Klöckner & Co SE (KCO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to today's Q1 2025 Conference Call of Klockner & Co SE. For your information, this conference is being recorded. At this time, I would like to turn the call over to your host today, Mr. Fabian Joseph. Please go ahead, sir.

Yes. Thank you, and also welcome from my side. Sorry again for the delay as we faced technical issues with our provider again. I am joined today by our CEO, Guido Kerkhoff; our CFO, Oliver Falk; and our CEO of Americas, John Ganem. They will guide you through today's presentation. And afterwards, we are happy to take your questions. I would ask our analysts to send in their questions via mail as we face technical issues in the telephone conference. So just send me the e-mail, and I will then ask Oliver and Guido afterwards during the Q&A session. With that, I'd like to hand over to you, Guido.

Yes. Thank you, and once again, sorry for the technical problems and the delay. And welcome to our Q1 conference call. I'll now start with the financial highlights of the quarter, followed by an update of company's strategic framework. We were able to achieve a slight year-over-year increase in shipments, despite this very challenging environment, we're still seeing primarily driven by the strong development of Kloeckner Metals Americas, where we continue to gain market share. In other segments, Kloeckner Metals Europe, however, shipments continued to develop negatively. Sales came in slightly below previous year's quarter as a result of the lower average price level. We achieved a considerable year-over-year increase in gross profit. Also gross profit margin increased year-over-year. EBITDA before material special effects came in on a constant level year-over-year and therefore, in line with our guidance. Operating cash flow was at minus EUR 118 million, mainly due to the seasonal build-up of net working capital. As a result, net financial debt increased to EUR 914 million at the end of the first quarter '25. Let's now have a look at our performance in Q1 '25 by segment. In our Kloeckner Metals Americas segment, we achieved considerable increased shipments year-on-year in Q1 '25. In this segment, demand for steel and metal products increased significantly from the middle of the reporting period. This development was supported by our continued outperformance against competitors, resulting in further market share gains. However, as a result of the lower average price levels in Q1, sales came in slightly below last year's quarter. EBITDA before material special effects came in at EUR 48 million, a considerable increase both year-on-year and quarter-on-quarter. In our Kloeckner Metals Europe segment, both shipments and sales came in slightly below previous year's quarter as a result of the continued negative demand development, particularly in the transportation industry. Consequently, EBITDA before material special effects came in negative at minus EUR 4 million in Q1. Let's now have a look at our updated strategy. '21 we implemented our corporate strategy, Klockner and Co 2025, leveraging strength. Since then, Klockner has developed, successfully improved its operational positioning and achieved important milestones. Most importantly, we evolved from steel distributor into a service center and now a metals processing company. We were able to increase our sales share in service center business by plus 10 percentage points and in HVAB by plus 8 percentage points compared to '21, the year when we introduced our leveraging strength strategy. Also, we strengthened our regional focus to the economical attractive North America and the DACH region in Europe, which -- a sales share increase in North America of plus 13 percentage points. Besides that, we were able to further derisk our balance sheet by funding our pension obligations for lasting improvement in cash flow from operating activities. In addition, we optimized our portfolio by selling part the low-margin distribution business in Europe and acquired value-accretive companies in North America. Moreover, we consolidated our role as a leader of the sustainable industry and are already offering CO2-reduced materials, services and logistics solutions today. Going forward, our key priority will be the expansion of our higher value-added business as well as our service center business. These businesses are an important lever to increase our profitability while reducing the volatility of our earnings. Higher value-added business involves all our metal projects that are extensively processed or fabricated before delivery to the customer, for instance, welding and 3D laser cutting systems. Service center business consists of multi-metal services, such as cutting-to-length, slitting. The EBITDA development in the recent past clearly showed that why we want to expand these businesses. Service center and higher value-added businesses are reliable contributors to our group EBITDA with a significantly lower volatility compared to the distribution business. In particular, higher value-added business has a higher profitability than distribution due to the high degree of production customization. Both service center business and HVAB are characterized by longer term contracts and therefore, less exposure to volatile commodity prices. In addition, both businesses have higher barriers to entry for potential competitors than in the distribution business due to the need for specialized equipment, technical expertise and certification. Let's now focus on our strategic pillars and how we will expand the business. The strategic pillars product and service portfolio diversification, strategic partnerships and operational excellence, build the foundation for our new strategy to, Klockner and Co, leveraging strengths - Step Up 2030. With this growth strategy, we'll enter a new chapter in our company history, where we aim to become the leading service center and metals processing company in economically strong region North America and Europe by 2030 with one of the highest profitability levels in the industry. To achieve this ambitious goal, we will continue to explore organic and inorganic growth opportunities and further expand the service center and higher value-added business. As a result, we will increase our profitability levels while significantly reducing our dependence on steel price trends and the volatility of our results. Core of our new strategy remains our customer centricity. While our activities with customers are focused, we consistently align our products, services and processes to the needs of our customers in order to offer them the greatest possible added value and build sustainable partnerships. Let's now have a closer look on the strategic pillars. Starting with the product and service portfolio diversification. We place a stronger emphasis on further diversifying and improving our product and service portfolio. Priority will be to build on unrivaled portfolio of products and services, which creates value for our customers. This will not only increase the customer share of wallet, but also establish long-term contractual relationships, thereby further reducing the volatility of our earnings. In response to growing demand, we will increasingly offer these products and services in a CO2 reduced range under the Nexigen brand. Strategic partnerships will further strengthen and deepen our relationships with strategic partners and suppliers. Through targeted measures and offerings, we will better integrate our products and services into our customer value chain, delivering solutions that create significant added value for them. Operational excellence, we're dedicated to providing our customers with the most efficient solutions and best service. One of our main objectives is to seamlessly integrate into our customers' value chain. We will, therefore, continue to identify and eliminate inefficiencies in our processes. Our increasingly digitized and automated operations will foster data-driven decision-making, operational and sales excellence, which will lead to high efficiency. We aim to further leverage our expertise and knowledge and automation by deploying our AI-powered tools worldwide, enabling economies of scale to achieve value creation with minimum manual intervention towards zero touch. As part of our equipment and co-leveraging strengths, Step Up 2030 growth strategy, we set ourselves the following targets for 2030. Our goal is to generate sales growth above the market. We aim to generate through the cycle EBITDA in the mid-3-digit million euro range, with an EBITDA margin of more than 5%. Furthermore, we want to generate at least a 10% return on capital employed. By further executing our strategy, we will create substantial value for all stakeholders to the year 2030 and beyond. Now let's have a look at our strategic progress that we've made since the beginning of this year '25. We agreed to acquire Ambo-Stahl in Cologne to significantly improve our capabilities in specialized steel processing. This helps us strengthen our position in the defense and infrastructure sector, where we see growing demand. We aim to complete the acquisition and integration by mid '25. And from there, we're focused on driving innovation and delivering top quality service to our customers. We also expanded our manufacturing capabilities this quarter in the United States with the acquisition of Haley Tool & Stamping located just outside Nashville, Tennessee. This not only strengthens our presence in the U.S., but also creates great synergy with our other nearby facilities. With Haley, advanced stamping practise and in-house tooling capabilities, we're improving operational efficiency, especially when it comes to handling larger production runs and more complex parts. This move supports our growth in sectors like automotive, aerospace and industrial manufacturing. With respect to the current tariff situation, I want to reemphasize on how our business operates and how we are structured. Generally, we run a local-for-local business, meaning that we buy material, process it and sell it in the same country or region. 60% of our group sales are generated in North America with 50% in the U.S. and 10% in Mexico. In the U.S., we operate as a U.S. company, sourcing from U.S. companies and selling to U.S. customers, as you can see on the chart. Only a fraction of annual purchases is imported. In Mexico, our primary customers are U.S. OEMs who generally produce in Mexico to serve the U.S. market. In Mexico, sourcing is 45% local and 25% comes from the U.S. In general, we benefit from the ongoing trend to bring back manufacturing to North America, be it in the U.S. or Mexico, by increasing demand for metal products and services. Coming to Europe, where we generated all our sales in the DACH region, so in Germany, Austria and Switzerland, accounting for around 40% of the group sales. In this region, we feel a limited direct impact from the U.S. tariffs as again, here most of our sourcing and selling is done locally. Similar to North America, we run a local-for-local business in Europe. Whether in Germany or Switzerland, we sold mainly domestically or within the European Union and do not import any material volumes from third countries. Most of our sales are made in the countries where we operate and within the European Union. We barely export to third countries. With that, I'd like to hand over to Oliver to have a closer look at financials.

Yes. Thank you. As Guido stated, we achieved a solid EBITDA before material special effects of EUR 42 million in the first quarter of the year, a promising start so far. Generally, we are committed to a strong through-the-cycle performance, fostering upside risk and mitigating downside risk. After we had to digest significant windfall losses in 2024 as a result of the steel price correction, prices developed positively in 2025, especially in the U.S. This development should provide a tailwind for us as we are dedicated to translating the current positive pricing momentum into strong operating results in Q2 and beyond. Further, the execution of our corporate strategy is fully on track, further improving our underlying profitability. Our digitization and automation initiatives remain part of the pillar operational excellence in our strategy. And we continue to leverage our digitization and automation initiatives. And we were able to increase the number of digital quotes by 2.6% year-over-year in the first quarter. Let's take a look at our shipment sales, gross profit and gross profit margin for the first quarter of 2025. Shipments came in slightly above the previous year's quarter, again, driven by the strong performance of Kloeckner Metals America. Sales decreased slightly year-on-year due to the overall lower average price levels and came in at EUR 1.7 billion in quarter 1 '25. Gross profit came in at EUR 313 million in quarter 1 '25 after EUR 297 million in quarter 1 '24, a considerable increase. Also, gross profit margin increased year-on-year to 19% from 17.1%. We will now focus on the EBITDA for quarter 1 2025. EBITDA before material special effects came in at a level of EUR 42 million and therefore, constant year-on-year. In the first quarter of 2025, we had a positive volume effect of EUR 8 million and a positive price effect of EUR 5 million. OpEx, however, were higher by EUR 18 million year-on-year, mainly due to the higher personnel and shipment expenses. Further, we had positive FX effects of EUR 5 million. Lastly, we had negative material special effects of in total EUR 23 million, mainly consisting of the final deconsolidation of our Brazilian distribution entity. We are now coming to cash flow and net debt development. In the first quarter of 2025, we had a net working capital build-up of EUR 124 million. Taking into consideration interest, tax payments and other items totaling EUR 12 million, our cash flow from operating activities came in negative at EUR 118 million in quarter 1, '25. Including net CapEx of minus EUR 23 million, free cash flow was negative at EUR 141 million. Let's look at our net financial debt. Additional negative effects were visible for leasing and other, while positive effects were visible for FX and the net debt effect from the divestment of our Brazilian entity. Consequently, our net debt increased to $940 million from $780 million at year-end 2024. I now hand over to John to have a closer look at our end markets in North America.

Thank you, Oliver. After a difficult 2024 in which demand in the Americas contracted by approximately 1.5%, Klockner Americas experienced a strong recovery in the first quarter, as already been outlined, driven by stable to improving OEM demand, contractual market share gains and a recovery in our transactional sales portfolio, which was supported by rising market prices and much needed supply chain restocking. Of course, trade policy has taken center stage in recent months and has created a fair amount of uncertainty, especially as it relates to future expectations for economic growth, cross-border trade and underlying metals demand. Due only to this rising uncertainty and despite continued positive developments in early second quarter, which includes still stable contractual OEM forecast, we have conservatively pulled back our full year estimates for North American real metals demand to 0% to 1%. Now looking at the specific segments. In Construction, we still see positive year-over-year developments in residential, non-residential and non-building investment with year-over-year square footage growth now expected between 1% to 2% and non-building spending increasing by an impressive 10%. Of course, these sectors are inherently sensitive to interest rates. And the current forecast assume lower interest rates to be realized over the second half of 2025. Looking at manufacturing machinery, which in some cases, saw double-digit declines in 2024. Q1 demand has shown signs of modest improvements. And many of our key OEM customers are forecasting modest year-over-year growth in 2025. However, this now appear weighted to the downside for the second half. And as such, we are planning on a slightly negative growth for the full year. As usual, the actual development may vary materially from segment to segment and customer to customer. Jumping to Transportation. The automotive sector has definitely been the most affected by trade policy. And there is no segment facing more overall short-term uncertainty. As such, the most recent North American production forecasts have been revised down, despite still strong sales through April. With the recent relief rate on auto parts tariffs and ongoing negotiations hopefully resulting in more trade policy clarity, forecast could be adjusted higher in coming months, especially if continued low unemployment keeps consumer spending stable at recent levels. Shipbuilding, on the other hand, is expected to expand in 2025 and looks to be in good position to benefit longer term from the administration's commitment to expanding U.S. shipbuilding capacity. This, of course, would be supportive of increased steel demand, especially for plate, which is a product line for which Klockner has recently made significant investments and enjoys a market leadership position. There has been no material change the outlook for appliance, HVAC and electrical, which are all significant industry segments for Kloeckner Metals Americas. Expectations remain stable to slightly higher demand in 2025. This generally positive outlook is supported by the continued growth in residential and commercial construction, especially for data centers. And finally, for energy, we continue to expect this to be the strongest segment for growth in 2025. Deregulation and a more balanced energy policy should be supportive of drilling and extraction in both the short and long-term. While policy shifts may slow growth rates in the renewable sector at some point in the future, there remains a strong backlog of projects, which will continue to benefit steel demand in 2025. Lastly, there continue to be large-scale investments to secure and modernize the electric grid and while improving transmission capacity and efficiency. So regardless of trade policy, surging demand for electricity is expected to continue and will require massive steel-intensive investments not only in 2025, but for many years to come. So in summary, while there remains no shortage of uncertainty related to the economy and trade policy, we feel strongly that Klockner Americas with a highly diversified and increasingly differentiated product and services portfolio is well positioned to navigate what could be a short-term and potentially bumpy transitionary economic cycle. Our Americas results over the last few quarters, including strong year-over-year EBITDA growth in the first quarter, provide further evidence of our more resilient business model and our ability to deliver consistently positive through-cycle financial performance. It's also important to emphasize that we have made significant investments in both the U.S. and Mexico that will be coming online and ramping up in 2025. As a result, we remain highly confident in our ability to deliver positive year-over-year growth even if steel demand is temporarily challenged as the economy recalibrates to the realities of new regulatory tax and trade policies. Finally, taking a longer term view, we remain extremely optimistic that North America will remain an engine of economic growth as it pursues both economic and national security. The reshoring of manufacturing will not only continue, but seems trying to accelerate. Investments in the defense sector are likely to increase significantly. And the pursuit of complete energy independence will continue unabated. These developments will undoubtedly lead to a strong increase in demand for North American sourced steel and metal in the years to come. And Kloeckner Metals has every intention to play a key and leading role in the market by continuing to expand our reach and by further enhancing our higher value-added capabilities. With that, I will turn it over to Guido to talk about Europe.

Thanks, John. In total, we continue to expect the real steel demand in Europe to remain stable to slightly increase 1% in '25, which is unchanged compared to our last conference call in '25 -- March '25, however, with tariff-related uncertainty significantly increasing. Coming to our sectors in Europe. Construction industry, we do not see a major change compared to our previous conference call. We continue to expect the construction industry in '25 to grow slightly with structural drivers intact and pent-up demand providing growth. However, the adverse effect on the economy of tariff posed the downside. Manufacturing, machinery and mechanical equipment, a sector where we also see no major change since the last call, we still expect mechanical engineering to develop broadly constant in '25. The sector should benefit from loosening monetary conditions, while tariffs may dampen sentiment in the sector. When it comes to defense, however, we sense especially more demand with significantly increasing defense spending. And we position ourselves to benefit. The acquisition of Ambo-Stahl will contribute to this. Transportation. Let's first focus on automotive sector where we sense a downturn compared to the last conference call. We now expect a slightly negative development as tariffs on EU imports create additional headwinds for the industry. The industry as a whole will benefit from a broader recovery in global trade and more export demand. Shipbuilding, while the commercial segment in shipbuilding could get more under pressure due to increased economic uncertainties, we're well positioned in the gray ship sector to benefit from upcoming demand. Household and Commercial Appliances, a segment with marginal impact on our European businesses, we still expect a stable development in '25 as consumer confidence remains low due to high deposit rates uncertainty and depressed residential construction activity. The energy industry growth is expected to slow due to weaker energy demand driven by high prices, tariffs and economic uncertainty. However, long-term demand remains supported by the electrification of transport and heating. Let's now come to the financial outlook for the second quarter of this year and the full year '25. As mentioned before, steel prices rose significantly over the course of the first quarter in '25, particularly in the U.S. As a result, we expect a considerable increase in sales and a constant development of shipments in the second quarter compared to the first. EBITDA before material special effects in Q2 '25 is expected to come in between EUR 60 million and EUR 90 million, considerable increase quarter-on-quarter and year-over-year. For full year '25, we continue to forecast shipments by considerably increase compared to the previous year. Consequently, sales are also expected to come in considerably above the previous year's figure in full year '25. In total, we expect a strong EBITDA before material special effects in full year '25 and a considerable increase year-on-year. Moreover, we also expect operating cash flow to come in significantly positive above full year '25 strongly. With that, we're now happy to answer your questions.

[Operator Instructions] First question comes from Boris Bourdet from Kepler Cheuvreux.

I have 3 questions. The first one, maybe you already tackled this during the presentation, that's relating to tariffs. And we understand from the slide there is a limited direct impact due to your local business. But that would be a [ real ] confirmation. But you don't see any early signs of any impact of those uncertainties linked to tariffs? That's the first question. Then I had a question on your midterm guidance. You're aiming at an EBITDA -- normalized EBITDA of something like EUR 500 million, if we could try to make a -- put a number on it. And combined with a 5% EBITDA margin, that would lead to something like EUR 10 billion sales, which is a massive growth as compared to the last -- sales published last year. So what would be the contribution of M&A in that road map? And can you shed some light on the financing? And maybe just as a quick add up on that, what's the underlying gross margin assumption behind the 5% EBITDA margin? And what would be the underlying business mix here?

Okay. Maybe I'll start first with the tariffs. As we've laid out in the presentation, the direct effect as well local-for-local are not that strong. On top of that, I think what you need to take into account if you want to judge the indirect effect is -- if we start with North America, for example, most of the production in Mexico and in the U.S. in the supply side is coming largely from the U.S. or you can get within Mexico. You can buy within Mexico. But the Mexican steel supply is not sufficient for the whole market as there is not that much steel production in Mexico. So even the indirect effects in this market are more driven by the reshoring again, of the whole production. Otherwise, we are in such a level in the North American sector that we do not have a lot of imports coming from Asia and mainly China there. So therefore, I think we're not that bad position as most of our customers are U.S.-based companies. In Europe, clearly, what you see on the indirect side, all kinds of exports into North America a bit weaker due to the tariffs with our relation to the automotive sector. It depends on the sector. In Switzerland, we don't have it. And in the German KMG business, as we laid out, we do not have such a big exposure to the automotive industry, more construction and local markets. So therefore, it's largely depending on the demand within the region and the country than just based on the exports. On Becker Steel, we do have a percentage in the automotive sector. And therefore, you see these effects in this sector. But overall, automotive is not of such a high importance for us than from any other sector. The midterm guidance, yes, you did the math right, EUR 500 million, and you go to 5%, you go to EUR 10 billion. Where we will be and what time, depends a bit on where the steel price level overall will be. The mix and the growth that we're doing will be based, like we currently did it, in a mix of developing our business organically and to some degree inorganically. But all the inorganic cases we've seen so far depend on acquiring companies that strengthen our footprint and therefore, lead to kind of organic growth and better usage of our equipment and of our sites that we already have. We will continue going forward that path. But financially, we will continue to be conservative, as we are throughout the other years. So we will keep leverage at through the cycle on good and decent levels and will always be financed through for quite some time. And the financing is largely done on working capital base lines. So we will not take any risk on that and go step by step to realize this growth. But we clearly see that by the acquired companies and all the business cases we have behind the acquisitions largely in North America up to now, they all pay back as we expected and are in line with our business cases we had -- when we took over the decision.

And the next question comes from Amira Manai from ODDO BHF.

I have actually 2 quick questions. You may have mentioned it during the conference. But I would like to know the price effect between Q4 2024 and Q1 2025. How it is expected in Q2 '25? And what is the split between the U.S. and Europe? And for the second question, net debt has increased in Q1. Do you still have capacity for further M&A in the coming months? If so, do you see opportunities in the current market?

Maybe starting with the first question on the prices '24 to '25. Yes, we saw an increase in prices largely, and that's what we laid out on Chart #15. In North America, hot roll prices went up compared to the fourth quarter by kind of 37%. That's why we try to procure as much as we could still on '24 levels. And therefore, our cash flow was burdened by that slightly in the first quarter of this year as well, so that we can participate in the first and second quarter in increased volumes and better pricing. We will see the better pricing largely coming through in the U.S. in the second quarter, much more than we saw it already in the first. Of course it was a bit stronger volumes. In the second we'll benefit more from the prices. That's one of the reasons why the Q2 guidance is that much stronger than the Q1 guidance. There are some of these effects in Europe as well, but not -- by far, not as pronounced as in the U.S. Then, if I got your second question right, it's a question of what opportunities on M&A you raise in the current environment and what we see going forward. We continue -- I mean, you've seen we did some 2 smaller acquisitions, but really smaller acquisitions in the first quarter this year. We continue to look around and see what fits and if there is a fit to our company. But again, I would like to stress here that financially, we always take a very conservative look. And we continue to look into sites that we dispose of and try to refinance the stuff.

Via the phone there are no further questions at the moment.

Thomas Schulte-Vorwick sent me a narrative and a mail. He cannot join the call, unfortunately. I believe I will read them out now. The first one, I believe, is for John Ganem. So regarding near-term demand and pricing outlook for North America, U.S. You have lowered your outlook for North American real steel demand and U.S. HVAC prices have recently retreated from the peak in April and it concerns about tariffs included demand destruction. Could you elaborate on current trading trends in the U.S. and Mexico since March and April following the implementation of tariffs? Where, if at all, are you seeing signs of customer hesitation or order delays? What are Klockner's expectations for pricing trends going forward?

I believe that one is for John Ganem. And then I will read out the 2 other ones.

Do you want me to answer first?

Yes.

Okay. What we see right now is virtually no impact from tariffs. Our underlying demand from our contract base is steady to increasing. I'm in Mexico today and I can tell you that there has been no shift whatsoever in our customers' forecast. Everybody is moving forward. As we had expected, there has been no negative impact from our perspective, from a demand perspective, at least through April. And we don't expect to see any really negative impact in the second quarter. We were only conservative in our full year guidance because clearly there are some risks and there's uncertainty and it's difficult to speculate. So we just took a conservative approach. We don't have any definitive indication from customers or recent trends that we're going to see a significant echo, even a modest pullback in demand. So we're still pretty optimistic from that viewpoint based on what we're seeing on the ground today. From a pricing perspective, yes, we have seen a slight move down in pricing. I think, obviously, it's beginning of the quarter, the middle of the quarter when the Section 232 tariffs on steel and aluminum were re-implemented. There was some move to increase the price. There was some pre-buying that fueled that. That drove the prices up, as Guido said, by that 37%. It's been pretty stable for the last month and now trending down. I think everything is just recalibrating. We're trying to understand the level of imports that we're going to see in the second quarter or third quarter. And again, everybody is just taking a cautious view. We do not expect to see a significant decrease in pricing falling all the way back to where we had started from what we're seeing. And we think is a moderation in getting back to a more normal run rate for pricing based on low cost, raw material cost and of course, the overall increase in operating costs. So we think there'll be a slight pullback in pricing. But we do not foresee that having a negative impact or creating any type of material negative windfall effects.

Thank you, John. So the second question regarding our European segment. EBITDA in the European business was negative in Q1. Do you expect a step-up and a positive contribution in Q2? What assumptions for the European segment are implied in the Q2 guidance? And what are the most recent demand trends in the region?

Yes. Well, as we're not in Europe that much automotive driven, but our biggest cost is in the construction sector. Seasonally, Q1 is always weaker, especially in Switzerland due to the winter season and the lower construction activity. Therefore, Q2 is better. And Q2 will be positive and is contributing positively to the Q2 guidance that we gave out. Otherwise, overall, what we see currently the demand trend is, as I outlined, overall stable. Some sectors still declining, but no major change in that one. But seasonally, Q2, Q3 are stronger quarters, especially in Europe.

Last question is regarding net debt. So your net debt remains relatively high at over EUR 900 million. Are there any short or mid-term targets regarding deleveraging? And what implication does this have for your future M&A activity and capital allocation?

I think, first of all, to take a look at the leverage levels. It only makes sense if you really adjust for the performance -- you take last year results, for example, the biggest lever we have to deleverage is to improve our EBITDA, which will happen largely this year. If you add our Q2 guidance and you just take the midterm point added to our Q1, we are almost at the full year results from last year by half year, slightly missing that. That's why the deleveraging this year will largely be driven by the EBITDA. So the assessment of the debt level you have to do to agree based on the overall level and the size of it and the financing of it. As I outlined, we don't want to increase it significantly. But we want to use opportunities that are out there in the market like pre-ordering some material end of last year, which we had to pay in Q1. Therefore, cash flow was weaker than it was operationally driven because the pre-order could get a bit cheaper. Once there are smaller companies -- opportunities, we might acquire them. On the other hand, we might dispose of, like this is in Brazil, some activities or some sites that we don't need any more to refinance. And that's why we're taking another look on the leverage level and then the debt level on what we can finance, how are we financed through and how can we overall drive and improve our free cash flow generating possibilities and opportunities in the company to reduce it over time. But its clear statement, we don't want to increase it further to the level that we have.

[Operator Instructions] There are no further questions. And with this, I hand it back to the management.

Thank you very much. If there are any additional questions, just reach out to Fabian or us, who're always available. Thank you very much, and goodbye.

Your conference call has come to an end. Thank you for attending. Good day.