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

Good morning, everybody, here in the Holiday Inn hotel. Very good to see you all and on the webcast. Welcome to Kendrion's Q2 and First Half 2021 Results Presentation. My name is Jozef Beurden. And with me here is Jeroen Hemmen, our CFO, although I don't see him in his seat yet, but I'm sure he will be here very shortly. First, I will present this morning's agenda. Welcome, Jeroen.

I was locked out.

First, I will give a brief update regarding the COVID situation at Kendrion and then Jeroen will review the Q2 and first half 2021 results. After which, I will take over and give you an update of the progress we have made both strategically and operationally over the past period. Next, I will discuss the outlook for the remainder of the year and then go to Q&A. Now as to Q&A, because of COVID, we created the opportunity to ask questions not only here in the Holiday Inn, but also for those attending this presentation virtually. [Operator Instructions] Before the COVID update, I would like to draw your attention to the following: Certain statements contained in this presentation constitute forward-looking statements, and 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. Next, 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. And although in most areas where we operate, the incidence rate of COVID is lower than, for instance, a quarter ago, the situation remains unpredictable with sudden clusters of cases emerging in a short period of time, and we, therefore, continue to enforce all our COVID prevention measures for as long as is needed. Now let's go to the business review. Jeroen?

Thank you, Joep, and good morning also from my side. So I will present the business review for the second quarter and the first 6 months of 2021. In Q2, we saw a further increase in activity level. The organic growth rate of 41% is, of course, driven by the low comparable revenue in the previous year, but also compared to the first quarter, our revenue increased with 4% with a higher activity level in all 3 business groups. Higher revenue also translated to a significant step-up in profitability with normalized EBITDA almost doubling to EUR 15.8 million, in line with the EUR 16.1 million in Q1. Our total number of FTE increased with 119 people compared to the end of Q1, which reflects the higher activity level and, therefore, required direct labor. It was not all good news in Q2 as supply chain constraints and the resulting order volatility continued to affect our businesses. On the 1 hand, this meant that -- this means that industries cannot fulfill the full underlying demand potential. And on the other hand, the resulting order volatility and raw material price increases leads to increased production costs. Although raw material prices are largely passed on in the supply chain, some impacts could not be avoided in Q2. The added value margin in the first half year ended 0.4% below the previous year, which is partially caused by a higher relative share of automotive revenue compared to the previous year and partially due to a time lag between increased input prices and the effectuation of higher sales prices in the second quarter. Our total staff and other operating expenses in the first half year were EUR 10.4 million higher than last year, when significant temporary cost measures were taken in response to the first COVID lockdowns. As a percentage of revenue, our cost decreased 2% to 35.8%. Also, compared to 2019, our staff and other operating expenses were still EUR 1.6 million lower as structural cost savings more than offset wage inflation. Despite the supply chain constraints and the temporary cost measures taken last year, our operational leverage was 25% in the first 6 months with an organic revenue increase of 22% leading to 46% higher EBITDA. The EBITDA margin improved to 13.6% in the first half year and the return on invested capital further improved to 15.5%. Then continuing to our cash flow and financial position. Free cash flow in Q2 was EUR 1.2 million, not far from the EUR 2.2 million in Q2 of last year despite EUR 5.5 million higher inventory levels, largely driven by the aforementioned supply chain constraints. Capital expenditure in the first 6 months amounted to EUR 10.1 million, which is below depreciation of EUR 12.3 million. Also, capital expenditure is affected by increased lead times for ordered equipment, but we do expect investments to pick up in the second half year, in part driven by the building activities in China. For the full year, we anticipate investments to exceed depreciation. Our net debt ended at EUR 112.7 million, which is almost EUR 18 million below the level of last year. The EUR 3 million increase compared to the end of Q1 is largely the result of the EUR 4.3 million cash portion of the dividend. On the back of the improved profitability, our leverage ratio further decreased to 2.1 from 2.3 at the end of Q1. Then switching to the business groups. First, Automotive. They saw their revenue increase with 29% at constant rates of exchange. Despite supply chain issues, the passenger car and truck markets show strong year-on-year growth. The long-haul coach market is still very much affected by COVID-19 with demand basically on the level we witnessed in the second quarter of last year. Although high order and demand volatility affected the automotive group, the EBITDA increased 69% to EUR 12.8 million in the first half year. The EBITDA margin ended up at 10.4%. Capital investments in automotive exceeded depreciation, mainly driven by new production lines and production line extensions. The China building investment is reported as part of automotive and contributed EUR 1 million to the total investments in the first half year. Both industrial groups benefited from a broad-based further improvement of market circumstances. Despite the continuing supply chain constraints also here, activity level is high as also indicated by the German manufacturing PMI that rose to 65.1 at the end of June. At constant exchange rates, the industrial activities increased 15%. Industrial Brakes saw the revenue increase with 15% to EUR 61.9 million despite a more difficult comparable with high wind power revenue in China in 2020 on the back of a subsidy scheme for wind turbines on land. Revenue in Industrial Brakes in the first 6 months also significantly exceeded the pre-pandemic level in 2019 when we include into on a pro forma basis. Revenue in Industrial Actuators and Controls increased 14% year-on-year. But here, the activity level is still somewhat below the level of 2019 with especially lower demand for applications for aircraft and textile equipment. EBITDA in the Industrial activities increased 35%, and the EBITDA margin further improved to 17.1%. Investments in Industrial are affected by longer lead times and were significantly below depreciation. We do expect also here that investments will increase in the second half year. That concludes the business review. And with that, I give it back to you.

Thank you, Jeroen. I will now proceed with an update of the strategic and operational progress we have made so far in 2021. As Jeroen just explained, I think that we can look back at a good first half of 2021 with revenues growing on the back of increased economic activity levels compared with those of 2020. In Q2, our underlying EBITDA almost doubled. And over the first 6 months, our EBITDA was 46% better than in the first half of 2020. I'm proud of the Kendrion team who have achieved this despite continued difficulties the COVID pandemic presents us with. And I'm excited about the acceleration in transition towards clean energy that we believe will benefit our 3 growth areas: Automotive, where we focus on the ACES, industrial brakes as it boosts demand for wind power robotics and various other segments. In China, where we see the same transition towards clean energy. Now let's get into a bit more detail. You probably know this picture, it's Kendrion's strategic house. The top of the building indicates our strategic intent. We aspire to continuously grow revenue and profitability by investing in opportunities that help society become more sustainable with a lean and focused organization and to provide a top-quality work environment to our employees. Linked to this are medium-term strategic objectives, such as our target to grow with at least 5% organically on average between 2019 and 2025. Underpinning this strategic goal are 3 pillars. The first is Automotive, representing around half 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, which is around 1/4 of group revenue. We offer a full range of brakes and see ample growth opportunity driven by the accelerating trend towards electrification. In robots, both industrial and collaborative and wind power and elevators in logistics and in more segments. Here, too, we focus on growth. The third pillar is Industrial Actuators and Controls, where the focus is on profitability and cash generation. We refer to this BU as our cash engine. We want this engine to keep generating cash and profits, focused on selected Industrial segments such as control technology, energy distribution, fluid controls, machinery and logistic 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. Let me now share some of the highlights of the past year, starting with auto in the past half year, I should say. As we all know, the Automotive market has been negatively affected by the pandemic. In this slide, IHS Markit illustrates by how much, year-over-year vehicle production in 2020 was 16% lower than in '19 at 75 million vehicles. And this is relative to 2019, which in itself was around 5% lower than 2018. According to IHS, it will take until 2024 before we return to the 2018 production levels, but there is a significant opportunity. The disruption in especially passenger cars triggers significant and ever growing investment in new technology at all large OEMs and Tier 1s, and especially the investment in software and electronics capability is striking. The size of this opportunity is illustrated by the next slide, looking at electrified vehicles. Here, we look at a number of battery electric vehicles and plug-in hybrid vehicles. As is clear, the growth of both classes of electrified vehicles has been and is projected to remain strong. In fact, these numbers represent an annual growth of over 40%. As a proportion of total vehicle production, the share of electrification is expected to raise from less than 3% in 2019 to over 11% in 2023. It's therefore not surprising that all major OEMs and Tier 1s are investing heavily in this. And we too have been investing relentlessly in our product road map, our commercial organization and our software and electronic capabilities to make full use of this important trend. A few more words on this. The transition towards the ACES keeps on accelerating supported by several significant government initiatives. For example, the Biden administration calls for $100 billion electric vehicle rebate program. The German government has announced it is targeting up to 10 million battery electric vehicles on its street by 2030. All major OEM and Tier 1s are investing heavily in the ACES. Daimler has launched the all-electric EQ Series. Volkswagen is expanding its successful all-electric ID series and GM has announced plans to introduce 30 new fully electric models by 2030. To enable all this, the software and electronics content in all vehicles keeps increasing significantly. Volkswagen is mapping out a software-centric future with its own operating system and software upgradability and over-the-air update is seen as critical features of future cars, which determines the overall architecture of how a car is designed. In summary, the internal combustion engine is being superseded as the beating heart of a car by the electronics that control safety and infotainment systems. This is a significant transition in which software and electronics are a major component of the vehicle and carmakers will have to become more like technology firms and Kendrion aims to be part of this change. Operationally, we made progress in the first half. Here's a few examples. The design wins of our AVAS Sound PHANTONE platform continue with 2 global OEMs selecting our latest platform release. The production ramp of these wins is planned for the second half of 2022 in China and in Europe. Our unparalleled sound experience and PHANTONE's strong cybersecurity feature are key differentiators for us. On the sensor cleaning front, we signed a partnership with a leading Tier 1 to develop a turnkey sensor cleaning team -- sorry, sensor cleaning system. This product is expected to be in production from 2024 onwards with autonomous driving cars level 4 and 5 as the main target market. For this product, we experienced strong industry interest from OEMs and from robo taxi developers. Now before we go to our Industrial business groups, let's look at the economic climate there. Jeroen already referenced this. On this slide, we see the German manufacturing index as reported by IHS Markit. And as you can see, the confidence level of the purchasing managers is high, well above 50, which indicates growing economic activity. In fact, it's even higher than in 2018, which was a strong year for the Industrial segment. We do see that in our order patents as well, although demand is held back somewhat by similar supply chain constraints as in Automotive. So let's look at Industrial, starting with Industrial Brakes. Operationally, we have aligned and unified R&D organization globally to achieve more focus in our development efforts, and we managed to maintain excellent customer satisfaction ratings as we kept our high delivery performance despite all the issues in the supply chain. On the product side, we continue to expand our existing product portfolio to serve the opportunities created by the broad electrification trend. For example, we expanded our product portfolio for winter turbines. And this has led to even better market traction with several successes with both existing and new customers, and without being too specific about those successes as our customers typically do not like to be mentioned. Our commercial strategy is to combine our global presence, unified product road map and the central R&D organization with a regional growth strategy and this has led to a series of successful project wins in a range of growth markets. We see substantial opportunities in robotics, in automation, in wind power, intralogistics such as AGVs, industrial trucks and in medical application. All in all, also as evidenced by the revenue growth in IB, a strong first half for IB with ample opportunity for further growth in the pipeline. Next, IAC. IAC is active in around 30 different product market combinations. One of the tasks for IAC's management is to invest in those segments that offer potential for growth, while ensuring the other segments are optimized for profitability and cash flows. These segments, just as in IB, vary per region and we operate globally but take full advantage of regional market opportunities. On the actuator side, we started production for industrial locks for devices like PCS testers, freezers, centrifuges, et cetera. And we see growth in medical equipment like dialysis and anesthesia equipment. In logistics, machinery automation and electrical distribution. We also enjoy strong momentum in our control products. Here, we launched a new drive controller for automated guided vehicles and provided inductive heating samples for applications like industrial ovens, coating and embossing. Like in Automotive, the importance of capabilities in software and electronics becomes ever more important. Before we move on to an update on our progress on corporate social responsibility, let's have a look at China. In China, we continue to grow during 2021, and our nominations continue to be higher than the size of the business. As in Europe, we see a significant opportunity in Industrial market driven by the same electrification trend strongly supported by China's 14th 5-year plan. For China's high-speed railway, we will produce the main circuit breaker system for the AC system and wind power robotics and motion control continue to enjoy significant momentum as well. To accommodate all that commercial opportunity, we are building our own factory in Suzhou. Here, you get an impression on our planned facility located in Suzhou's Industrial Park, or SIP. SIP Is recognized as the most high-tech area in Suzhou and is the premier location for technology and advanced manufacturing companies there. In Phase 1, we plan to build more than 27,000 square meter with the possibility to later add another 16,000 square meter in Phase II. For this project, we are receiving strong support from the Suzhou local government who have granted us favorable conditions for 30 years of land use rights. The building, including a fully automated warehouse has been designed with final approval by the local government expected soon. This means we expect to be breaking ground in the next few weeks to move in by the second half of 2022. Final point. As you can see, we are planning photovoltaic panels on the roof and expect to generate 1.1 megawatt hours, which should cover up to 60% of our internal energy requirements, which brings us to the progress we made on our CSR program. 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 and human capital and responsible business conduct. When it comes to our product portfolio, we aspire to develop products that will help to either keep you safe that reduce climate impact or improve health. And with our focus in automotive on the ACES, with our brakes helping to further enable electrification of many Industrial segments, and with the opportunities we have in medical in IAC, we feel we are well on our way. Our goal is not just to create sustainable growth, but to grow to help sustainability. As we do every year, we zoom in on a specific theme that is part of our 5-year sustainability plan. And for 2021, this theme is diversity. On the back of a detailed analysis in 2020, a special team is implementing our diversity framework with as its goal to improve Kendrion's diversity step-by-step over the coming years. And this includes specific initiatives such as unconscious bias trading and targeted recruitment efforts to get Kendrion as diverse as is possible. We know we continue to have to work on this and on other sustainability goals, but we're making good progress towards our 2023 sustainability targets. Next, let's go to outlook before the Q&A. Over the past 6 months, the global economy has improved and underlying demand is strong in both Automotive and Industrial. Having said that, we do expect the constraints in the supply chain and upward pressure on raw materials to continue. Longer term, the broad-based energy transition towards electrification is advancing and even accelerating, driving growth opportunities in our focus areas of Automotive, Industrial Brakes and China. These positive business fundamentals drive our business with as our main objective, delivery of sustainable profitable growth or, in CSR terms, to deliver growth to help sustainability. Therefore, our long-term outlook is unchanged and remains good for both the Automotive Group, our Industrial activities in China. Which brings me to our long-term targets as announced in September 2020. Over the past 18 months, I believe we have shown resilience, making full use of available cost savings and cash preserving instrument when orders were down and using our operational leverage to grow our profitability when demand improved. We also kept progressing our strategic agenda. We reiterate our medium-term targets of average organic growth of at least 5% per year from 2019 to 2025, and an EBITDA margin and return on invested capital of at least 20 -- sorry, EBITDA margin of 15% and the return on invested capital of at least 25% by 2025. Thank you for your attention. And with that, let's go to Q&A. Frank, microphone is on its way.

Frank Claassen Degroof, Petercam. I'd like to zoom in on the raw material prices. Could you quantify the effect of the raw material price inflation in the first half or maybe on top line and on margins. And what can we expect going forward? Is it easy -- yes, is there still more to come? And how easy is it to pass it on? Do you have contracts which allow for that? Or how is that working?

Okay. Do you want to take that?

Yes. So we'll not exactly quantify it. It's -- actually, it's quite fluid. It's a combination of price decreases, which are not happening plus price increases, different contract lengths. So the 0.4% lower added value margin is partially caused by mix and partially caused by raw material price increases that could not be passed on, so the majority of the price increases have been passed on. Also, the majority of the contracts, especially in Automotive, contain raw material prices clauses. And in the Industrial area, the contracts are mainly negotiated on an annual basis. So there you have -- yes, you can do it much, much easier, more often and smaller customers, yes, you can simply increase the catalog prices. So if you calculate the 0.4%, that is less than EUR 1 million in Q2 and that is then partially a mix effect and partially the raw material prices.

And just 1 more thing to add to that. There is, as Jeroen mentioned that also in his prepared remarks, and there's, of course, also always a bit of a time lag. So prices increase. These contracts are in place on the way down. You benefit on the way up. You always realize it a bit later.

And then on top line, how much of the, let's say, growth is coming from raw materials? Is that quantifiable?

The top line growth of the raw material? Because you mean -- because of the inflation of pricing?

Yes.

Yes. That's even more difficult, but I would certainly not overstate that, certainly not in the short term. So in the end, the way we think about it is certainly something that keeps us very busy, both the pressure -- I mean, the shortage of the raw materials, the demand fluctuations because let's not forget, we feel that, but actually the indirect effect is for us is much larger. I mean we've seen all in the press where also I can talk about so many cars that they could have shipped but were not able to because of semiconductor shortages. Well, if they don't ship the car, we don't ship the actuator. So the effect on the top line from that indirect effect is much larger. The other thing it does is another thing we -- I think we managed quite well is the demand fluctuates with more volatility than normal, which, of course, means that if you have certain orders and you prepare to produce it with the inventory and all that stuff. And all of a sudden, it disappears, you obviously have a bit of work to do. So the demand imbalance, the volatility, the indirect effect of the supply chain and direct effect. Altogether, if you look at how we did in H1 and Q2, I think we managed that fairly well.

Okay. Then a second question on the working capital, that was a bit higher than I had expected. Is it also because of the supply chain issues? And what can we expect going forward for the working capital requirements?

Yes. So if you look at the payables and the receivables, they increased in line with the activity levels. If you compare it to year-end, that is always a bit impacted by seasonal effects. But if you look at Q2 compared to Q1 then I would say that there is no particular effect there with the exception of inventory, and that indeed has to do with supply chain constraints, which means that sometimes you build some buffer stock because most important is, of course, that you are able to deliver, and in other cases, yes, you have some stock. But yes, if you cannot complete the products, then yes, you still have it. I expect not that the inventory levels will increase further compared to that -- compared to the current level and -- but it will prolong as long as the supply chain constraints are there.

[Foreign Language] In English? Yes?

Yes. Please.

Sorry. Yes. The first question is on the comment on the weakness in the long-haul coach market. I think, yes, that is understandable, given the situation with COVID. But how is the exposure of Kendrion to the transit versus the city business? And then the reason I'm asking is because the -- I also noticed the huge electrification programs of various governments and transit buses or city buses are ideal to do that. And are you in conversation with the big European bus makers, Volvo, Daimler, Scania, in order to develop that because that could be a huge growth market in the near future.

Yes. So there's -- indeed there's 2 parts to the answer, just as there were 2 parts of your question. So the immediate effect on the long-haul coaches market that's today, and we have certain reasonably old but proven components for long-haul coaches that is down. As you mentioned, basically still at COVID levels, maybe a touch better, but not by much. And we don't really know when this comes back. This affects revenue in the short term. We shouldn't overstate that because it's part of the commercial vehicles market where we also sell to trucks and others, but it's certainly noticeable. The flip side is that also in this market, not only for city buses, but for all these buses and also for trucks. The electrification is going, and we have exactly the same opportunity with sound actuation potentially with sensor cleaning down the road as we do in passenger cars. So the longer term, of course, the coach market and the buses and trucks are a little bit behind, but we see exactly the same trends and therefore, the same opportunities as we see on the passenger car side.

And then you signed the new clients because there seem to be new players on that market?

We are certainly in contact -- as we are, by the way, on the automotive side, as you know, lots of people talk about NIO, but there is an enormous range of different companies. We actually have some design wins on the passenger car side there because, again, it's a bit more advanced in time.

And it's specifically in the bus market?

Yes, we are. Well, we don't have design wins yet. I think it's a bit early for that, but we're certainly in touch with them.

Okay. With new players, okay, that's interesting. And then basically a similar question on the offshore wind market. You have a big position in China that is your position on a global level or let's say, Europe, because Europe is more dominant than that. Are you also providing products to the top 3 European wind turbine makers?

We certainly have -- I mean, as you rightfully point out, in China, the position is very strong. We also benefit from the fact we talked about extensively last year, specifically in Q2 and Q3, it helped us because the Chinese government has certain subsidies for these -- for investment in wind power, so that helped. But there is fundamentally no change in the position, a little bit in the momentum maybe in Europe. And also now with the change in administration in the U.S., a lot of announcements have been made for the similar investments in the U.S., which we're eyeing as well. So wind power generically is clearly a very good field for us. We have a strong position on all the different forms of movement that these turbines make the pitch in the year to be precise. So yes, for the coming years, we expect a lot of that.

Yes. Yes. For Kendrion, it doesn't matter whether it's onshore or offshore, yes? So you will also benefit from the offshore.

Correct. Yes.

Okay. That's interesting. And then yes, you already basically commented on the progress on the new Chinese facility. But are you also willing to share your internal budgets of the possible annual turnover, and that's probably ramping up in the second half of 2022? But what are you calculating with for '23, '24?

Well, I don't want to go as far as to tell you exactly what our internal planning is of how fast that ramps. But in that first phase, if you fill that factory, the revenue level is around EUR 100 million, and then there's Phase 2 as well. So there is certainly a substantial opportunity to grow that. And you can imagine that we're not building this factory because we don't think we'll fill it. So in a reasonable amount of time, we expect that to reach that type of level.

Johan Hooven, Edison Group. A few questions. We've seen a good recovery in Automotive. Can you perhaps give some more details about the different dynamics within passenger cars and trucks. We've known about long-haulers. So it's a difference in growth and other dynamics. Then other 2 question is about wind power. We've seen 12% growth in China. Could you give an indication of the growth apart from wind power. So China excluding wind power? And also give some more explanation about the extended product range in wind power, so sort of also how many products or how many value per wind turbine, please?

First question was on the difference in dynamics between passenger cars and trucks. Now these markets operate independent and have their own cycles, normally. Of course, these are not normal times. And last year, during COVID, everything was down, as you well know. The truck market also varies regionally. So if you look at the truck market today, I'm parking the long-haul buses, which is a very specific niche that we're exposed to. The truck market in the United States is actually doing quite well. In Europe, it's okay, not as strong as in passenger cars. And this is -- I don't think this will change. So these stores operate independently. In itself, it's not so bad because it gives us a bit of a hedge. Normally, 1 segment is strong, the other 1 is a bit weaker. So you get a bit more stability which is not necessarily a bad thing. The other thing is that most excitement in passenger currencies around electrification, autonomous driving. I mean you've heard us talk a lot about that over the past years. That is clearly -- there is more happening in the passenger car than in on the truck side. They are a couple of years behind, but the same fundamentals are at work. Just talked also on [ Tijs' ] question. So today, if you look at our pipeline, if you look at the work that we do on design-ins, the vast majority is on passenger cars simply because that's where the market is. But we fully expect, and of course, these technologies are transferable. We fully expect the same thing to happen in the truck market and in the bus market over time as well. Yes, on wind power, so China last year benefit -- specifically China because of the subsidy program that ended at the end of 2020. Jeroen mentioned that if you look at our growth in China, we grew our business with quite a good clip in the first half. Despite the fact that in China, the impact of COVID, the comparables are tougher because China did much better than Europe did in the first half and was impacted less by COVID. And despite the fact that the wind power subsidy is now gone. So China is a target area for us. All 3 businesses are active. It's the largest Automotive market in the world, as you well know. The same electrification trend there is also picking up speed and pace. But also on the Industrial side, whether it's in wind power or in intralogistics or in robotics, all these -- there's a lot of manufacturing going on in China, if you will. There is an enormous amount of activity, which is also the reason why we're building this large factory. So the growth number in China in the first half is quite gratifying in my view. Then finally, yes, the product extension, the dynamics in the brakes market are a bit different from in Automotive, where new product developments take a long time. You need to design in. Here, we have more degrees of freedom to change the size, optimize a break for a specific application as the amount and the number of players in the wind power market increase. That means we get opportunities by effectively tweaking is maybe a little bit, overstated by changing the existing product a little bit in a reasonable amount of time, you can then expand your product portfolio to suit other customers, and that's what we're doing. As I mentioned, there is various electro motors deployed for the pitch, for the ore. We are serving all these segments, subsegments within wind power.

And can you [ scratch ] an indication of how large wind power is within China. The Chinese revenues?

Did we break that out, Jeroen? Last year, we -- no?

No. But it's a significant part of -- especially of INTORQ. So we were also strong in wind power. But yes, INTORQ added around about EUR 20 million in that and a significant portion of that is wind power.

More questions. Anything online may be? No? Tijs?

Yes. Seeing the EBITDA margin of the Industrial business at 17.1% of strong demand. But also reading your comments that you are continuing to optimize production within the Industrial Actuators and Control. So there's probably more margin upside there, even though market circumstances are quite okay, I guess. And then your assumptions about the new Chinese factory probably also has somewhat higher margins compared to the European business? Or is that a false assumption?

Sorry, on China, I did miss that part on China.

The general profitability levels you are calculating with for the Chinese facility, is that above, let's say, group average once it's fully running and all the inefficiency are out there?

No, I would say that is similar. At the end of the day, the Chinese market used to be extremely price driven. So if anything, there was always -- it was challenging to reach a similar profitability level. To some extent, that's still true. On the other and that market is maturing as well. A big push that we have in China, we talked about that as well at the Capital Markets Day is localization. So -- which -- we want -- I mean, we're building, obviously, the factory locally. The production equipment is sourced locally. Our supply chain is made local. Our R&D -- investing in R&D. So that we aspire to get similar profitability levels in China as we do in the rest of the world effectively. So I wouldn't say there is a material difference up or down in the long haul.

Yes, because in relation to your overall group EBITDA margin target, I mean, if automotive just comes back to the historic normal levels, you would say that you're already exceeding your targets?