Kendrion N.V. (KENDR) Earnings Call Transcript & Summary

Good morning, everybody here in the Novotel and on the webcast. Welcome to Kendrion's Q2 and First Half 2020 Results Presentation. My name is Joep van Beurden, Kendrion's CEO; and with me here is Jeroen Hemmen, our CFO. First, this morning's agenda. I will give an update regarding the COVID situation at Kendrion, both in terms of how it has affected our employees, and some context on what happened in both the Automotive and Industrial markets in which we operate. Then Jeroen will review the Q2 and first half 2020 results. I will then take over and give you an update to the progress we have made operationally. Next, I will discuss the outlook for 2020 and go to Q&A. Now as to Q&A, because of COVID, we created the opportunity to ask questions not only here in the Novotel, but also for those attending this presentation virtually. This requires that you actively move the cursor on the screen of your computer and then ask your question, pop-up will appear at the bottom, on the right side. You can click on this block and submit your question. When submitting the question, please state your name and the company you are representing. Before we start with the presentation, I would like to draw your attention to the following. Certain statements contained in this presentation constitute forward-looking statements. These forward-looking statements rely on several assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside the company's control, that could cause actual results to differ materially from such statements. First, the COVID update. Our priority in dealing with the pandemic is the health and safety of our employees, their families, customers, suppliers and all other stakeholders. And to safeguard the group's continuity to ensure that we come out of this pandemic stronger than ever. We've established a broad range of measures to protect the health and safety of our employees. Our employees are working from home as much as possible. In all our production facilities, we have strict separation between shifts with professional cleaning and disinfecting of relevant surfaces as the shifts change. Our canteens are closed and we measure employees' temperature daily, use of face masks is mandatory for all. And in Europe, the return to the office after the holidays is only possible with a negative COVID-19 tests or after having worked from home for a 14-day period. We have a global weekly COVID-19 call and other frequent communication within the company to keep reinforcing our health and safety measures. All this has been in place as early as March, having basically copied the measures taken in Suzhou and Shanghai. And they're still in place in all Kendrion facilities around the world. So how has the pandemic impacted Kendrion employees so far? We've had 9 infected colleagues, 7 of which have fully recovered and 2 who are recovering. Of the 2 recovering employees, 1 is hospitalized and both are doing well. Fortunately, we've had no COVID-related fatalities. In no instance has a Kendrion employee infected another employee, and we've been able to continue production in all of our factories in a safe and responsible way, and we continue to deliver to our customers around the world. Next, a few words on the pandemic impact on the markets we operate in to provide some context in what business environment we've been operating, starting with Automotive. As is visible on the slide, the global sales and the production of passenger cars have been severely affected in the first half year of 2020. In Q1, as we reported at our Q1 results, China was hardest hit, but in Q2, especially in April and May, when most of Europe and the U.S. were on lockdown, the disruption moved west with the virus. At the same time, China experienced a so-called V-shaped recovery with volumes of passenger cars sold back at pre-pandemic levels. With Kendrion's exposure to the European passenger car market, this has had a significant effect on automotive revenue levels in Q2, on which Jeroen will shed more light. China mitigated some of it. Next, let's look at the Industrial market. In Industrial, we are active in more than 30 segments. We have found over the years that the global purchasing manager index provides us with a good proxy on how these segments on average perform from a revenue perspective. And as a reminder, an index above 50 signifies an expanding market; below 50, a reduction in activity. This slide takes us back all the way to 2006 and indicates, for instance, what happened during the financial crisis of 2008/2009. It is obvious from the graph that in terms of the index, the lower activity level as a result of COVID has indeed been unprecedented. Clearly visible is the V-shaped recovery in China and the significant recovery in Europe and the U.S. when the economies reopened by the end of May. All in all, the industrial segment has been more stable than automotive with especially Industrial Brakes and China performing better than originally anticipated. Industrial is now roughly 50% of the group; and China, well over 10% of our revenue. This fundamentally changed profile has helped us weathering the storm caused by the pandemic, which leads me to the business review. Jeroen, over to you.

Okay. Thanks, Joep. So good morning also from my side. In the next 4 slides, I will present the financial review of the second quarter and the first 6 months of 2020. So as anticipated, much of the second quarter was guided by the effects of COVID-19 on our operations, our revenue and of course, our response to mitigate the impact as much as possible. Our revenue decreased 22% in the second quarter and organically, so excluding the contribution of INTORQ with 34%. The hardest hit area of our business was Automotive where most of our customers in Europe and the U.S. had shut down their operations in April and May and car sales significantly impacted by lockdowns around the world. The industrial activities in some segments within automotive, such as agriculture, were less affected. China recovered sharply from the first quarter and reported 13% year-on-year growth and 63% higher revenue compared to the first quarter when it's faced this main impact from COVID. The changed composition of the group, as Joep mentioned, with the Industrial segment now representing 50% of the group, had a positive impact on our added value margin, which increased more than 3% in the second quarter. In response to the COVID-19 crisis, we were able to reduce our total staff and other operating costs with EUR 8.9 million or 23% on an organic basis. Strict cost control, restructuring measures executed in previous quarters and temporary measures such as short time work and a voluntary salary reduction contributed to the lower cost. Lower cost and a better margin structure ensured that we were able to realize a 9.5% EBITDA margin in the second quarter despite the significantly reduced revenue. When looking at the first half year, revenue decreased 10% and 23% on an organic basis. Lower cost, better margin structure and a strong contribution from INTORQ mitigated the profit impact of lower revenues. INTORQ performed ahead of expectations and contributed EUR 1.9 million to group profit over the first 6 months of 2020. In the first half year, we incurred a total of EUR 1.6 million one-off costs that have been normalized in the results. The one-off costs include EUR 500,000 acquisition costs and EUR 1.1 million restructuring costs related to cost savings, mainly in Actuators and Controls and the realization of synergies in Industrial Brakes. Now I will continue with some statements about our free cash flow and financial position. So despite the difficult market circumstances, normalized free cash flow, before acquisitions in the first 6 months, was ahead of last year. Cash conversion in the second quarter was good with EUR 4.7 million free cash flow on a normalized basis. Working capital decreased with 24% compared to the end of the first half of 2019 and will be a continued area of focus. Capital investments for the first 6 months ended 23% below depreciation as we continue to prioritize those investments that are needed to project current and future revenue. Our leverage ratio, based on the definitions in our loan agreement, ended at 2.6 against the financial covenant of 3.5. And the availability under our committed credit lines was EUR 54 million as per the end of June. In June, we repaid, as planned, a EUR 20 million bridge loan facility related to the acquisition of INTORQ, and almost all of the remaining credit lines are committed until the summer of 2023. We have reached an agreement on key terms with our banking syndicate for increased leverage ratio covenants going forward. Although Kendrion is operating well within its existing covenants based on the current performance, the new covenants structure is intended to ensure that we will continue to be able to execute on our long-term strategy also in case of unforeseen circumstances as a consequence of COVID. The new financial covenants will peak at 5.8 in the first quarter of 2021 before gradually decreasing to 3.25 as from the end of 2021. In deviation of the existing covenant, the IFRS 16 lease obligations will also be included in the definition of net debt. Some additional restrictions will apply, most important of which are the inclusion of a minimum liquidity covenant and on distributions allowing for dividend payments as long as the leverage ratio does not exceed 3.25. Although we withstood the shock of the COVID-19 crisis, we are pleased to have been able to increase our financial buffers. Now I will zoom in to the Automotive segment. Automotive revenue was impacted severely by the shutdowns of our customers, especially in April and May. Revenue showed a strong recovery in June, albeit still below pre-COVID levels. Automotive has shown resilience and was able to significantly reduce its costs primarily by making full use of government-supported measures, such as short-time work, in all our European plants. Total cost in Automotive were EUR 8.6 million lower compared to the first half year of 2019. Around EUR 4 million of this relates to contributions from short-time work facilities in various locations. Also, the EUR 3 million annual structural cost savings realized at the end of 2019 contributed to the lower costs. EBITDA in Automotive ended EUR 7 million lower than last year at EUR 7.6 million with cost savings mitigating a substantial part of the EUR 38 million lower revenue. Despite all measures to protect our cost and cash position, investments in Automotive slightly exceeded depreciation as we continue to invest in production lines for future revenue. Then over to the Industrial activities. Industrial increased revenue with 19% on the back of the INTORQ acquisition. Excluding the contribution of INTORQ, revenue decreased 14%. Industrial Brakes faced limited impact from COVID-19 in the first 6 months of the year and had a strong contribution from INTORQ, especially in China, where IB benefited from strong demands for its wind power solutions. In Industrial Actuators and Controls, some segments, such as textile, machinery and aerospace were significantly affected while segments such as the medical industry and infrastructure were more stable. Despite the unfavorable market circumstances, the EBITDA margin increased to 14.5% compared to 13.1% one year earlier. The step-up in profitability was due to INTORQ performing ahead of expectation as well as a EUR 3.4 million lower cost in Actuators and Controls and the former IDS business units. This concludes the business review, and I'll now give the word back to Joep on the -- for the operational update.

Thank you, Jeroen. So let me proceed indeed with the operational progress that we've made in the first half of 2020. On September 10, during our Capital Markets Day, we will provide more insight on the strategic direction of the group, including updated financial targets. But let me first remind everybody of our so-called strategic house. This is also the way we communicate about our strategy internally. The top of the building indicates our strategic intent. We aspire to continuously grow revenue and profitability in a sustainable way, with a lean and focused organization and to provide a top-quality work environment to our employees. As mentioned, linked to these are our medium-term strategic objectives, which we will update on September 10. So how do we underpin this strategic goal? We support it with 3 pillars. The first is Automotive, representing around 50% of group revenue. In Auto, we focus on growth and especially on the opportunity we see developing in actuators for Autonomous, Connected, Electrified Shared Mobility, the so-called ACES. The second pillar is Industrial Brakes, around 25% to 30% of group revenue and we now offer a full range of brakes and see ample growth opportunity in robots, both industrial and collaborative; in wind power; in elevators and more. Here, too, we focus on growth. The third pillar is Industrial Actuators and Controls, which is the merged combination of ICS and IMS. And here, the focus is on profitability and cash generation. Internally, we refer to this business unit as our cash engine, a deliberate choice of words and one I quite like. It's a cash engine and factually, not a cash cow, as we want this engine to keep generating cash and profits, focusing on selected industrial segments such as energy distribution, fluid controls and transportation applications. And then, of course, we have our focus on China, active in all 3 domains with the same intent: growth in Auto and Brakes, profit in IAC. As just mentioned, post the integrated INTORQ acquisition and after several years of strong organic growth in China, the profile of Kendrion has changed. In the metaphor of the strategic house, this looks like a stronger and more balanced structure, not dependent on any one vertical and geographically, more diverse as well. Let me now share some of the operational highlights of the past half year, starting with Auto. As seen before, when we look at the global production and sales of passenger cars in the Automotive segment, revenue has been under pressure. We have been laser-focused and relentless in using every tool we have to control our costs and absorb the revenue loss. In our view, this has been effective. At the same time, and I want to emphasize this, we have continued to invest in smart products for automotive, with emphasis on autonomous, connected, electrified and shared vehicles. We received new nominations for active suspension valves and we have also significant commercial interest in our sensor cleaning platform and Kendrion's acoustic vehicle alerting system, or AVAS products. When it comes to capital investments, revenue-generating projects have been the priority. And finally, our new global Head of Automotive R&D has started per July 1, 2020. So despite the difficult market and our strict cost control, we have been investing in our road map and our commercial organization to make sure we continue to fill our project pipeline. Let's look at Industrial Brakes. As Jeroen has mentioned, in Q2, the COVID effect on industrial Brakes revenue has been limited. Revenue came in ahead of original budget. Brakes were doing well across the board but benefited especially from strong orders in the wind power segment in China driven by government subsidies for clean energy. In China, our IB presence has been helped by the INTORQ acquisition. And speaking of INTORQ, the integration is mostly complete with the realization of the targeted EUR 2 million run rate for cost synergies, as per the end of 2020, on track. Let's move to Industrial Actuators and Controls. Also highlighted already by Jeroen, the impact of COVID on IAC was mixed in some segments like Textile Machinery and Aviation, revenue declined; in others like medical application and infrastructure, the market was more stable. There were also a limited number of supply chain problems in the early part of Q2, which has resulted in a greater-than-normal backlog. These problems have been resolved, and we are working to reduce the backlog. The integration of the 2 former industrial business units, IMS and ICS, is progressing well. Then before I give an update on the progress of our -- on our corporate social responsibility program, we will review China. China had a strong second quarter as its economy rebounded. It is now well over 10% of the group's revenue on the back of organic growth and the INTORQ acquisition. Current volumes of passenger cars sold in China are back at pre-pandemic levels. And in the second quarter, both revenue and profitability grew substantially compared to Q2 2019. We have a strong pipeline across the board in Automotive, Industrial Brakes and Industrial Actuators and Controls. We continue to invest in production equipment, our local workforce and supply chain. As travel is difficult in the world of today, the R&D training for our Chinese colleagues by our German team is now fully virtual. China continues to be an important opportunity for Kendrion and the key pillar underpinning our growth. Next, an update on CSR. As you know, Corporate Social Responsibility is an integral part of the way we do business at Kendrion. We strive to make substantial improvements in all 3 pillars that comprise our CSR framework: natural capital, social capital and human capital -- sorry -- yes, social and human capital and responsible business conduct. In 2019, we completed the 5-year CSR road map and started with implementation. When it comes to waste management, we target a 10% reduction of waste total compared to 2018. We continuously monitor distribution of hazardous and nonhazardous waste with a keen focus on hazardous waste. And these are materials like cooling fluid, old oil and the packaging of hazardous substances. And we also monitor and aspire to improve our recycling, the overall rate increased from 80% to 82% over the past period. Next, let's go to the outlook. As we all know, the global economy is severely impacted by the effects of the COVID-19 pandemic. We expect this to continue for the remainder of 2020 and possibly into 2021. And at the same time, we are optimistic. Medium to long term, we continue to see growth opportunities in our focus areas of Automotive, Industrial Brakes and China. Our product pipeline is healthy and the work on, and investment in future projects is continuing. I believe we've shown resilience, making full use of available cost saving and cash-preserving instruments. Our financial position is strong, and the covenant relief provides us with an additional above buffer in case of a second COVID wave or other unforeseen events. The medium and long-term outlook is unchanged and remains good for both the Automotive group and the Industrial activities. We're going to more -- talk more about our medium- and long-term prospects during our Capital Markets Day. This day will be held on September 10, 2020, at 11:00 a.m. Central European Time, in a similar format as today. We'll present a comprehensive strategic overview, including updated medium-term financial target. Thank you for your attention. Let's go to Q&A.

So we'll probably start with Q&A for the people present here in the room, and then if there are any questions online, we can go there as well. Maarten?

Maarten Verbeek, The IDEA. Firstly, you mentioned about the 3 pillars you had. I also thought that going forward, after the completion of the INTORQ acquisition, you would report through these 3 business lines. But still, I do see 2 business lines, Automotive and Industrial one. So am I wrong in understanding that at the end of the day, you would go to these 3 new divisions or will you stick to the 2 you report today?

You're talking about how we're going to report on this?

Yes.

Yes. So the plan is to -- starting next calendar year, that we will indeed start to report on the 3 pillars. So this year, in order not to break and make it all complicated, it's still going to be -- it's going to be Automotive and Industrial. We have tried to give a little bit more context already. But then from next year on, it's going to be Auto, IB and IAC.

And secondly, concerning the leverage ratios. You only mentioned 2 dates, 5.8 at the first quarter of '21; and 3.25 at the fourth quarter of '21. How will that develop over time? So next coming quarters, year-end, et cetera?

So next quarter will be 4.5, 4.7, 5.8 and then it decreases to 5.75 and to 3.9 and then back to 3.25.

China is today over 10%. Could you more or less give a feel what you reported growth was? Because it also -- it was helped by the consolidation of INTORQ. But also what the, more or less, the organic growth rate was of China? Ballpark figure.

Well, it's -- so first, when we started to talk about and focus on China, it was around 3% of group revenue. That has increased over the -- before we acquired INTORQ to around 6%. It's now well over 10%. Now of course, you have to take into account that China has a V-shaped recovery in Europe. Of course, revenue, certainly on Automotive, under pressure. So it is not -- it's skewed a little bit like that. But I would say through the cycle, in a more normal environment, you will say, it is around 10% of group revenue. But if you look at the growth rates in the pipeline, we expect that to continue over the coming years. So it is going to be a key element of our growth strategy.

But you can't attach a -- some kind of organic growth to China, what you have realized this year?

Well, so we're going to report on the 3 pillars. The complication, of course, is that China cuts through that. So we don't want to start guiding too many individual segments. So it will be guided per set, per pillar. But China is also represented in this metaphorical strategic houses is a strong supporter of the overall growth.

Could you give some color about what kind of -- how much of nominations you expect to secure this year? At Q1, you were pretty optimistic. Is it still the case?

So you've seen -- we always talk about nominations when we do the full year. And the past 2 years, both years, it was well over EUR 300 million. It means that if you look at the book-to-bill, that is a leading indicator for solid growth in the automotive segment. This year, our targets, you can well imagine, are not definitely deviating from that. It's interesting to see that we've talked about -- I don't want to be giving you the sort of score sheet, where we are now. But it is fair to say that if you look at the activity level, specifically in the areas of the car of the future, the ACES, despite all the pressure on revenues that -- not just us, but every player in automotive sees, this continues. And we also see -- continue to see very good opportunity in that segment to get to the nomination levels that we had last year. So I'm cautiously, cautiously optimistic. It's early days. We're halfway through the year. But I'm cautiously optimistic that we're going to get a third year of a good nomination result. But it's certainly not yet in the bag.

And how would you define a good year? Is that a book-to-bill over 1?

Pardon?

How do you define good? Is that a book-to-bill of over 1?

Yes. Definitely.

Okay. And regarding the nominations, could you give some -- bit more color on the suspension valve contract you secured?

There's not that much color to make. It's a substantial contract. You know we've been active in this area for a long time with, I think, a fair amount of success. I will say that active suspension, as a category, we've been talking about this for quite a while, is proliferating. So more and more cars. It used to be really for the real high-end Mercedes S-Class and things like that. But it is definitely proliferating, also driven by autonomous driving and cars that need to be ever more smooth. It's also a very important feature, a safety feature. Suspensions are extremely important for handling and for keeping a car on the road.

And this new order win, should I relate that to your CapEx outlook? Because according to me, you have raised your outlook at -- somewhat for this year?

No, this wasn't included. So indeed, it's somewhat -- but I would say it's, yes, in the same ballpark. That is not the specific reason for it.

Johan van den Hooven, Edison. A few questions about Automotive. If you look at the global decline in car production of 31%. It's a bit of a nasty question, but what is the reason that Kendrion's decline is larger? Is that product mix? Is that a difference in passenger car/trucks? So can you give a bit of information about that one? Also in the press release, you mentioned a positive impact, a mix effect on gross margin of Automotive, that may be agriculture, which you mentioned, which did well. But perhaps also some more information over there? And the EBITDA margin of Industrial was already quite strong last year, even stronger this year. Is there any government support impact there? And where is the limit?

I'm sorry. I was just on -- I was -- so the first question I got. The second was -- the third one. Can you repeat that, please?

Third one is about Industrial, the EBITDA margin, which was already strong and you discussed this last year -- was already strong, now even higher. Is there an impact of government support or --and what's sort of the limit what you can see in Industrial?

So just a few things on the passenger car. We showed the slide. I was just looking it up here. You're right. So if you look at down turning globally, it's around 30%. If you look at Europe, it's higher. It's 40%. There's always mix effects in these types of things. We are clearly more exposed to Europe than we are to other areas. So that is one explanation why it is slightly deviating. I will say, if you look at the accuracy of these types of analysis, my statement would be that we're following this reasonably accurately, taking into account where we are present from a passenger car side. Of course, there's other stuff we're also exposed to. Commercial vehicles, we're exposed to. Farm equipment, et cetera, et cetera. But if you step back, it is reasonably in line.

In addition, because the production is the first half year. And Automotive, in our first half year decreased 28%. So actually, we -- yes, are basically in line, even slightly better.

Yes. I think Q2, it is more in line with this number that is presented here. Jeroen, can you...

Yes. So I believe on the mix effect in Automotive. So this is indeed driven. In April, May passenger cars dropped tremendously, and that impacted also the product mix within automotive. So also commercial vehicles are somewhat hit, but we had some strong pockets. For example, agriculture would carry a little bit higher average added value.

Industrial? There was also a margin question, right?

Yes. Okay. Yes. So yes, I should not say that the sky is the limit, but -- so on your question on government contributions, that's what -- actually in Industrial, fairly limited. And so in total, we were able to save EUR 3.4 million costs, around EUR 0.5 million is, yes, short-time work contribution. Obviously, also the voluntary salary reduction we also had in Industrial. That contributed somewhat. And other than that, it was mainly driven by more structural cost measures. And yes, and so 14.5%, our long-term target existing is 15% EBITDA margin, and I would expect that in the long run, when the market returns, that in the industrial area, we should be able to do much better than that.

Any questions online or any further questions here?

Online, yes.

Yes?

I have 3 questions that came via the webcast. From Frank Claassen from Degroof Petercam. So you indicated that June automotive sales increased sharply versus April and May. Could you give an indication of how much automotive sales were still down in June versus last year?

So let me answer it like this. If you look at the slide that we presented on passenger car production and sales, without being too precise and making an interpretation on the exact numbers, it follows this pattern reasonably closely. You can see, for instance, in China, in Q1, a sharp reduction and then full recovery actually in the 3 months, even a little bit more than a full recovery. We see exactly that and it's very similar in Europe and in the U.S.

Okay. I have another question, again from Frank Claassen from Banque Degroof Petercam. On your lower cost base in Q2, could you indicate how much is roughly due to the structural measures? And how much due to COVID-related temporary measures? How much additional cost savings can we still expect in the rest of 2020?

So on the -- in the second quarter, the structural cost measures last year, we realized EUR 5 million cost savings fully to be realized within this year. In the first quarter, we realized an additional -- in the first and second quarter, we realized an additional EUR 1 million. And then at the end of the year -- so we also started to realize some of the synergies within Industrial Brakes. So within the second quarter, the contribution of that was a little bit less than EUR 2 million. And for the full year, the total cost savings from structural measures for this year is EUR 7 million and then that includes EUR 1 million of the -- around EUR 1 million of the estimated EUR 2 million synergies and the remaining EUR 1 million of the estimated EUR 2 million synergies will then follow in 2021.

Okay. Some more questions again from Frank.

Okay. That's fine.

What kind of impact of COVID have you seen on the signing of the new orders in your existing order book? Have you ever noticed any push-outs of orders or postponements of orders?

So I would say in Automotive was the nomination and the call offs are related to the actual production we just talked about. And we follow that. When it comes to the projects and new design-ins, specifically, when it's -- when we talk about autonomous, electrified driving, all these technologies like audio or AVAS, like smart suspension, like our cleaning sensor platform, the activity level there is, if anything, up, but at least the same as what we saw before the COVID pandemic. So I think that's a good leading indicator for the world post-COVID. In Industrial, it's effectively a little bit similar. You have -- the projects there typically run longer. Call offs are related to activity levels. So if you look at the Purchasing Manager Index, and you see that, for instance, in China, but also in Europe, the index is recovering. That is a good indicator of what we can expect in terms of the order patterns in Industrial.

Okay. So no more questions from the webcast. Here in the room?

Yes, Maarten. Maarten has a question. Yes.

Maarten Verbeek, The IDEA. Did you also make use of governmental support regarding delay of tax payments or whatever?

Yes. So we did. In Germany, our most important country, we delayed VAT. So that is around about -- it depends obviously, on revenues, but EUR 500,000 per month. And that is then due, normally, at the end of this year. So there is a temporary benefit from that. And we -- everywhere decreased our -- and suspended our prepayments for the corporate income tax that will not really return because, obviously, in these -- yes, with the profitability levels as we currently have due to COVID, the tax payments will anyhow be lower.

And with respect to the Kurzarbeit, will you also make use of that in the next coming month?

Yes. In principle, maybe a few words on that on short-term, Kurzarbeit in Germany. That's a time-tried and tested mechanism that has been in place in Germany for a long time providing, I think, very good flexibility in terms of temporary crisis and stuff like that. So it's an existing system that we know well, and we make maximum use of. The current system or the exist system is such that once you are in the short term, the Kurzarbeit regime, you can use that for 12 uninterrupted months. So it is not expected to be out of the toolbox anytime soon. And we continue to use it to its full capacity, making full use of the flexibility that it provides us.

Okay. Can you say anything about the inventory pipeline, both in Automotive and in Industrial?

Inventory?

Inventory part, yes.

Inventory pipeline or...

Inventory at your customers or have they really brought it down to very low levels or...

That is always extremely difficult for us to get a grasp on. So I don't know. I cannot really say. So obviously, what you see is that that's the OEM numbers that were presented by Joep. And so our revenue is slightly behind on that. And so in March, you saw it tailing off quite a bit, while our March was still reasonably okay. And we got the hit in April. But yes, especially in Automotive, the lead times are fairly short. So there are no huge inventory effects. But precisely, we simply don't know.

It's hard to know. But if you cast your mind back to late last year, of course, which is very long time ago, Automotive in 2019 wasn't exactly doing well, doing great. So there was some destocking going on then. You can argue that, that helps, if you like. The impression there -- Jeroen is right. We don't know. They don't tell us. It is very difficult to really gauge how much inventory is in the supply chain. But I do not have the impression that there is a massive overhang.

And then lastly, you have currently 5 projects within your lighthouse. Do you think -- or are you expanding that to new projects? Or is more the deepening and widening of the current projects?

No. In terms of those platforms, that we talk about them, and we'll give a bit more color also on the 10th because they are advancing. And we get a lot of commercial interest in talking about A and B samples. But there is a continuous quest and drive for more of these types of products, both in terms of what we do in-house, but also in conjunction with our customers. There is a bit -- there is a substantial change, but again, this is -- we'll talk a bit more on the 10th, that it used to be much more that a customer would request something and then we would basically, in conjunction with that customer, produce it. We are now -- our aspiration is to have much more platforms with modularity and more IP that we own. So for instance, on sensor cleaning on an AVAS, that you can take the fundamental same design and tailor it for your various customers. You can well imagine that has solid scale effects not just in the R&D organization, but also in production.

Two more questions, please. Johan van den Hooven. Perhaps I missed the announcement, but you appointed a new global Head of Automotive R&D?

Yes.

Is it just a replacement of the previous one? And if yes, is there anything changed in your market approach there? Second question, a follow-up of the question of Maarten about the suspension valves. Can you -- not so much a question about the order, how large the orders are, but can you mention the number of customers you have now for this product?

Yes. So first of all, on the R&D head. It's basically following -- it's a bit of a follow-on on the remark I just made. The way we think about R&D, we've created centers of excellence. We have -- there's a lot more emphasis, for instance, on software and electronics to make sure that the valves that we create can interact and interface with cars that become smarter and smarter. So it used to be much more mechanical and now, we're getting into true mechatronical devices that can actually interact with the car and the microprocessors that control the overall state of the vehicle. With that -- that's a new approach, if you like. Of course, we've been on this for a number of years that -- and our new head of R&D is from that world. And his task is to accelerate that and to reinforce and to make sure that, that is how we build our product road map along the lines of the 5 lighthouse projects that we have now. In terms of smart damping, let me not try to answer that because I haven't got all that detail in front of me here, but we are going to, as I said, on the 10th, when we talk much more about the long term, about the strategic of action. By the way, not just in automotive, but certainly also in brakes and in China, we'll give a bit more color on how we see that market, how we see that segment and what it is that we are going to do in order to make full use. It's a significant growth opportunity. I know we've talked about it for quite a few years now. It is absolutely coming together. We're beginning to win more. It used to be just [ Bilstein. ] The market is growing. The number of players are proliferating. It's quite interesting for us.

No questions from the webcast.

No more online questions? Not from Frank?

Not -- none -- not from Frank.

Okay. Very good. Well then, I thank everybody here on the webcast. And here, of course, physically present in the Novotel, for your attention. If you have any follow-on questions, then you know where to find us. Thank you.