from Michael Junghans of Commerzbank.

Yes. I have a couple left of them on the table. First, I go then through one by one. The first question I have is on VINCORION. So could you put a little bit more color on how your business in VINCORION with the railway and aircraft business has developed in Q1? And in addition, how much of your very good Q4 order intake with VINCORION shown here actually did come from the defense industry? And then thirdly, how sustainable do you see the high margin you received in VINCORION sustainable for 2020 out of the COVID-19 outbreak?

Thank you for your questions. Railway and aircraft is an interesting one. The aircraft and railway business, the challenge is, of course, more around the services. The aircraft that doesn't fly doesn't need service. And therefore, that's a bit of a challenge. Same goes for railways. Some railway provider might say, we don't service our equipment that much. I don't think that's a long-term effect or deep effect, but it might have an effect on the demand of those 2 businesses going forward. To the margin question, it depends very much on the mix. VINCORION's margin is, like many of our businesses, actually, very mix dependent. In 2019, we have had given the permission relatively late, nevertheless, to sell -- to ship power supplies. And those products have a fairly high profit margin for us. So gross profit depends on the margins -- sorry, gross profit depends on the mix as much as gross profit margins depend on the mix of products. And therefore, to say, in 2020, 2019 has been pretty high because we had a rich margin product mix.

Okay. And do you -- I just wanted to have a follow-up. So did you -- currently the order backlog for VINCORION has. And do you think you can achieve this high share of Patriot project in 2020, again, like in 2019 or would you say that you would see a little bit of a lower level in 2020?

Look, we don't want to give detailed guidance on the gross profit of individual divisions, please do understand. We don't want to give guidance. Overall, we have a hard time to give any guidance at the moment, let alone to get into these details really. That's really hard for us to tell unfortunately.

Yes, sure, I fully understand. Just last question, on VINCORION, the share between defense industry and aircraft, railway in Q4 in terms of the Q4 order intake, how large was this roughly in terms of defense?

Again, we don't separate in our reporting between the defense and the rest of the businesses. Overall, the share of defense is around 55% to 60%. The rest is railway and aircraft. But that's by margin. We don't report that per quarter.

Yes, fully understood. Okay. Then I have a couple of questions left here. One question on that in production. So I just want to get back to the situation in the automation integration vertical here in terms of your INTEROB. How is the lockdown kind of affecting INTEROB at the moment? So because what you could see in the press news is the local government of Spain, they imposed a complete shutdown, lockdown of the country. So is there currently any impact on INTEROB at the moment?

Yes, here again, the situation is very dynamic at the moment, we can still communicate to INTEROB, but they are on home, in home offices. And the good thing is that their office is not in Madrid, but they're really in the countryside, sort of in the middle between Madrid and Bilbao. And that place is not as much affected. At the moment, it's operating, but of course, that can change anytime.

Okay. So is it realistic to assume that you might see -- there might be the risk that the automotive customers in Spain, they would ask you to -- that they would ask INTEROB to postpone the deliveries? So they would ask for push out of deliveries. So assuming that the COVID-19 impact at the moment would not improve over the next months.

Again, I simply don't know.

Yes, fair enough. Okay, fair enough. Then I have a couple of smaller questions left on Light & Optics. So currently, have you seen any slowdown with respect to your semiconductor business within lithography equipment in Q4 in terms of the order intake, what you received in Q4? And how is the business currently doing, so within your lithography business only currently in Q1 in terms of your intake?

By and large, litho is still going well. As I said earlier, semiconductor manufacturing business is still going well. Q4 order intake, again, has been skewed because the order intake that we did get in 2018, the large sum that we got in 2018 in Q4. The comparator Q4 '19 versus Q4 '18 is not a good one. It's skewed because of the -- to do with the project that we booked in '18. I hope that answered it.

Okay. Then Light & Safety, small question with the Light & Safety here, which you could read in the news there were some litigation issues you had with the traffic sales coming from Germany. And you can also see that your road safety business in Germany, there was some slight contraction in sales if you exclude the Toll Collect impact last year. So could you give us an update on the situation here with respect to these litigation issues at the moment?

Yes, sure. The world-famous commonwealth of Saarland decided to rule that they want companies to actually store the original data of a measurement. Now that's against what the federal bureau for measurements or something, that the PTB that they tell us that they put themselves more differently. And so we have a funny situation that there is a federal body saying, no, no, we don't want you to do that. As a matter of fact, we don't allow you to do that. And then there is a court in, a high court in Saarland ruling that you're required to do that. And in that moment, we are stuck. And we have originally offered to adapt our product and we have built a new software for that, but that the understanding of government contract, the federal body declines to accept that adapted software because they still are of the position that they don't want the original data to be stored for data security reasons. Now the situation is the following, all other German Bundesländer are up and running and several, really several courts have ruled that the federal decision is the higher one or the right one. It's just the country of Saarland that has decided to have another opinion. For us, that's not that much of a problem. Again, we appreciate all businesses. We appreciate the business that we would have gotten from Saarland. But the impact on our overall sales figure from the business, I don't know how many cameras we have installed in Saarland, but the impact on our total group business is not that high.

Okay. Then I have a few questions left, a couple of housekeeping questions. So you booked an impairment loss in Light & Optics of around EUR 1.3 million. What was the reason for that? And then the impact on the EBITDA coming from the IFRS changeover, I remember that the CFO mentioned the impact would have been around EUR 10 million. However, in the annual report, on Page 97, I read a figure of around EUR 12 million. So which one is the correct here? And the last question is in terms of your trade payables. The trade payables increased sharply to around EUR 84 million versus EUR 60 million last year. So will this normalize again to a lower level in 2020?

Hans-Dieter, I think those are questions for you. I'll point out that EUR 12 million is probably around EUR 10 million, but Hans-Dieter is clearly here to explain and he knows better than I do.

Yes, yes, yes. EUR 12 million or around EUR 12 million is the correct figure. It's EUR 11.59 million, yes. And the difference to the EBIT is the figure I mentioned because in the EBIT, it's only EUR 1.7 million. And so the missing part in the EBIT is the EUR 10 million. This is what I tried to explain. So yes, on the EBITDA side it's going to look like EUR 5 million is the amount, which is equaling to EUR 12 million. There was one question on the other amount?

Yes. And to the last question, the one question was in terms of the impairment loss you booked in Light & Optics of EUR 1.25 million. So what was the reason for this?

One point -- I know it's fairly in there.

EUR 1.2 million.

This thing was for machines. We have depreciation of machines.

12 machines.

Well, whilst we are checking, do you have another question. And then...

Yes, the last question, yes, my very last question is with regards to your trade payables. So they increased to around EUR 84 million this year versus EUR 60 million last year. So do you think this is going to be normalized again to a lower level in 2020?

I'll take payables. I mean, we did purchase a lot of material in Q4. We've had a very massive Q4 and that drove up our accounts payable. So depends on, again, on the timing of our sales. But in Q4, we had to revenue recognize a lot of sales which we had billed in the fourth quarter. We just assumed in the first quarter revenue recognize it and obviously that means we end up with accounts receivable and accounts payable in the balance sheet.

The next question is from Gordon Schönell of Bankhaus Lampe.

Yes. Dr. Traeger, you said that these times are interesting for strategic activities for Jenoptik. So are you referring to M&A activities? I mean, you already did one bigger deal. And I mean, in these times, cash is king. Yes, that would be my question.

Yes. Cash is king. That's always the case. And we're doing all we can to manage our liquidity. But on the other hand, yes, I think, again, excellent companies steer actively through the choppy waters and emerge even stronger on the other side. And we want to be a part of the excellent group of companies, if you know what I mean. I do think that some of the valuations in the marketplace that has been very, very, very high in '17, '18, '19 come down a bit after this one. Valuation of the companies affected as well. But I would think that once the capital markets reopen, at the moment, everything seems to be closed. At the moment, it's very, very hard to get the visibility. But I think once we normalize on a lower level, then assets become, again, a bit more attractive if the prices for assets become a bit more realistic maybe. I think our share is undervalued. I think we have a ways to go up, but I think some other companies, other interesting companies and assets, it could be an interesting point to actually intensify M&A activities once we have a bit more visibility on how things develop in the next few days at least.

[Operator Instructions] There are currently no further questions in the queue.

Okay. I know that we owe you one answer still, the gentleman from the Commerzbank, but Michael just would be well served digging into that. Maybe you can touch base with our Investor Relations department and they can take it up in an individual call with you, if that's okay with you. And we will certainly try to deliver the answer as soon as possible. So our Investor Relations department will follow up in an individual one-on-one probably. I hope that's okay. Okay. Other than that, again, thank you for dialing in.

Stefan, excuse me, can I answer the open question concerning this impairment, the EUR 1.2 million in Light & Optics is concerning a site in Berlin where we decided to not go ahead with the business and we depreciated fixed assets to 0.

Ah, now I remember.

You know the famous project. You know the project, yes?

Now I know. Yes, I know the project. I remember that.

And it's one R&D project which we also took down and wrote off. So in total, it's EUR 1.2 million, excuse me, but I took a longer time to research.

It's good that we know. It gives us the chance to point out one, actually, to pick up on that point. What you see there is that already in 2019 we prepared ourselves for quite some initiatives for structural cost takeouts in the business and for structurally making our business stronger. And part of that, some of these initiatives do include product line pruning. Those of you who have been with us at the Capital Market Day will remember that we had pointed out that we can really do that, other than VINCORION and now HILLOS. There are also other smaller businesses and smaller product lines that increase complexity for our business and are, from a strategic point of view, let's say, not necessarily stars in the portfolio. And we have taken measures already to prune some of our product lines, to prune the product portfolio and grow those products that have a good position in the marketplace, those product lines that have a good margin profile for us. And apparently, the EUR 1.2 million points to one of those products out of the portfolio where we believe that it's better to actually prune it and to, let's say, rightsize our product portfolio overall or optimize our product portfolio overall. We will use 2020 as a year to make our business even better structurally. We have put these projects in place already in '19. It's not something that's being driven by the corona crisis. And again, let me point out, I don't want to be cynical. We have no intention to sort of utilize the disaster that we all see, but we have put plans in place already in the last few months and weeks, and we fully intend to execute on them as much as possible in the crisis. Takes me back to the analogy of ships that, those who steer actively through choppy waters might be, there's a handful, once the storm calms down. And we fully intend to be one of those. So we intend to pursue our strategy. We believe it's a good strategy, is a sound synergy. We have a good balance sheet. Of course, we will not be reckless. We know that the crisis might be severe and we manage very closely at the moment, really almost by the hour. We're in touch with our banks. We're in touch with our customers. We're in touch with our suppliers. But given the structure of our business, we're actually hopeful that once this crisis is over, we'll emerge even stronger on the other side. Thank you very much.