NORMA Group SE (NOEJ) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to our analyst call Q3 2022. Overall, we grew in Q3 amid a turbulent market environment. We had sales that increased the net sales by 19.9% to EUR 318.6 million, which reflects an organic growth of 10.3%. We generated an adjusted EBIT in Q3 2022 of EUR 27 million, which increased by 18.3% at a margin of -- EBIT margin of 8.5% versus Q3 2021 of 8.6%. We had a net operating cash flow in Q3 of minus EUR 3.8 million and an equity ratio of 45.7% which improved slightly versus end of last year. We have net debt of nearly EUR 400 million, EUR 396.6 million. And the leverage at the end of September 2022 at 2.5, based on a solid maturity profile with next larger refinancing in 2026, which we will see later on. Going to Page 3 of our presentation regarding the top line development, we see that the increase in net sales by 19.9% to EUR 318.6 million in top line. The organic growth of 10.3% in Q3 shows a strong performance, especially in Americas and EMEA. The EJT sales increased to EUR 181.8 million, and this reflects an organic growth of 16.5% due to a strong performance in all regions and mainly driven by price increases, while our price activities run very well in 2022. In our Standardized Joining Technology, we saw sales increase to EUR 134.6 million. This reflects an organic growth of 2.5% with a high single-digit organic growth in Americas and a decreased business in EMEA and APAC also due to some restocking effects in previous years. The currency effect also impacts our sales development, and we saw a positive translation effect of EUR 25.5 million or in terms of percentage, 9.6% in the third quarter. Looking into the segment reporting on Page 4. We see that the regional split for the first 3 quarters of 2022 increased the Americas stake to 47% of our sales in the first 9 months, while we have the stake of EMEA sales at 39% and 14% in APAC. And we also see on that chart the increase of Americas sales overall, 27.7%; EMEA sales, plus 0.9%; and sales in APAC region plus 6.5%. If you have a deeper look on the sales development on Page 5. For EMEA, we see for the EJT business, Engineered Joining Technology, very strong double-digit organic growth of 20% in Q3, which is mainly due to the positive pricing effects and also higher volumes. And in the SJT business, Standardized Joining Technology, we had a 7.9% organic decline in EMEA in Q3 2022 due to lower volumes, partly compensated by good pricing developments in the third quarter. Moving into Americas. We saw a strong double-digit organic growth of 14.6% in the EJT business, where we also see the good pricing effects in that area. And also in the SJT business, 8.9% organic growth in the third quarter, which is primarily a result of a very positive pricing effect. Coming to APAC. Organic growth of 9.4% for EJT in Q3 with higher volumes, while pricing have a slightly positive contribution. And Standardized Joining Technology organic decline of 7.7% in Q3 due to lower volumes, but overall compensated by some positive pricing effects. Looking into the margin development on Page 6. We see that in the third quarter of 2023, we are showing an EBIT margin of 8.5% and an EBITDA margin of 13.1%. So we catched up versus Q2 to these figures. And regarding some details on the margins, I hand over to Annette, Annette Stieve, our CFO.

Yes. Thank you, Michael. So let's have a look -- a closer look to the profit loss development. We can see that our gross profit ratio decreased in Q3 '22 by 210 basis points. This is mainly due to higher material costs related to global supply chain shortages and high inflation. And it is, in particular, in EMEA already also still caused by the Ukrainian war. We see an improvement in our personnel cost ratio by 230 basis points to 24.1% in Q3. We could reduce there our average headcount by roughly 260 headcount. Looking to our net expenses. We see that our OpEx increased by EUR 10.2 million to EUR 51.6 million. This leads to 16.2%, mainly due to, on the one hand, operational inefficiencies in EMEA on higher leased staff, in particular, in Juarez and Tijuana, so it's Mexico and India and higher IT implementation costs. Consequently, our adjusted EBITDA margin decreased by 50 basis points to 13.1%. And our adjusted EBIT margin amounts to 8.5%. The next slide, where we come to our operational adjustments. So nothing happened there since the last quarter. The message is that on our EBITDA level, we don't adjust anything. So our adjustments mainly refer to PPAs and these are our only adjustments. So they are focusing on net profit. We can see a reported net profit of EUR 36.1 million, adjustments of EUR 12.5 million that results then in an adjusted net profit of EUR 48.6 million. I go already to the next slide because the EPS, we can see they are much better. Our EPS development is visible there. So when we look to year-to-date, our adjusted earnings per share amount to EUR 1.52. And this corresponds to a net income of EUR 48.6 million. And our reported earnings per share amounts to EUR 1.13, and this corresponds to net income of EUR 36.1 million. Referring to our balance sheet developments. As you can see on the next page that our net debt increased by 24.5%, mainly due to the dividend payment of roughly EUR 24 million in May and our business seasonality. Our leverage increased to 2.5 due to higher net debt and to a lower EBITDA. Our equity ratio increased by 110 basis points to 45.7%. Michael already pronounced that or emphasized that on the very first page, we look to a very solid maturity profile. And we have in the next years, no significant refinancing to do before '26. That brings us in the situation that the currently increasing interest rates are not touching the general business of the company. Coming to the next page to our net operating cash flow development. We decreased our factoring programs by EUR 57 million compared to the year-end of last year of EUR 62 million. Our trade working capital outflow is at EUR 81.6 million, mainly due to higher inventory levels and increased receivables that is majorly in EMEA. Our lower adjusted EBITDA with higher working capital outflow leads to a decreased net operating cash flow before CapEx of EUR 41.3 million. And our CapEx spending of EUR 35.3 million is a little bit higher compared to last year of EUR 30.6 million. This results all in a net operating cash flow of EUR 6 million compared to last year of EUR 70.5 million. I would like to emphasize that I described here the operational cash flow. For sure, we have also financial cash flow. The last 2 conferences I've been asked to that. So therefore, we have financial cash flow there also of minus EUR 37 million. And if you can follow up in our detailed interim statement where all this is well published on our IR site. So having said that, we come to our NOVA. Our NOVA amount currently to minus EUR 4.7 million, which is a delta to last year of minus EUR 26.3 million. By this, I would like to give back to Michael Schneider.

Annette, thank you very much. Following our short presentation regarding the performance improvement plan. Of course, we have additional measures to further improve. And just to mention here that we have 3 phases of that. And the phase for 2022 is the stabilization measures short term for making sure that we get to our profit guidance. And in the next years, we have additional efficiency measures, structural measures to further improve. From a guidance perspective, and you all know that we adjusted our guidance. We have organic sales growth that we expect to be in the medium to high single-digit organic group sales at an adjusted EBIT margin of around 8%, generating a net operating cash flow of EUR 60 million, around EUR 60 million and the normal value added that we expect in the range of minus EUR 20 million to plus EUR 10 million for 2022. With that, that's our short overview on Q3 and year-to-date figures. And of course, happy to take your questions.

[Operator Instructions] The first question is from Philippe Lorrain from Berenberg.

So a couple of ones on just like housekeeping. Would you mind sharing with us the pricing contribution to the organic growth for both Q3 and 9 months at group level and perhaps as well by region?

Yes. If you look in the pricing section, Philippe, and thanks for your question, if we take the first 3 months of 2022, we have overall a pricing effect of 9% for the first 9 months. Its split is 5.8% in EMEA, 14.8% in Americas, 2% in APAC. So that's for the first 9 months year-to-date. And you also asked for the Q3 figures. From a total perspective in terms of pricing, we had 11% in group perspective, which is 8% at EMEA, 17% in Americas and 3% in APAC. So we see also what we mentioned that we catch up also with the pricing with a nice effect in Q3 2022, which shows that we are on a very good way in terms of pricing negotiations with our customers.

Yes. Would you mind just repeating because -- it was for EMEA for 9 months, acoustically, I did not really get you on your answer.

Repeat for the first 9 months?

First 9 months, EMEA, yes.

Yes. First 9 months for total group, it's 9%. About the regions or...

No, exactly. I was just missing EMEA.

Philippe, I recommend we will send it to you. So no problem about that. You can get the slide.

Okay, 5.8% for EMEA.

Philippe, I send it to your way after, yes.

Okay. And just like a second question from my side. To understand versus your guidance for the net operating cash flow of EUR 60 million. So it's a step-up of about EUR 54 million, if I calculated that correctly for Q4 that you anticipate. What are going to be the main drivers for reaching your target here?

At the end, the fourth quarter is always a high quarter of cash generation, and we are pretty optimistic to get that settlement problem about that. I'm not worried in this case. So that's coming out of Q4.

I understand that in seasonal terms. But I was just meaning like can you be like really confident that, I don't know, inventory levels perhaps will go down meaningfully in Q4? Or that as well, you've got like a bit less CapEx coming through because I think CapEx was a notch higher in Q3 this year versus Q3 last year. So I was just asking about the moving parts.

Sure, sure. So we expect that the realization of CapEx will be a bit lower because we have there also supply chain disruption. So we already know that a few significant investments will not be ended by the end of the year. So that is a part of that. We for sure optimize our inventories. However, as I said, there are -- we will not come back to years -- 10 years ago or sometime back because our seasonal part of increasing water business is there, that's clear. Anyhow, we will collect more receivables. We have the high amount, which is a kind of carryover. It's unusually high in EMEA, but that's really due to the quarter. So I expect there also a drop-down.

Okay. Perfect. And a final one on that topic. Should we expect as well increase in factoring volumes? Because so far this year, it's down a little bit versus last year. So there is no...

Yes, you're perfectly right. We will level that out by the end of the year in order to reach our target as less as possible. But anyhow, for sure, we can level that out by the end so that's effectively what we will do.

The next question comes from Ingo Schachel from BNP Exane.

The first one would be a follow-up on pricing. And if you could give us a bit more background on, let's say, what share of this price increase would be permanent versus price escalation clauses and steel surcharges that will fall away? Of course, you don't have to give us too much detail, but maybe, for example, you can indicate whether if raw material prices remain at the currently lower level, whether you would expect average prices in 2023 to be higher than this year or whether you would see incremental price impacts in Q4 as well or whether a big part of the 9% will phase out at those raw material costs and then possibly energy cost decrease?

Yes, Ingo, thank you very much for that question. We have in our contracts with our EJT customers these 2 clauses for the alloy surcharges. So the alloy surcharges are fluctuating depending on the London Stock Exchange rate. And so far, these are going up and down, currently going up. And even if it's going down, of course, it works in both directions. And so far, that part of the alloy surcharge, where we have these 2 clauses also will fluctuate if the alloy surcharges are going down. This reflects the EJT business and maybe half of -- roughly half of that spend is related to the alloy surcharge.

Right. When it comes to steel, for example, the way you've negotiated your price increases now in the Q2, Q3, those would in principle be sticky or it would be up to the OEM to then renegotiate the next year's contract negotiation, but there's no automatic price de-escalation if the steel prices remain low?

So at the end, that is always the case with automotive. If you are a single-source supplier, you will never get a kind of direct passthrough. However, we are very close to that in terms of what we keep, that's always. So if we see what we achieved this year, this is at least more than double of what we budgeted for. So that's tremendous. That is a typical volatile year, and our assumption is that in the future, we will fully countermeasure our inflation by pricing. That is at the end, what we are doing. What do we keep out of that, that's a crystal ball. At the end, in water and industry in the past never gave back any kind of price increase. However, we increased our prices in the recent 2 years so over proportional that we need to see what happens there, but that will be marginal. So that will be not a lot. In terms of the car industry, that's vice versa. So as soon as prices stabilize on a certain level, for sure, carmakers will come again and will ask for repricing. And then we need to extend as long as possible. It's the other way around. So the one who sits in the bus tries to keep the doors closed as long as possible. And this time, we need to sit in the bus and need to keep the doors closed as long as possible. But that's the typical story.

And it's always a matter of negotiation with the customers that we have, in principle, a very good position.

And you can see that now this pricing comes in. So as Michael said, alloy surcharges, that's always a timing delay. Therefore, we are much stronger in pricing in the second half of the year because the alloy surcharges are dropping in now out of that time shift.

Okay. Understood. And maybe one question on the volume growth at NDS and I think first half has been very strong. So I was wondering how you think about the, I think, negative volume growth rate that you seem to have had in the third quarter for NDS. Is that a function of restocking in the channel in the first half? Or do you see any pockets of weakness with new construction related or certain channels that are weaker? Or have should we not read too much into 1 quarterly data point, which might have been a bit softer from a volume perspective?

That is, first of all, cautiousness. At the end, we don't see that we are missing new projects. But what we see is that the wholesalers, the big customers, that they are cautious in order to take stock over the winter. And that is, for sure, fully combined with the increases of interest in the states. And as we -- our customers are typical residential home water, residential customers, these customers are cautious there. We are further determining not missing a real project that's stocking over the winter of these wholesalers and distributors.

The next question is from Nicolai Kempf from Deutsche Bank.

It's Nicolai Kempf here from Deutsche Bank. My first question would be on input prices. Do you see material prices coming down, both for steel or for plastics?

Well, currently, we are still on a high level that we see. In principle, if you're all discussing potential recession scenarios for the next year, if it's Americas or whatever, in principle, there should then be a certain lowering of prices. But this is what we cannot see currently, it's still on a very high price level.

It's also -- I would say there are splitted levels currently. For sure, the commodity steel is already -- already went down, so there is a certain relaxation. We are using high-quality stainless steel with a lot of surcharges, with a lot of alloys in it, splitted, walls down. So that's a very high specialty steel. These are still on a high pricing level. That's the same for technical resins. The technical resin is still on a very high price level. There's a certain relaxation in China in APAC, but not at all in Europe and not at all in EMEA because that is a high consumer of any kind of energy. Where we see a certain relaxation is on commodity resins, what before it's something used for NDS, that gets better.

Okay. Understood. And my second one would be on energy costs. What kind of headwind do you see next year that could grow because of higher just energy cost in terms of electricity or natural gas?

Well, we are mainly dependent on energy. Natural gas, we have some production areas in Maintal in Germany. But gas is from our, let's say, source of energy but the lower part, we more or less are facing energy and gas as a low part of what we need in Maintal.

At the end, our main cost driver of energy is already baked in our raw materials because you cannot produce any metal or any resins like we need without gas. So the major part of that is already the price increase in our raw materials.

You have to see that steel production is quite energy intensive. So the high level that we still see in these steel categories that we need are also driven by the energy prices.

The next question is from Jürgen Pieper from Metzler.

I have principally one question. I mean, if you look at the auto production in most regions, especially in Europe. This has strangely gone up since August, September. And I think this to a certain degree has supported your third quarter. What is your best guess? I mean, is this just a very short-term phenomenon? I think it's mainly driven by this fading of the chip crisis. Is it more a short-term thing until year-end, let's say? Or is it if you look at the delivery times for new cars, it could well last until spring/summer of next year, so it could bring you through this tough winter. So what is your best guess? Is this a very short-term thing? Or is it a medium-term thing? And secondly or 1B, so to say, question is on your guidance. We -- I think we all had the understanding that after the second quarter, it was a pretty tough target, still the 8%. Now I think it looks more comfortable and to a certain degree because of this auto production, I guess. Is it a view you share that you're quite comfortable now with the 8% on the growth target? Maybe a little less with the free cash flow target. Is it a fair view you share? Or is it an exactly rated view of an analyst?

Maybe taking your first question, moving into the automotive market development. We would expect for the full year, no volume increase. What we see for 2022 is purely priced in. And we also would be cautious in the principal market development for the first half of 2023. So it's the short-term and midterm impact. Although we have some startup productions next year, the overall market, we would be quite cautious based on the aspects that you mentioned.

At the end, we still observed that with a high degree of respect because it's not at all stable. So it became better, yes. Is it on the level one has been promised to us by LMC or by IHS, not at all. So we see at each and every automotive plant that in nearly every customer here that is not picking up the last day of production, we are facing still certain shortages all around the world. Market be in Americas, market be here, it's often the topic still, special chips and so on. So it is -- it became better, but not at all stable. And this volatility will last and we expect that carry over to the first quarter and first half of the year of '23.

Okay. And on the guidance have you changed in any way?

And these LMC, these marketing companies, they are not that reliable any more than in the recent years. You need to make their certain calculations downwards. Otherwise, you don't survive.

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

My first question would refer to the supply side. Also, I think we have talked about the prices where you said there is only some cautious signs of a relief, but not to try and run so still inflated levels. But what about real supply? Do you get the volumes you need? Or are there still delays and constraints which do also cause extra cost here? What's the situation there?

Well, we get the volumes that we need. This is good. But we also see the overall volatility in the supply chain. And so far, it's going into the company and out of the company. And what Annette mentioned earlier that the volatility is there when, for example, customers pick up. Also the volatility on the incoming supply chain is there, but we get our quantities that's okay. But of course, we are on a very high level of prices.

At the end, in the pure automotive sector relief, there is still a lack of volume. So this is visible. We are not fully on the volume what normally is outlined there and would be planned there. We can countermeasure much better than others, in particular, in our plants where we also produce SJT on the same machinery. So we can maybe better countermeasure than others. But in pure automotive plants, what we have, for example, in Serbia and so on that we see month by month here and there are still missing volumes. The order books are there, but at the end, there is a closing here, closing there. We look to the U.K., we had a 2-week shutdown around the ceremony of the death of the Queen. So things like that as a producer, it's utilizing.

Okay. So the ones caught by the OEMs, funds still lower than initially expected. That's the message, right?

It's still a very volatile development and the order book stability from the past has gone since, I don't know, 2 years or so.

Okay. And second question refers to the extra costs. You're also mentioning correction with the depressed margin revenue you have at the moment from the IT side where you said you have here additional investments to COVID and also with the transfer of production, which was obviously more costly than expected. Could you shed a bit of light on the size of these effects in the first 9 months? What the extra costs you had -- should be in here? And when we should expect that these burns fade out?

Just to make it complete, you're referring to which cost? The line is quite bad, so we didn't get it acoustically. The operating cost in the first 9 months, you are referring to?

So at the end, I think you referred to -- that was one of the major reasons out of our profit warning in July that we stated out that we have certain extended topics on our restructuring to close our last plant and to transfer the products either to Maintal or to Czech. And that caused, in particular in Czech, also higher IT costs. So that was the major problem of Q3, I would say, in July, September and so on. So we are there in a very good way. I would say, in particular, Czech is pretty well stabilized already. We faced a higher IT cost not because we -- our IT systems are not under control. At the end, we had a delay in our restructuring, in our -- transferring products and machinery over the border. That started already with COVID that we had a certain time delay. That brought us to a delay in integrating an early -- a necessary update in our IT systems there. And for sure, if you have then not thrown in the processes and need to implement a standard system on that, that's more costly. The good news is, I think it's becoming better and better. Czech is, I would say, well off. We still face a few topics here in Maintal that's clear, that we meant with operational costs. And that is at the end, the status where we are. It should be done by the end of the year.

And could you please give a figure to these extra costs? That was my question.

Well, we already had that. That's not easy to say.

Rough estimate walk through?

We estimated something around EUR 10 million, EUR 15 million, I would say, that could be. But that's really because it's in each and every position. The good news is it's over. We closed Gerbershausen by the end of the year. Our last employees are just leaving us. And the last product is or has already arrived last week in Maintal. So these are the last things. But roughly EUR 10 million, EUR 15 million is, I would say, the gut feeling around that. That was the figure by September. Maybe it's a little bit different now, but roughly.

The next question is from Peter Rothenaicher from Baader Bank AG.

I think my question refers also to the last question. If I look at the segment reporting, the profitability in EMEA is, I would say, disastrous with -- in the third quarter, around 3% adjusted EBIT margin. So if I look back some time years ago, we had here profitability levels, 16%, 18%, 19% even. So I think this has to do also with the restructuring. But what would be your best guess in 2023? Is there a chance to come back to margins of 10% or something like that?

Well, if you look into the EMEA region, Peter, we must say that we have these operating issues purely in EMEA region. So this margin development of EMEA is linked to these operating, let's say, challenges/problems. And as we mentioned, the transfer from Gerbershausen to Maintal will be resolved end of 2022. And when we resolve these operating issues, also the margin will be significantly better in EMEA as it is today.

And how fast can there be a recovery? I mentioned the 10% for the regional margin. Would this be possible in 2023 already?

It is step-by-step. So I'm really a fan of step-by-step, increasing margin step-by-step and sustainably. So what we are missing the most in terms of margin is in the EMEA region,that we needed then to focus much more automotive business in order to satisfy our automotive customers. And therefore, we are missing, to be honest, SJT volume. And SJT volume is our high volume business. So as Michael said, I'm convinced that the bulk of that is done. So Czech is already pretty fine. Maintal has still because we have the last one here who have been transferred. But by the end of the year, the major bike should be still done and then step by step. However, our own problems, we can see like that. We expect somehow a bumpy year '23 in terms of recession. Everybody is speaking of a recession in Europe and in Americas. So we are cautious on that. In particular, this Ukraine war is taking the place already quite along and have high impacts here. And this topic of inflation, how this develops has certain clouds for everybody. Therefore, I'm cautious, but our own things, we will bring under control. And then we should float with the market development and mostly NORMA can do that then much better.

For these operations challenges, the measures are defined to get better step-by-step. And with these improvement measures, also the margin will develop.

Okay. My second question is on the income tax expenses. So you had in the third quarter, a very high tax rate of almost 48%. I think you also increased your guidance for the tax ratio for the full year to more than 30%. Can you comment on this? Was this a onetime effect in the third quarter? And what is your expectation for the tax rate going forward?

That is at the end, a timing effect. So we have a tax audit in the house and it's pretty clear that in terms of transfer prices, we need to see here a certain impact what will be then leveled out by the other country. So therefore, that's a timing issue. We will get that back in other countries, but not in the same year. So we need to, at the end, to balance for that and expect the money back from the other states roll in the next year, let's say.

So this means overall, nothing has changed regarding the overall expectation of 28% or something like that?

Nothing has changed, exactly. It's a typical transfer pricing topic which carries over the fiscal year. But you cannot double tax. So therefore, we will get it back. I'm pretty sure about that.

The next question is from Klaus Ringel from ODDO BHF.

I want to get back on this pricing versus raw mats cost topic and maybe a qualitative statement on looking at Q4. And when we look here, we had this 11% pricing in Q3 at group level. What's the indication here? Will we see -- have you seen the peak already in terms of the pricing effect? Or will we, let's say, with some time delay, see maybe a higher figure for Q4? So it would be great to get your color here.

Yes. The pricing issues were the most important impact started middle of the year. So we saw already a good Q3, and we also will see a very good Q4 in terms of pricing effects for the full year.

But can you say if it will be higher sequentially or same level or...

It's getting sequentially higher in the second half year in Q3 and Q4. Whereas as I mentioned earlier, we budgeted a certain amount of pricing for the budget, and we will end up nearly doubling that price impact, which is an impact in Q3 and especially also in Q4.

And that's the impact of these alloy surcharges. In alloy surcharges, we have a delay between 3 and 6 or 9 months. Hence, the peak of the alloys in terms of nickel was by the end of April. These peaks will flow in now. So that's a rhythm, which we fully see now, and that's clear. On top, in automotive business, you're always lagging a bit behind because you need to justify against a running contract some can change. So therefore, you need to sell something in your hand. So this is all flowing in now, what we already see in Q3 where we really over proportionally realized.

The next question is from Andres Gujan from Carnot Capital.

Could you please explain the headcount a bit more in detail? I see a 2% increase in personnel, although volume has decreased. I see that the increase comes mainly from the temporary workers. And the second question regarding personnel, they have increased by 10%, i.e., I have noticed that FX effects play in here, but still that's a significant increase. Why so high? And what can we expect for next year when the salary increases come into effect? And will we see a personnel decrease once those employees have left the site? Can you describe this development a bit, please?

Well, yes, Andres, thanks a lot for your question. When you're looking into the efficiency aspects and operations aspect that we especially saw the last month, we also must say that we have additional temp workers that we have inefficient processes to be very frank. And with the improvement of our operations processes, we are going to see also a higher efficiency of headcount and temp workers again.

We need to be a bit cautious, Andres. At the end, our headcount decreased compared to last year and our personnel cost ratio improved. For sure, our leased staff increased, and that has a typical fully independent story. We are working with leased staff in particular in a so-called tax-driven, I would say, market, lower structure in Mexico. And in Mexico, which is at the end best-cost country for Americas, each and every of our employees is leased staff. And as our volumes are increasing there, that's healthy and normal that this is increasing because we shift the work there. And it's India, so it's -- that has to do with certain structures where you have extended workbenches with low-cost country or best-cost countries, and there you have this typical structure. So that's something normal.

Yes, and maybe a look into '23. Can you give an indication what the headcount will do? Will we see any significant changes? Or is that what we see in this third quarter report?

So in '23, we closed our major restructurings. However, we already decreased in headcount and it is not -- we are not shrinking. So we are transforming or transferring work from those high-cost to best-cost countries. So we are a growing company, which means our portion of people in best-cost countries are increasing. So it's much better to look to ratios and to look to personnel costs than only to headcount.

Yes, of course. But in the cost ratio, you had the very, very significant material cost increase. And that's why I did refer the development to the volume development. And the volume development was negative, right, in the third quarter.

Exactly. So therefore, I think we are, for '23, we will get there on a good range. But as these restructuring measures, what we realized the next 2, 3 years, show them their success, I would say, in terms of numbers without giving you a detailed plan for '23.

There are no further questions at this time, and I hand back to Dr. Michael Schneider for closing comments.

Yes. Thank you very much, and thanks to everybody who participated in that call. And before we leave, please, let me make a personal remark. As you are aware and what we communicated, my contract, my council contract will expire June 2023. And as we communicated, I will not extend my contract and I will leave the management board end of this year. So this also means that this is my last investor call at NORMA Group. And I would like to thank you all for your external perspective, the professional and always positive relationship over the years, which I enjoyed very much. And this started with my time as CFO and then later as a CEO. And so far, I wish you all the best. Stay healthy. And again, thank you all very much.