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

Good morning and welcome to the Third Quarter Results Analyst Call of Kendrion N.V. My name is Laura and I will be your operator for today's call. Please note this call is being recorded. [Operator Instructions] I will now hand you over to your host, Jozef van Beurden to begin today's conference. Thank you.

Yes. Thank you very much. Good morning, everybody. And welcome to Kendrion's Q3 2022 Results Teleconference. My name is Jozef van Beurden, Kendrion CEO. And with me on the call is Jeroen Hemmen, our CFO. We'll start the meeting with some remarks regarding our Q3 results after which we'll have time for Q&A. We'll post the recording of this call and of the Q&A on Kendrion's website, as soon as is practicable. I'd like to draw your attention to the fact that certain statements contained in my remarks and in the answers to your questions 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. Before reviewing our Q3 2022 results I would like to reflect a little on the current economic and market environment that we're operating in. In Q3 2022, the overall business climate has not materially changed from the first half of 2022. Russian invasion of the Ukraine has continued to cause widespread uncertainty and volatility affecting all parts of the global economy and especially Europe. Inflation is suddenly high, affecting the price of raw materials and wages. And we're also facing uncertainty in the supply of energy and of its cost. And COVID, including China's response to COVID is still with us. As the fighting in the Ukraine continues the economic future looks uncertain. Is there a positive as well? Most certainly, demand for our products in the industrial groups, both for industrial brakes, and industrial actuators and controls remained strong in Q3. And looking at our order book it's expected to stay strong as our actuators enabling the transition towards clean energy continue to drive growth. Let's talk about the quarter. We had a strong third quarter. Revenue grew in all our business groups, resulting in a revenue of EUR 132.9 million an increase of 17% compared to last year. This is a new quarterly revenue record for Kendrion. Our industrial groups in particular performed well. Industrial brakes grew its revenue by 28%. While industrial actuators and controls achieved a revenue increase of 26% or 14%, excluding 3T's contribution. The automotive group grew by 8%. In summary, our growth potential is good. This quarter represents the 8 consecutive quarter revenue growth in which what has been consistent, difficult economic circumstances. We defended our added value margin well by working diligently with our customers to pass on the increases in raw material prices. This resulted in a stable added value margin. We are also disciplined when it comes to our costs. The combination of sustained revenue growth, a stable added value margin and tightly managed cost considerably increase our profitability. Our normalized EBITDA grew by 20%, EBITA by 37% and our net profit before amortization by 53%. I'm proud of our global team who deliver these results despite ongoing difficult market conditions. So what is driving this performance? Some of our stakeholders still view Kendrion as an automotive Tier 2 company with a bit of industrial site business. The reality is different. When an actuator company focused on products that help enable the global push to its electrification and clean energy, whether it's breaks for wind power, robotics, automated warehouses or induction heating technology, helping industrial processes move from oil and gas to electrical solutions. In all our business groups and in China, the broad push towards electrification determines our product development and M&A decisions as it has for several years now. It resulted in a balanced portfolio exposed to the global and accelerating trends towards electrification and clean energy and not overly dependent on any specific vertical or market segment. As a result, we have been able to deliver significant growth in revenue and profit over the past 2 years. Let me talk in a bit more detail about Q3 and some of its highlights. Our industrial segments continued their strong performance on the back of increased demand for products supporting the transition towards cleaner energy. And as a result, activity in almost all Kendrion's industrial market segments remained at a high level. Industrial Brakes revenue increased by 28% to EUR 40.1 million. And when measured at constant rates of exchange, the increase was 24%. In IB, we benefit from commercial synergies between former into spring applied product portfolio, combined with the permanent magnet brakes where Kendrion has always been strong. Industrial Actuators and Controls reported organic. So, excluding the revenue from 3T, revenue increase of 14% to EUR 32.5 million. Growth was 11% at constant rates of exchange. IAC was especially successful at sourcing scarce components to make full use of its strong order book. Our growth in China accelerated as the team caught up with the Shanghai lockdown-related production backlog of the second quarter. Construction of our new factory at the renowned Industrial Park in Suzhou is almost finished, and we expect to start production in the first quarter of 2023. The increased production capacity will allow us to meet current project pipeline demands and capture the many opportunities we have identified. Automotive revenue increased by 8% to EUR 60.3 million and when measured at constant rates of exchange, growth was 5%. The automotive trading environment remains volatile with ongoing semiconductor shortages, demand swings and supply price increases. When the announced -- with the announced split of the automotive group into Automotive E and Automotive Core, we make a clear strategic, operational and organizational distinction within the Automotive Group. In the new setup, we will further increase our focus on innovation and products such as AVAS sound systems and active suspension, while at the same time, improving the efficiency and cash generation from our current combustion engine products. We're on track to implement a new setup by the start of 2023. Now let me review our profitability in a bit more detail. We were pleased with our added value margin despite the ongoing inflation. As we successfully passed on price increases of raw materials to our customers, the added value margin came in at 47.3%, 0.7% below the margin of the same period in 2021. Please note that the price increases are passed on without margin, resulting in downward pressure on the added value percentage even if the increases are fully passed on. Our normalized EBITDA, the operating result before depreciation and amortization increased by 20% to EUR 14.9 million. And as mentioned, top line growth, stable added value margins and cost discipline resulted in good operational leverage in the industrial business groups that more than offset weaker profitability in automotive. At EUR 6.0 million, depreciation charges were in line with the same period in 2021, leading to an EBITA increase of 37% to EUR 8.9 million with the EBITA over revenue ratio increasing to 6.7% compared to 5.7% a year ago. We're on track to realize EUR 4 million in annual cost savings in the automotive organization from Q1 2023, as announced during our recent Capital Markets Day. Together with the EUR 4 million cost savings related to the closure of the Austrian production facility that will be fully effective in Q4 2022. These savings will contribute to a significantly lower cost base in automotive. In the third quarter, EUR 1.6 million restructuring charges have been normalized from the operating result. We expect total one-off restructuring costs for the Core E split will come to EUR 5 million. Normalized net profit for the third quarter before amortization of intangibles arising from acquisitions, increased to EUR 6.1 million, 53% higher than in Q3 2021 when it was EUR 4.7 million. Reported net profit came in at EUR 4.0 million. Total net debt increased to EUR 254.1 million at the end of Q3 2022 compared to EUR 145.6 million at the end of Q2 2022. Quarterly free cash flow was affected by capital investment of EUR 14.3 million, of which EUR 6.6 million was related to the construction of the new production facility in China. Quarterly free cash flow included EUR 1.6 million of payments of restructuring charges. We maintained a strong focus on investments, working capital and the level of net debt and especially on reducing inventory. Despite increased activity levels, we were able to reduce inventory from EUR 94.6 million at the end of Q2 2022 to EUR 92.0 million at the end of Q3. Our leverage ratio, based on the definitions in our main credit facilities remained unchanged at 2.6, well below the financial covenant of 3.25. Kendrion's solvency ratio remained strong, 43.3% at the end of Q3 2022. In Q4, we expect to be able to reduce our net debt despite investments continuing to exceed depreciation as we finalize the construction of our new China facility. Before we go to Q&A, let's talk about our outlook. For the remainder of the year and into 2023, we expect the economic environment to stay volatile. Therefore, we remain focused on managing our cash position and cash flow while protecting our added value margin. Our longer-term outlook remains favorable as our products help enable the global transition to cleaner forms of energy. We are confident that this accelerating trend will offer significant organic growth opportunities across all our business groups and expect to achieve our strategic medium-term targets by 2025. I now open the line for your questions.

[Operator Instructions] We'll now take our first question come from Frank Claassen of Degroof Petercam.

Two questions, please. First of all, on your restructuring charge, the EUR 5 million, what did you do with the restructuring charges? And what do -- can you elaborate what kind of cost savings you've implemented? And also, can we expect the rest of the EUR 5 million to kick in, in the second half or still in Q4? Or will it be more towards the start of '23? And then secondly, on cost inflation, what do you think? Have we seen the most now of raw materials and higher energy costs and maybe also labor? Or do you still envisage more cost inflation? And what are you going to do about that?

Yes, Frank, thank you. I'll hand the first question over to Jeroen, and I'll talk a bit about the inflation.

Yes. So the restructuring charges in Q3, the EUR 1.6 million primarily related to severance costs for, yes, a number of FTE that have left the company. We do expect the remainder of the restructuring charges up to EUR 5 million for the -- in total to be effectuated in Q4. And also that is, will be primarily driven by headcount.

And to come back on that, those are mainly indirect people in the core automotive related. Is that...

Primarily, yes. Yes. That's a fair statement. And then these savings will kick in, in Q1 2023.

And then on the inflation, Frank, of course, the honest answer is that we don't know. But what we see is that it seems to be stabilizing a little bit, at least the growth in the inflation seems to be tapering off somewhat. Of course, on the raw material side, we've already seen a bit of volatility where sometimes even steel and copper prices have come down. So although it's still with us, it could well be that moving forward this is now -- I mean, it's still there, but it's at least not increasing anymore. But all the same, whether it's up or whether it's down, what we, of course, do diligently is working with our customers to reflect that inflation in our raw material prices in the sales price. Now as I made -- I reminded everybody in my remarks, we basically pass on the cost without margin, as you can well imagine. So that means that percentage-wise, you would still see a bit of contraction in the added value margin. But in absolute terms, we are aspiring to pass on every dollar of inflationary pressure on our raw materials into the end price.

And then looking at pricing, it has been 6%. I think it was also 6% in Q2. Is that a fair assumption also for the coming months? Or will that also taper off because of lower inflation? Is that --?

It's related. So if we're staying roughly at this level, then I would expect that this -- because it's still with us, as you know. I mean we just -- I think the quarterly inflation numbers also for the Netherlands have just or the monthly have just been released. So then you can -- if it stays at that level, you can expect that in the revenue as well. Clearly, if it comes down, then that effect would also be a bit lower.

We'll move on to our next question from Axel Stasse of Berenberg.

I have 2. The first one is, so if I understood correctly, you do not see any signs of an easing in the semi shortages that we have seen over the last couple of months, right?

Yes, that's correct. Now a bit more granularity there. I would say that when you look at the semiconductors at sort of the more advanced nodes, so the semiconductors that during the COVID times were pretty much taken up by gaming devices, laptops, televisions and all these types of consumer electronic entertainment devices. That is, the availability there is definitely better. But there are, of course, many more semiconductors than just those that are present in cars. And these are the more, I would say, normally, we would say, commoditized, but some of these are still pretty scarce. As you can well imagine that if you miss 1 or 2 of these in your car, then effectively, you can't produce the entire car. So example, things like in the fuel pump controller, there's quite a bit of semiconductors. If you miss those, it's going to be hard to deliver the car. So in some areas, you see easing, but the overall picture hasn't really changed yet. No. Expectation, my expectation and everybody's expectation is that will change over the next couple of quarters, but we said that before. So hopefully -- but your question is, today, today that shortage is still very much influencing the supply chain of the automotive industry.

Okay. Okay. That is clear. And then the second question I have, and maybe a third one afterwards. But the second one was more related to M&A. Are you still looking on potential targets? And if so, can you please maybe provide a bit more information on these?

Yes. So I mean, we're always looking -- M&A is always part of our strategic arsenal, if you like, we're always looking around for ways to strengthen the company. And we have basically the first key question we always ask is, I think we have a fairly clear strategy. The first question always is does this -- if we were to acquire this specific company, would it help us reaching our medium and long-term strategic goals? Now looking back, I think both in terms of and talking T3, you can see that, that question was answered with a resounding yes. Not that you get, of course, all the other questions around valuation, quality of management, culture, et cetera, et cetera. That's the first question. That's always -- we're always basically sniffing around, if you like, that hasn't changed, and I don't expect that to change. Now in terms of previewing what potentially could happen, that's impossible. I would like to say M&A is by definition, opportunistic. Sometimes you see an opportunity and then you have to act fast, which we typically do. But at this point in time, there is nothing to report on that front.

Okay. Okay, clear. And last question for me is about the stats. We have seen basically that the amount of employees you had has been declining compared to Q2. Should we expect some more cost cutting on that front going forward? And does it only impact the Automotive division? And actually, a follow-up question on that is, can you take basically employees from the Automotive division and basically use them for the IB or IAC division?

Yes.

Yes. So indeed, you have seen a big of a reduction. One of the reasons underlying reasons there is the closure as announced of the Eibiswald location and another is, yes, let's say, more regular fluctuations in direct labor. And so direct labor, yes, fluctuates with production levels. So that is actually, that is more like a normal fluctuation through the season. The real -- the structural item here is the closure of Eibiswald. And indeed, in the coming quarters, we do expect it to decrease further as we are implementing the cost measures that we have announced related to the split of Core and E. There are limited possibilities to -- yes, to use people from automotive in the other organizations. But obviously, where possible when, for example, IB needs an engineer that is not needed in automotive, obviously, we make use of that possibility. So it happens occasionally, but that is not the majority of the hires in industrial or the releases in automotive.

And then, and maybe to drill down a bit more on that and where it does happen is actually on the direct side. So on the production facility, for instance, in Villingen, we have 2 factories in 1 building. One is Automotive. The other one is from Industrial Brakes. So there, we use the flexibility that we have between the 2 production sites on the direct side as much as we can.

Okay. And in terms of costs, salary increases have not basically changed from what you said in H1, right?

No.

No. And there, what we do specifically in Germany, but in most other jurisdictions as well, we effectively follow what the agreement is between the unions and the employer organizations. So until that is clear, we can't be precise on what we were going to propose, but that is what we typically do. And I expect that will happen as well in 2023.

[Operator Instructions] We'll take our next question from Tijs Hollestelle of ING Bank.

Yes, I've got a question about the new Chinese facility. You expected to start producing in the first quarter of next year. Could you give us any guidance on, let's say, the expected revenue from that? I guess you have the customers lined up, so you can be as conservative as you want. Did you get some feel for what kind of revenues we can expect and I guess that will then ramp up into 2023? So some guidance would be helpful. That's the first question.

Okay. So initially, what will happen is we have 2 factories, 1 in Suzhou and 1 in Shanghai. So the first step will be to move those production facilities and, of course, the associated revenue into that new larger building. It's not that we are basically now waiting to implement additional projects until the factory is ready. So clearly, we're currently accommodating both existing and future customers in those 2 buildings. So as a first step, and we expect that, as you mentioned to happen in Q1 is we are going to move first, the Suzhou factory and then the Shanghai factory into the new facility. And then we will have ample capacity for further growth, some of which is in the pipeline that over in the course of '23 and '24 are going to start up in line with the plans that we have, so the start of production planning, et cetera, et cetera. This is true for Automotive for Brakes and for IAC. And of course, we will also continue to work very hard commercially to keep adding new projects to that pipeline. So don't expect a step change in Chinese revenue in Q1. Initially, it's just the transition of the current revenue into that building, but it will basically accommodate the growth already foreseen and of course, underlying also our own medium and long-term plans for revenue growth. So that factory will accommodate that growth.

I appreciate the answer, but I'm more looking for the financial unplay because it sounds to me there will be an incremental negative impact on the top line because of these changes. I mean it is probably challenging to move these production facilities.

No, I don't expect that today. And this is not the first time we've done this, for instance, in Eibiswald as well. So clearly, it's quite an operation. But we know how to do. So there is definitely -- I mean, definitely, there's a big mishap or some sort of problem with transportation. We do not expect this to negatively affect our top line in any way. There is, of course, we will need to create some buffer stock. So you may see a temporary increase in our working capital. While we move the line and set it up, clearly, we have to keep delivering our customers, which we will. But then hopefully, after a few weeks, that's stabilizing. And then it's business as usual.

Okay. I'm still going to ask. I mean, all things equal, what kind of absolute revenue on the low end of your expectations, can we expect next year from the new setup in China? Because I mean, the stock market is pricing in a recession. So nobody knows what the collapse and demand is, but it seems to be Kendrion canola least that some compensating factors by the new facility because, yes, you have the machines, you have new clients. So what is, let's say, the low end of the additional revenue we can expect next year?

If you're asking me to guide specifically for China revenue, we talk about in China that we are roughly at around 10% of group revenue. And that has been growing, as you know, over the past years since 2016 from around 3%, right? So there is a good growth that we have effectuated over the past years. We've moved from one facility in Suzhou to another. That was twice as big. That's now full. We're now moving into an ever larger facility. And that, of course, over the next couple of years, we will also try to fill. And that facility supports EUR 100 million and EUR 110 million of Chinese revenue. And so it's effectively this move is an indication of our confidence in sustained growth in China. So without having been drawn into giving you an actual number, we will, of course, keep you and your colleagues informed in terms of the percentage of revenue that we generate from China. But this facility without the facility, we would not be able to accommodate the growth that we see in our pipeline of product -- projects and products that we've won. Yes, I'm hoping I'm helping you a bit, but.

Yes. Okay. Yes, it does the long term and on the short term, but okay, let it go. Yes. On the CapEx, I think you also mentioned that they will be also high in the fourth quarter. So it will be probably for the total this year above EUR 40 million. And what is roughly, let's say, the budget for next year?

So yes, for this year, we do expect around EUR 40 million, indeed driven by the finalization of the building in China. The budget for next year has not been finalized yet, but guided before for next year, I expect the investments to drop down to a more normal level, slightly above the depreciation.

Okay. And there is no, let's say, refinancing required for next year. I think you just...

No, we did it. Yes. I think we timed it well looking backwards. We did it in the beginning of the year. So for the coming years, we should be okay.

And also on the, let's say, the expected interest?

You mean the increasing interest?

Yes.

So of the roughly EUR 155 million debt that we currently have around EUR 90 million of that, EUR 90 million is based on fixed rate, either swaps or fix rated loans. The remainder is floating. So yes, there we will see -- we do and we'll see a somewhat increasing interest charge.

Okay. That's helpful. And do you expect or already see, let's say, any one-off items impacting the OpEx, the cost of goods sold, the cash flow in the fourth quarter/ Anything a bit out of the ordinary, apart, of course, from the one-off costs you were already guided for?

No. There are 2 things that -- so first of all, of course, the Core and E where we guided to EUR 5 million, of which EUR 1.6 million has been done. In addition, we are still in the process of selling the building in Austria that might materialize this year or in the beginning of next year. That will be a couple of million cash in and hopefully a small book profit. Those are yes, I think the only atypical things that we currently are aware of.

We'll now take our last question from Johan van den Hooven of Edison Group.

Johan van den Hooven from Edison Group. First question, I will do them one by one. You expect for Q4 lower net debt. Can you please explain a bit more and give a bit of indication where we might end up and also cost important for that the level of inventory by the end of the year?

Jeroen?

Yes. So yes, we do expect, as also announced at the half year numbers that free cash flow in the second half year would be positive or we target positive free cash flow in the second half year. Q3 was a negative EUR 9 million driven by the high CapEx that was already committed. So in Q4, the reduction will be driven by lower working capital partially by structural actions that we set out, especially related to inventory. We saw the first dividends of that in Q3 with dividends -- with inventory coming down despite a much higher activity level, but also in Q4, as traditionally revenue in December is particularly low. That also leads automatically to low accounts receivables, lower inventory levels. So that will drive in Q4, the lower net debt level. And for the remainder, I repeat what I said at the half year. So for the second half year, we will have -- we do expect positive free cash flow, so that means for Q4, at least EUR 9 million positive.

Okay. Thank you, Jeroen. That's clear. Another question about Industrial, which is still performing very well. Are there any end markets which especially stand out in this performance?

Yes. I would say the end markets that stand out are the ones that are related to electrification. Now as you know, IB, which is around EUR 40 million is around 30% of group revenue is basically 100% exposed to electrification because almost all these brakes are integrated together with an electron motor. So that clearly stands out. And you've seen the results not just in this quarter, but we've experienced very good growth there over the past couple of years. Then in IAC, it's a little bit more mixed because, as you know, there are around 30 different segments that we are active in. But there too, we have some segments like we are also creating an IAC some products for automated guided vehicles. We have a new development around induction heating, which effectively means that all sorts of heating processes traditionally using oil and gas are being replaced by inductors. That's also electrified. We're making certain actuators for switch gear for high and lower voltage transmission lines. So as new infrastructure in related to electrification is being put in around the world. That is a very good business, very good growth business. And finally, we also create certain safety devices that are used for cooling nuclear power stations. And there, too, we see on the back of this energy transition. We see significant opportunities, both now and also going forward. So all in all, 100% of IB is exposed to this. And by our own estimate, around 50% of IAC is directly or indirectly linked to electrification or other forms of clean energy.

Okay. That's clear. Another one if you look at within Automotives, can you please explain a bit more the difference in passenger cars and commercial vehicles? I think we hardly speak about commercial vehicles, but doing relatively well, I guess?

Yes. I mean it's interesting, but you're right. We are -- we used to talk a lot more about that because all the news flow and everything that's happening is dominated by passenger cars. But at the same time, we still have a significant amount of our automotive business in commercial vehicles. The characteristics there are they always were. They're much more stable. There is not as much growth as traditionally was and today is available in passenger cars, specifically when you look at electrification. But innovation speed is low. It's mostly diesel related. And of course, also there, there is a big push certainly for the last mile to create more electrified forms of transportation. But for the long-haul trucks, it may occur at some point, but today, that's still a very long-term dream. So that's a stable business for us. That is really part of our core business that we expect to be servicing for many years to come.

Okay. And a last question is, well, typically for you, if I'm correct, your second term, the CEO until December 2023. And I'm just a bit curious on what your plans are regarding a possible third term?

Yes, Johan, thank you very much. You're right. So a year from now is the end of my second term as you know, and everybody knows, I'm not the one deciding if there is a third term, but I am available for that. So it's up to the shareholders to decide if availability is accepted or not. That I am definitely available.

We'll now take our last question from Maarten Verbeek of The Idea.

It's Maarten Verbeek from The Idea. A couple of questions from my side. At this moment, you're only able to pass on the higher cost to your customers. So without the additional profit, gross profit for you, when do you think you will be able to do so?

You mean passing on raw material prices, including margin?

Exactly.

Yes, that is, it would be great to do that, but we don't expect that from our suppliers, and I'm not sure our customers appreciate a move like that. So in the end, I think in a high inflationary environment, and of course, as you will appreciate, we've had a very low inflationary environment for a long, long time. I think the passing on the cost is -- I mean, as we talk about defending the gross margin, that's what we do in initial terms and everything around related to effectively increasing your value-added margin has to do with more of your product road map and innovation. Jeroen?

Yes. So, maybe to add a bit on that. So the part of the price increases that is driven by raw materials, and so raw steel and copper. So the assumption is also -- I mean, that fluctuated quite heavily. And you also see new contracts, for example, that even more will be built in that you have some sort of a reference price. And if the price goes up, then also the sales price goes up, but down of course, in the same way. So there, we do not expect any margin. But obviously, for new projects where you do expect increased wage cost, which will be there, yes, basically forever. I don't think that after 2024, the employees will say, I will accept the 4% wage decrease. There, obviously, for new projects, we will build in a higher price and also a margin on that.

At your Capital Markets Day, you provided some insight in revenue and revenue development auto Core and auto E. Could you give some insight what happened in this third quarter concerning these 2 units within Automotive?

Well, the insight was a long-term insight. As you know, one of the things that we always do when we announce year-end results is we give a bit more granularity on that and specifically on the order book and the pipeline, and we're going to do that again when we meet in February for Q4 and full year 2022 results. I mean, automotive is, as you say, it's pretty -- as you know, it's pretty volatile. So between now and the Capital Markets Day not much has changed. So basically, if you look at the percentages that we then mentioned of what is Core and what is E, that's still valid.

Okay. And then lastly, in the press release, you stated that Industrial, the promise of Industrial offset the weak performance of Auto.

Weaker. Weaker performance, not weak.

Weaker performance of Auto. But again, I was seeing how I should interpret that. Do you imply that Automotive has a lower result compared to last year?

Yes.

Definitely yes.

Is it still in the plus?

So I'm going to refer you again to the full year results, Maarten. But in the automotive world, as you know, the volatility, which, of course, also influences, for instance, your direct cost is plus the pressure on the value-added margin where there is always a bit of a delay between incurring the costs of the raw materials and then pass them that on to your customers, which always temporarily, and that will reverse at some point, put some pressure there as well. It's certainly very tough in the automotive industry. I also refer you to other Tier 1 and Tier 2s that are more pure-play companies where you can really see what's going on in that business, and we are no exception. So it's under pressure. It's compared to last year it's certainly lower as it is in the entire industry. We talked about our response to that in terms of taking cost out on Core and or instance by closing our Austria facility. The split in core and E gives us a lot more focus on innovation where we need to innovate and at the same time, focusing on cash and cash flow where we think that is the more important KPI. And therefore, going forward, I expect that in Automotive, we will again -- or we will improve the overall performance if you put the 2 together in 2023 compared to 2022. But it's been a tough environment, a difficult year in that part of our business.

There are no further questions, Jozef. So I'm handing it back over to you for any closing remarks. Thank you.

All right. And I'd like to thank you very much for all your questions. And if you have any follow-up, you know where to find us. Thank you.

Thank you, ladies and gentlemen. This concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.